Spanish banks reported a sharp drop in deposits during July, but analysts say fears of a massive capital flight from the country may be overblown.
In July, bank deposits in Spain declined by €74 billion, which is equal to about 5% of all deposits in the country, according to data from the European Central Bank.
Some analysts viewed the drop as evidence that Spanish households and businesses were frantically pulling money out of the country to avoid being stuck with pesetas if Spain is forced to seek a bailout.
According to research from Nomura Securities, the overall amount of money that flowed out of Spain in the second quarter was equal to 50% of the nation's gross domestic product.
"We are witnessing very large scale capital flight from Spain, both as foreigners are selling their Spanish holdings and as depositors in the Spanish banking sector are withdrawing deposits from the Spanish banks," the Nomura analysts wrote in a report.
But others argued that the data on bank deposits were being misinterpreted.
Carlos Garcίa, a senior banking analyst at Societe Generale, wrote in a note to clients that much of the fall in deposits was driven by a change in regulation that caused depositors to shift money into short-term bonds, which are not counted as deposits.
After adjusting for this and other factors, Garcίa says Spanish bank deposits were essentially flat in July.
In addition, the bulk of withdrawals from Spain in July, about €44 billion, were in the "other financial institutions" category, said Christian Schulz, senior economist at Berenberg Bank.
This group is largely made up of "hot money" investors such as hedge funds, as opposed to pension funds or insurance companies, said Schulz. "This category has been quite volatile in the past," he added.
While there are signs deposit outflows may have peaked in July, Schultz said current account data have shown capital leaving Spain for several months.
"It's clearly due to the fact that Spain has economic troubles, specifically banking troubles," said Schultz. But he was reluctant to call the trend a bank run, or even a bank jog, "it's more like a bank walk," he said.
On Monday, the Bank of Spain announced plans to inject €4.5 billion into Bankia, one of the nation's leading mortgage lenders, from a fund set up by the government to recapitalize banks.
Spain has requested up to €100 billion in loans from the eurozone bailout funds to help shore up banks struggling with a mountain of bad real estate loans.
But there are signs the worst may be over as investors gradually resume buying Spanish bonds in anticipation of bold action by the ECB.
ECB president Mario Draghi is widely expected to announce details on Thursday of a bond-buying program that could provide some relief for Spain, assuming Madrid agrees to the terms.
The yield on Spain's 2-year bond fell sharply in August, suggesting that money has been flowing back in to Spain as investors anticipate a major intervention by the ECB.
In addition, investors have been scooping up shares of Spain's largest multinational banks, including Santander (SAN) and BBVA (BBVA). Overall, the benchmark stock index in Spain, the Ibex 35, rallied 10% in August.
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