By Julien Toyer
MADRID (Reuters) - Spanish lenders are bracing for lower profits and dividends and a tougher funding environment under new rules meant to prepare them for pan-European supervision next year and avoid a repeat of last year's multi-billion-euro bailout.
On Thursday, the Bank of Spain urged lenders to cap cash payouts to shareholders to the equivalent of 25 percent of profit and to be cautious on dividends paid in shares.
That came hard on the heels of another recommendation from the central bank to calculate the impact of removing minimum interest rate clauses on residential mortgages, a move that would lower payments for homemakers but hit bank profit.
Also a long-awaited European deal on how to distribute the cost of bank rescues hit share prices last week of some banks in the region's weaker countries, including Spain, on fears they could find it harder to attract funding.
Three banking sources said the new rules did not bode well for the second half of the year because they left investors with the impression that banks had not been fully cleaned up and that more measures were still to come.
"The new guidelines on dividends introduce more uncertainty in a sector which already registers high levels of insecurity at a time when the volume of additional provisions that banks will need to book is still unknown," said one of the banking sources, who declined to be named.
Lenders had already been asked by the Bank of Spain to review by September their 208 billion euros ($270.5 billion) in portfolios of refinanced loans.
Economy Minister Luis de Guindos said lenders would probably have to book another 10 billion euros in provisions to cover potential losses on those loans and seek 2 billion euros in fresh capital once the review is complete.
This would add to the more than 80 billion euros booked last year, which hit profit across the board, forced some lenders to scrap dividend payments or raise new funds on the stock and bond markets and prompted the government to seek 42 billion euros from the European Union to recapitalize the weakest ones.
The massive write downs and the European-financed bailout have partly restored confidence in the Spanish financial system after it was devastated five years ago when a decade-long property bubble burst.
The rescue has so far failed to reactivate bank lending to Spanish companies and households, while the rate of non-performing loans continues to rise.
The banking source said the latest guidelines on dividends were dictated by the International Monetary Fund, which earlier in June called on Spanish lenders to reinforce the quantity and quality of their capital by being prudent on cash dividends.
The source also said the Bank of Spain wanted all Spanish lenders to be fully cleaned up and well capitalized before pan-European stress tests next year.
In the short term, however, banks such as Popular and Sabadell , which did not need public aid last year, may face headwinds.
Both have high levels of refinanced loans, have heavily used clauses in mortgage contracts that set floors on interest rates and may find it more difficult to fund themselves under the new EU regime, which mean that second-tier banks in the periphery of the euro zone are likely to have to pay a premium to attract equity and debt investors.
The new guidelines may make it hard for them to stick to their dividend plans for 2013, analysts say.
They also say that other banks that have ridden out Spain's crisis until now, including Spain's three-biggest lenders Santander , BBVA and Caixabank as well as Bankinter , may have to adapt for different reasons.
"Santander and Caixabank dividends per share are probably too high. Bankinter probably needs to adjust downwards its cash dividend per share because payout exceeds 25 percent ... BBVA could move to more scrips (dividends paid in shares)," Carlos Garcia Gonzalez, an analyst at Societe Generale, wrote on Friday in a note to clients.
State-owned banks including Bankia are not safer. Although they already had a ban on dividends until 2014, the three other regulations may weigh on the capacity of the government to apply their restructuring plans and quickly sell them, analysts say.
($1 = 0.7691 euros)
(Additional reporting by Jesus Aguado; editing by Fiona Ortiz and Jane Baird)