Analysis - Investors run scared of Spain's battered banks

(Reuters) - Spain's banks are fast joining the ranks of the most unloved in Europe just as many need to raise capital urgently, deserted by investors who believe the country is on the brink of a recession that many lenders will not survive.

The government has ruled out more state aid for a sector that comprises a motley mix of international lenders and heavily indebted local savings banks. That leaves two options: raising private capital or turning to the EU for bailout funds.

Prospects for a private sector solution are poor. Nothing on the horizon looks likely to persuade foreign fund managers to invest, such is the fear of the banks' growing bad loans, their holdings of shaky sovereign debt and the worsening economy.

Already battered by a property market crash that began four years ago and continues unabated, few Spanish banks are able to borrow funds on wholesale credit markets and the majority are instead relying on the European Central Bank.

http://uk.reuters.com/article/2012/04/11/uk-spain-banking-idUKBRE83A08F20120411