Spain's largest banks have reported dismal results over the past 24 hours, hit by toxic real estate assets, and according to analysts, the results highlight the desperate need for Spain's banks to raise more capital.
"The problems for Spanish banking are far from over," Ashok Shah, chief investment officer at wealth management firm London & Capital, told CNBC on Friday.
"The underlying real estate market is only half-corrected,so when it fully corrects over the next year of two, the non-performing loans are going to keep spiking up which will keep eating into the tier-one capital so the need to raise more equity is going to be enormous and very, very pressing indeed."
BBVA reported that profits fell 44 percent in 2012 as it made 9.5 billion euros($13 billion) in provisions on bad real estate loans from the 2008 Spanish property crash. The gloomy picture continued elsewhere as Caixabank reported that profits tumbled nearly 80 percent last year to 229 million euros ($311 million) as provisions doubled during 2012 to over 12 billion euros ($16.4 billion).
Banco Popular Espanol reported its biggest ever net loss of 2.46 billion ($3.36 billion) euros in 2012, compared to a forecast of 2.38 billion euros made by analysts polled by Reuters.
The news followed Thursday's earning miss from Banco Santander which showed that the bank's net profits had more than halved as it put aside almost 19 billion euros ($26 billion) for non-performing loans and property assets.
On January 1, Spain's Central Bank revised solvency rules and set a new core capital-ratio target for Spanish banks of 9 percent. It also said that it will require a quarterly breakdown of what Spanish banks are including as core capital. New regulations from the Basel Committee on banking regulations have also called for more stringent minimum capital levels, so banks maintain sufficient assets to face future financial crises.
(Read More: Why New Basel Rules Won't Make Safer Banks)