Spain announced Thursday its crisis-torn banks need up to 62 billion euros ($78 billion) to survive a severe financial slump, far less than the maximum foreseen in a eurozone rescue deal.
It released the results of two independent banking audits just days before it was due to formally request a loan from a credit line of up to 100 billion euros offered by the eurozone for Spanish banks hammered by a 2008 property market crash.
The audits, one by the German firm Roland Berger, the other from the US firm Oliver Wyman, tested 14 top banking groups in a likely "baseline" scenario and a "stressed" outcome of a slumping economy and real estate sector.
They found that in a stressed scenario lasting three years, the banks would need 51-62 billion euros in extra capital.
In a baseline case they would need just 16-26 billion euros.
"I am wondering really whether markets are going to find these figures sufficiently credible," said Edward Hugh, an independent economist based in Barcelona.
"Markets are going to wonder, especially if we are looking at a three-year term, whether this has gone far enough."
On the eve of the audit's release, Fitch Ratings had said it estimated the Spanish banks' capital needs at 50-60 billion euros in a base case and 90-100 billion euros in a scenario similar to the Irish crisis.
Fitch, however, said it did not actually expect Spanish banks' credit losses to be as high as those in Ireland.
Bank of Spain deputy governor Fernando Restoy said the audits indicated that problems were limited to banks that were already being helped and that the rescue loan would be sufficient.
"The agreed figure of 100 billion euros gives us ample margin," he said.
"The largest entities in the country do not need need additional capital," he added.
The stressed scenario assumed a 6.5-percent slump in activity, a 26.4-percent dive in home prices and an 85-90-percent collapse in land prices over the three years, Restoy said.
But a look at the details showed some leeway was given.
Under the baseline scenario, for example, the jobless rate -- already at 24.4 percent in the first quarter of 2012 -- is assumed to be just 23.8 percent this year and 23.5 percent next year.
Even in the high stress scenario the jobless rate edges up only to 25.0 percent this year, and 26.8 percent in 2013.
Both scenarios expect the worst of the recession over within two years. In the base case, there is a recovery with the economy growing of 0.3 percent in 2014 and in the stressed scenario it contracts 0.3 percent in the same year.
A second, more detailed study to be carried out by Deloitte, KPMG, PwC and Ernst & Young, is to look at the valuation of banking assets, with a global figure due for release July 31 and a full breakdown due in September.
The audits, a key stage in the costly restructuring of Spanish banks brought on by the 2008 slump, were released at a time when Spain is under intense scrutiny by global financial markets.
Spain managed to raise 2.22 billion euros in an auction of two-, three- and five year bonds hours before the audit, beating its own target with demand outstripping supply by more than three times.
But it had to pay soaring rates to lure investors.
For two-year bonds, for example, the yield more than doubled to 4.706 percent from 2.069 percent at the last comparable sale March 1, a sign of deep misgivings about Spain's near-term prospects.
Far from calming markets, the banking rescue loan agreement on June 9 sent Spain's borrowing rates to the highest levels since the birth of the euro in 1999 as investors fretted over the impact on the country's booming debt.
A Group of 20 summit in Los Cabos, Mexico, this week raised expectations that eurozone authorities could cut interest rates or even purchase Spanish and Italian bonds, however.
Spanish 10-year bond yields, which pierced a euro-era record above seven percent Monday, eased to 6.496 percent Thursday evening, a rate still viewed as unsustainable over the long term.
Spain could yet require a full-blown state bailout, said a report by financial research group Rabobank's fixed income strategists Richard MacGuire and Lyn Graham-Taylor.
The Spanish crisis resembled Ireland's, with a tight relationship between banks and the state, they said, and the threat was elevated by Spain's credit rating, now ranked just above junk-bond status by Moody's.
"The bottom line, then, is that it seems hard to countenance Spain avoiding a more comprehensive bailout," the Rabobank strategists said.
Spain's battle to rein in its mushrooming sovereign debt, especially during a recession and high unemployment, is a key concern.
Even the IMF has said Spain will likely fail to meet its targets to trim annual deficits from 8.9 percent of economic output last year to 5.3 percent this year and 3.0 percent in 2013.