Mid-sized Spanish bank Banco Popular suffered a 21% rise in bad loans in the 12 months to September 2007, as the Spanish economy is dragged down by a troubled property sector. Financial Times

’We are reducing our exposure to the real estate sector,’ José María Lucía, the bank’s chief executive.

Popular has €8bn in outstanding loans to developers, accounting for 10% of the bank’s loan book.

Lucía said mortgages now accounted for 38% of Popular’s loans, compared with 67% in 2003.

Santander and BBVA, Spain’s two largest banks, report third-quarter results next week amid fears that Spain is harbouring a ‘subprime’ real estate crisis of its own.