19 August 2016 – Expansión
Yesterday, the Bank of Spain published provisional data for 30 June 2016, which shows that the default rate decreased for the fifth consecutive month, to 9.44%, its lowest level since June 2012. The figure includes the change in methodology for classifying Financial Credit Establishments (EFC), which are no longer included within the category of credit institutions. In this way, the default rate has now been below the 10% threshold for the fourth consecutive month.
The decrease in the default rate has come despite the fact that total credit in the sector rose by 1.2%, the first increase since November 2015. Specifically, total credit increased by €15,682 million to €1.298 billion. “The decrease in the default rate coincides with the strong growth in new loans to SMEs and households”, said José Luis Martínez, spokesperson for the Spanish Banking Association (AEB).
The doubtful debt balance sank to €122,508 million, down by €3,689 million compared with the previous month, its lowest level since June 2011. Financial entities have decreased their combined doubtful debt balance by more than €70,000 million since the peak in 2013, when it exceeded €200,000 million.
Therefore, the clean up of the financial sector is now a reality. Nevertheless, some entities have performed the process more quickly than others. In the last year, Sabadell and Bankia stand out as the entities that have got rid of the most doubtful assets, having reduced their doubtful balances by almost a quarter each. Specifically, the Catalan entity has reduced its doubtful debts by 23.9% and Bankia by 23.2%. Three other Spanish entities reduced their doubtful balances by at least a fifth between June 2015 and June 2016, namely: Liberbank (22.4%), Abanca (22%) and CaixaBank (20%).
Several factors have contributed to the reduction in the doubtful debt balance. As well as the macroeconomic improvement seen in recent years, the entities have accelerated their portfolio sales to large funds.
Another way in which the banks have shrunk their large doubtful balances has been through foreclosures, especially of unpaid loans to property developers overdue by more than one year.
Original story: Expansión (by D.B.)
Translation: Carmel Drake