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Banks Still Hold Doubtful & Foreclosed Assets Worth €224,000M

5 November 2015 – Cinco Días

Spanish financial institutions held doubtful and foreclosed assets amounting to €224,000 million on their balance sheets as at June 2015, according to data published by the Bank of Spain in its latest Financial Stability Report.

In its report, the body led by Luis María Linde (pictured above) warns that these unproductive assets are placing “negative” pressure on entities’ income statements, reducing their ability to generate profits, since they do not generate any revenues. These two types of assets represent 8.7% of the total assets of the banks in Spain.

Nevertheless, the volume of assets foreclosed or received in lieu of debt payments from businesses in Spain, held on the financial institutions’ balance sheets decreased by 0.9% in the last year to amount to €81,000 million. (…).

Meanwhile, at the consolidated level, the total amount of refinanced or restructured credit increased to €211,000 million as at June 2015, of which 52.1% related to non-financial companies and 45.2% corresponded to households.

Less refinanced credit for the private sector

2.4% of the total related to loans to Public Administrations, whilst the remaining 0.3% corresponded to financial companies other than credit institutions. The total volume of loans to the private sector that had been refinanced or restructured amounted to €163,800 million in June 2015, i.e. 15.8% less than in the same month a year earlier.

The Bank of Spain said that this variation represents an acceleration in the decrease seen over the life of the index, which began in March 2014. The decrease in the volume of refinancings and restructurings over the last year has been centred around non-financial companies (17.5%) and households (13.5%).

Meanwhile, the weight of refinancings and restructurings over the total credit balance has also decreased in recent quarters to account for 13% in June 2015, compared with 14.2% in the same month a year earlier.

Doubtful loans accounted for almost half of the refinanced and restructured loan balance (with a slight decrease of one percentage point with respect to last year), whilst those classified as sub-standard loans represented 18% of the total and those regarded as up-to-date (performing) loans accounted for 33% of the total.

In terms of the distribution of refinanced operations by sector, 64% corresponded to loans granted to companies, whilst the remaining 36% related to household debt.

Half of the refinanced operations relating to companies corresponded to loans granted to companies operating in the construction and real estate sector.

Finally, 26.2% of the restructured operations relating to households corresponded to loans granted to finance house purchases.

Original story: Cinco Días

Translation: Carmel Drake