19 July 2016 – Expansión
The default rate of loans granted by banks, savings banks and cooperatives to individuals and companies decreased to 9.84% in May, returning to a level not seen since July 2012, when it amounted to 9.86%, according to provisional data published on Monday by the Bank of Spain.
This figure includes a methodological change in the classification of Lending Institutions (Establecimientos Financieros de Crédito or EFCs), which are no longer considered within the same category as credit institutions.
The total doubtful debt figure fell to €126,152 million in May, down by €1,583 million from the previous month. In one year, the volume of doubtful loans has decreased by €27,999 million, equivalent to 18.16%.
In this way, the banks’ default rate has decreased by 3.76 percentage points with respect to the historical maximum recorded in December 2013, when it stood at 13.6%.
The decrease in the default rate has come about, in part, thanks to the continuation of the decline in the overall credit balance in the sector in May. Specifically, total loans decreased by €76,786 million, or 0.52%, to €1,281 billion. In YoY terms, overall credit has decreased by 5.06%.
If we exclude the methodological data, the NPL ratio stands at 10.04%, given that the loan balance in this scenario decreases to €1,256 billion.
In line with default rate, financial institutions have cut their provisions by €762 million with respect to the previous month, down to €74,664 million. A year ago, this “buffer” amounted to €91,836 million.
Original story: Expansión
Translation: Carmel Drake