Bank of Spain: NPL Ratio Falls Below 11%

19 August 2015 – Expansión

The NPL ratio has recorded 10 consecutive months of decreases to fall below 11% for the first time in more than two years.

The NPL ratio of loans granted by banks, savings banks and cooperatives to individuals and companies decreased in June to 10.998% from 11.42% in May. As such, it completed 10 consecutive months of decreases and has now returned to a level last seen in April 2013.

According to provisional data published by the Bank of Spain, out of the total loan balance granted by financial institutions (€1.35 billion), the defaulted balance decreased by €4,843 million in June, to €149,308 million (€154,151 million in May). Nevertheless, the indebtedness of families and companies, i.e. the total loan portfolio, increased by 0.546%.

If we set aside the impact of recent changes in the methodology, then the NPL ratio amounted to 11.2% in June; however, that still represents a decrease compared with the previous month (11.6%), since the loan balance decreased from €1.325 billion to €1.332 billion. Nevertheless, financial institutions are still maintaining their provisions, although they have decreased them slightly with respect to the previous month, to €89,529 million. In May, that “cushion” amounted to €91,836 million.

Meanwhile, the Bank of Spain has created a new section in the Statistical Bulletin, called the pro-memorandum to facilitate the monitoring of the NPL ratio in a way that is homogeneous with its past performance. (…).

Jaime Díez, analyst at XTB, expects this downward trend in the NPL ratio to “continue”, since it is still a long way off the historical lows reached before the outbreak of the crisis.

Original story: Expansión

Translation: Carmel Drake