The revision of refinanced credits requested by the Bank of Spain before the end of September continues to make the hidden default rate of the Spanish financial institutions appear.
The figure, in fact, has reached a new historic peak at the end of June, according to the figures published this morning by the Bank of Spain, that place the percentage of doubtful credits at 11,6%, while the volume of awarded loans continues to fall.
This figure means a new historical peak in the default rate endured by banks which most probably will continue increasing at least until the end of September, the time limit given to banks to revise all their portfolio of refinanced loans.
The increase in the default rate registered in a period of credit contraction has a multiplying effect on this rate establishing the default rate over the previous maximum level, of 11,38% reached last November.
The volume of doubtful loans has reached at the end of June 176.420 million Euros, an increase of 6214 million Euros from the previous month, that cancels the reducing effect of the transfer of toxic assets from the nationalized banks to the bad bank.
The registered default rate decreased greatly in December 2012, when it fell from 191.468 million Euros to 167.468 million Euros thanks to the transfer of risky real estate assets from the nationalized institutions, Bankia, Novagalicia, Catalunya Banc and Banco de Valencia to Sareb. After a slight increase in January to 170.756 million Euros, the rate decreased again to 162.038 million Euros in February when the nationalized institutions Banco Ceiss, Caja 3, Liberbank and BMN sold its assets to the bad bank. From that moment on, those credits considered doubtful have been increasing in number up to the 176.420 million Euros cancelling completely the so called Sareb effect.
The total portfolio of credits in circulation has suffered a slight increase, from 1518 billion Euros to 1519 billion Euros in the first increase registered since the last month of March. The increase does not mean an inflection point in the concession of loans in Spain as these types of variations are usual in some isolated months. In fact, in the banking sector, they have already warned that the reclassification of refinanced credits and their higher penalty would force a new contraction of the awarded loans after a period of strong restructuring processes already suffered by the sector.
From June to June, the evolution of credits has dropped from the mentioned 1744 billion Euros to the 1519 billion Euros, which means approximately 13% less in a period defined by the destruction of employment.
The default rate of the credit financial institutions – institutions that award financing to buy cars, furniture, televisions and other consumer goods – remained at 9,81% for the fourth consecutive month, with a volume of doubtful loans of 3599 million Euros, slightly higher than the previous month.
In the last year, the default rate of these institutions has varied around one percentage point, as it reached 8,93% in May 2012.
The other institutions – banks, savings banks and rural savings banks – registered a volume of doubtful loans of 171.076 million Euros of a credit portfolio of 1460 billion Euros, reaching therefore a default rate of 11,71% opposite to the 9,78% reached in June 2012.