Bank Of Spain: Default Rate Fell To 10.2% In 2015

22 February 2016 – Cinco Días

The default rate of loans granted by banks, savings banks, credit cooperatives and other financial entities operating in Spain ended last year with another decrease, taking it down to 10.12%, its lowest level since July 2012, compared with 10.35% in November and 12.51% at the end of 2014.

According to the provisional data published on Thursday by the Bank of Spain, this latest decrease in the default rate comes after the cumulative unpaid loan balance in the sector decreased by more than €4,000 million (in December), to €134,327 million, in line with the drop in the total loan balance granted by all of these institutions, which decreased slightly to €1,327 billion, from €1,342 billion a month earlier.

The loan portfolio held by Spain’s financial sector has decreased by just over €53,000 million since the end of 2014, from €1,380 billion, as a result of the deleveraging performed by families and companies alike.

Meanwhile, doubtful debts have recorded a dramatic cut over the last 12 months, falling by €38,276 million from their balance at the end of 2014 (€172,603 million).

Moreover, the aggregate arrears recorded by banks, savings banks and cooperatives, excluding credit institutions (EFCs) also improved at the end of 2015, down to 10.20%, from 10.40% in November and 12.61% in December 2014.

In this case, the balance of doubtful debts also decreased to €1,274 billion, from €1,289 billion a month earlier.

In the case of credit institutions (EFCs), the percentage of bad debts decreased to 7.07%, its lowest level for seven years, since February 2009, after it had remained at 8.69% for three consecutive months.

The loan portfolio of these entities, whose main business is the financing of large consumer goods, such as cars, furniture, electronic goods and appliances, continued to grow, in line with the trend during the year, to reach €39,859 million.

By contrast, unpaid debts decreased to €2,818 million, down from €2,925 million, which allowed the decrease in the default rate.

Original story: Cinco Días

Translation: Carmel Drake

Real Estate Debt Decreases To €41,000M

21 December 2015 – El Economista

The clean up of the financial institutions and the reactivation of the economy are leading to marked decreases in the banks’ real estate arrears. At the end of September, loans granted to property developers had decreased to €41,621 million, a figure that has not been seen since the middle of 2010, when the process to restructure the sector began with the merger of the majority of the saving banks.

In just nine months, the volume of insolvencies relating to property has reduced by almost €13,000 million and the default rate has fallen to 30.6%.

Some of the decrease is due to the sale of unpaid loans that several entities have been carrying out to reduce their non-performing assets. These portfolios have been acquired by investment funds with significant discounts on their nominal values, with the hope of recovering the money and, thus, generating sizeable profits. Another factor that has reduced the amount of property developer debt is the exchange of debt for homes and land by the banks to lighten customer charges and to collect a portion of the loans granted.

Since the outbreak of the crisis, real estate financing has been weighing down on the Spanish financial sector. The number of insolvencies peaked in 2013, at €70,000 million, excluding the volume of loans transferred to Sareb by the entities that received state aid.

According to the data published on Friday, another one of the sectors hardest hit by the crisis, construction, has also been experiencing a significant decrease in its defaulting customers. After decreasing by €3,000 million this year, they now amount to €13,300 million, also returning to 2010 levels, and with a default rate of less than 30%.

The decrease in the default rate is happening in all of the production sectors, as well as in the mortgage sector. As a result, the total volume of unpaid loans being financed by the banks, savings banks and credit cooperatives decreased to €136,000 million in October, a volume similar to that recorded at the end of 2011. In nine months, this amount has decreased by €31,000 million. The default rate of the system as a whole has reduced to 10.6%, its lowest level since 2013, just after the European bailout.

The volume of loans granted by the banks, savings banks and credit cooperatives decreased by 3.5% between October 2014 and the same month this year, according to data published by the Bank of Spain.

The volume of financing granted to companies and families increased to just over €1.2 billion.

Original story: El Economista (by Fernando Tadeo)

Translation: Carmel Drake