The number of defaults will in any case be manageable for the entities. The consultancy firm EY calculates that the ratio will increase to 4.5% in 2023
Spanish financial institutions have managed to weather the blow of the pandemic in the pockets of households and businesses with millimeter-controlled delinquencies with a ratio of around 3.79% at the end of September, a far cry from 4.3 % in which the year started . However, the industry is starting to see some deterioration in some of its loan portfolios, “more with companies, especially SMEs, than with individuals,” they noted from a national financial institution.
While top bank executives have remained calm about the situation in recent weeks, assuring that even if bankruptcy rates rise in 2023, it will remain at an “acceptable” and “usual” level for the industry, there are some concerns about the impact that inflation will have. has on the costs – especially the energy costs – of the companies that, moreover, have not yet fully converted to their final selling prices.
In this scenario, and according to the Bank of Spain’s latest bank lending survey, the entities have been restricting access to credit for months, applying higher interest rates and imposing tighter requirements in the concession. And so they plan to continue avoiding risks such as those already pointed out by the European Central Bank (ECB) in the coming years.
In a recent financial forum, the vice president of the institution, Luis de Guindos, explained that “when one looks at the profitability of certain sectors, especially SMEs, a significant deterioration is observed.” Something that, if it continues, “will have an immediate impact on the financial industry.”
The CEO of Banco Santander, José Antonio Álvarez, is one of the industry executives who has directly pointed to this problem. “Our most sensitive challenge in Spain is concentrated in the world of SMEs, because if the economic outlook materializes, some will face a more stressed environment and we must be prepared to finance by controlling our balance,” said the number two of the bank in the same days
The entities claim to have the situation under control. But they are aware that there will be many companies that have survived these years thanks to measures such as loans guaranteed by the ICO and moratoria, there will be defaults. Especially in the sectors most affected by the rise in energy costs.
According to the European Bank Lending Economic Forecast report published by EY on Monday, the volume of bank lending to companies and households will fall by 0.2% this year due to this situation, with a further 1.3% in 2023. the deterioration in demand due to the energy crisis, weak consumer confidence and high inflation.” At the same time, financial delinquencies will reach 4.5% in 2023, compared to the expected 3.9% for the end of 2022.
Experts point out that the figure would continue to grow gradually to 5.5% in 2026. Figures that are at least a long way from the highs of the previous financial crisis and also from the feared 10% levels that predicted worse omens in the first months of the pandemic.
By activity, loans to non-financial corporations are expected to fall by 2% next year, consumer loans by 1.1% and mortgages by 0.6%. “Spain is facing a mild recession this winter due to high energy bills, tight financial conditions, lower consumer confidence and high inflation. The impact on financial institutions’ income statements from the slowdown and likely increase in delinquencies remains to be seen, although we believe Spanish companies are in a better position to cope with these macroeconomic externalities than a few years ago”, says Pedro Pérez, partner responsible for the financial sector of EY Spain.
Source: La Verdad
I’m Ben Stock, a journalist and author at Today Times Live. I specialize in economic news and have been working in the news industry for over five years. My experience spans from local journalism to international business reporting. In my career I’ve had the opportunity to interview some of the world’s leading economists and financial experts, giving me an insight into global trends that is unique among journalists.
