Delinquency breaks with six months of moderation after the first rate hike
The delinquency of loans granted by Spanish banks broke in august the downward trend that it had held for the previous six months and did so after the European Central Bank (ECB) raised interest rates for the first time in eleven years in the euro zone; and after inflation peaked in Spain at 10.8% in July. Specifically, the default rate rose in August to 3.86%, from 3.85% the previous month due to the increase in unpaid loans in consumer finance companiesaccording to data published this Monday by the Bank of Spain.
The credit portfolio that was in force at the end of August totaled 1,225 billion euros, down from 1,233 billion the previous month, while non-performing loans had been reduced to 47,237 million, some 200 million less.
Compared to August of the previous year, credit delinquency has gone from 4.43% at that time to 3.86% in August 2022 and the doubtful balance has decreased by more than 6,300 million. In addition to the total data for the sector, the Bank of Spain publishes each month the aggregate delinquency of banks, savings banks and cooperatives (rural banks), on the one hand, and, on the other, that of consumer finance companies.
In this way, although in the sector as a whole it rose slightly, the non-performing loans of banks, savings banks and cooperatives remained at 3.77% in August, exactly the same rate as the previous month. Delinquency remained unchanged despite the fact that the credit portfolio was slightly reduced, to 1,174 billion, thanks to the fact that the balance of defaults did so in the same proportion, to 44,343 million.
As for consumer finance companies, the ratio, however, worsened, going from 6.28% to 6.30%, with a volume of doubtful loans of 2,705 million, slightly lower than the 2,728 million in July. The explanation for the rise is that the credit portfolio was reduced to a greater extent, to 42,907 million. With regard to the provisions or capital “cushion” with which entities face possible deterioration or insolvency, in August they continued to fall to 32,981 million.
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