The rise in interest rates and the recent turmoil in the European financial system as a result of the Credit Suisse crisis are leading Spanish banks to tighten the conditions for loans to companies, whose interest rates in some cases are already they have tripled in just one year.
Banking sources recognize this trend and explain that it is due to the fact that the entities “are now more cautious because there is a lot of uncertainty and the priority is to protect customers, which is done by providing responsible financing”. They deny that the faucet of loans to companies is being turned off, but they do agree with many analysts in the diagnosis: “Risks are increasing, demand is reversing and banks’ ability to lend is limited.”
The current situation in the markets is exacerbating the rise in debt prices that started in the middle of last year, with the rise in interest rates. According to the latest data from the Bank of Spain, the average rate of new loans to companies of more than one million euros for twelve months was 3.44% in January, three times more than the 0.96 % of a year earlier. When the money is lent over five years, the cost rises to 4.41%, compared to 1.08% in January 2022.
The employers’ association of small and medium-sized companies, Cepyme, reports that SMEs are suffering from a “strong credit restriction”, to the point that loans have gone from being equivalent to 19.8% of sales before the pandemic to around 14.7% now. Current interest rates, he notes, are at their highest level since 2015. The speed of credit tightening is the highest since 1995.
According to Leopoldo Torralba, deputy chief economist of Arcano Research, “banks are afraid after the episodes of the last two weeks, despite the fact that their solvency and liquidity situation is still very healthy”. “They realized that their liquidity risk was greater than what they anticipated”, despite being “well managed” and doing “their homework”.
Interest rates “won’t go much higher” in part because the turbulence these days has outpaced the effects of additional ECB hikes. Banks now have to look for more liquidity and, at the same time, fight for their profitability, which leads them to “lend less”, adds Torralba.
The volume of bank loans to companies already fell sharply in January, after standing at just 356 million euros in credits with more than five years of more than one million euros, when on average s they had approached 2,000 million euros per month until July of last year. The sharp decline is partly due to the fact that large companies have found better financing in the debt markets than among banks.
Smaller companies have also been able to finance themselves so far through ICO lines and guarantees, and are now waiting for the arrival of the part of the European funds channeled through credits, the amount of which is approaching 84,000 million euros and can allow them to avoid bank financing.
Meanwhile, the focus is on the health of the entities after the fall of Credit Suisse and the doubts surrounding Deutsche Bank. The governor of the Bank of Spain, Pablo Hernández de Cos, yesterday defended the solvency of European and Spanish banks after the episodes of the last few days, marked by “specific circumstances”. As on other occasions, he asked entities to be cautious and not stop providing risks, and he had more words for employers. “They are the ones who create wealth, generate employment and activate the economy”, he said.
After the turmoil in the markets last week, calm returned to the markets yesterday and the Ibex rose 1.29%, with the banks recovering. Santander advanced by 2.17%, compared to BBVA’s 2.07%, Sabadell’s 1.53%, CaixaBank’s 0.86% and Bankinter’s 0.59%.
The president of CaixaBank, José Ignacio Goirigolzarri, stated at the Wake Up Spain forum that the banks have an “enormous strength” and that the scenario in Spain and Europe is “radically different” from the North American one.
The president of BBVA, Carlos Torres, also spoke, who assured that he saw “the situation of European banking with confidence”.
