The credit tap will continue to lose flow in Spain during the fourth quarter of the year, according to the banks’ forecast. Its forecast, collected in the latest survey of bank loans prepared by the ECB at the European level, is that at least until December there will be an additional reduction in both the supply and demand of loans.
Its forecast is the result, on the one hand, of the latest rate increases, already at 4.5% after the decision adopted by the central bank in September, and on the other hand, of the economic slowdown scenario, which is already detracting from the momentum of consumers. . The Government’s forecast is that growth will go from 2.4% this year to 2% in 2024.
With the new tightening of banking conditions, there will now be seven quarters of deterioration. The Bank of Spain points out that the worsening expected until the end of the year will not be more intense than that of the third quarter, while the ECB points out that between July and September the behavior of credit was somewhat worse than expected.
The diagnosis offered by Spanish banks of the current situation is not very different from that of the rest of the economies in the euro zone. 58% of Spanish entities have detected a lower demand for loans to companies in the third quarter, only behind 73% in Italy, while, in the case of home purchases, the percentage of entities that report a contraction is, along with France, the highest in the environment, at 60%.
What is expected for the fourth quarter in Spain is an additional reduction in credit supply and demand in the three categories analyzed, which are companies, mortgages and consumption. In Spain, demand for consumer loans has fallen between July and September at a faster rate than in Germany, Italy and France.
“The tightening of credit from 2022 is already substantial,” says the ECB, which takes for granted the “weakening of credit dynamics.” This trend is a direct consequence of interest rate increases, although their intensity is key to the decisions made by the central bank in the future.
The tightening of financing conditions for companies in the third quarter of the year in Spain was similar to that of the previous quarter. Many companies have ICO loans and are not so in need of resources now.
However, the Bank of Spain warns that the tightening of conditions in the mortgage and consumer loan segment increased during the third quarter.
The greater restrictions on the credit tap, he indicates, not only respond to rate increases, but also to “a lower tolerance for risks, and, to a lesser extent, to the deterioration of liquidity.” At the end of the first half of the year, banks had to return the loans on advantageous conditions that the ECB had provided them during the pandemic, known as TLTRO.
The Bank of Spain also warns that the percentage of rejected credit applications increased again in the third quarter in all modalities.
The survey among banks shows that the decline in demand is mainly due to the increase in the cost of financing. Among companies, lower investments also weigh, while among households it is lower consumer confidence, greater use of savings and worse prospects for the housing market.
The small consolation for consumers is that during the third quarter there was a “slight decrease” in commissions. For banks, the worst news is that the current scenario includes “the need to provision for certain risks and the possibility of capital losses.”
