Rising interest rates and persistent inflation continue to undermine the ability of individuals and businesses to repay debts, at least for now. Bank delinquency has been on the rise for two months, but its progression is measured in hundredths and does not prevent this indicator from continuing at its lowest levels since the end of 2008, according to data released yesterday by the Bank of Spain.
Doubtful loans, which are those with at least three months of non-payment of principal or interest, stood at 3.59% in May. It is one hundred and four hundredths higher than the previous month and not far from 3.51% in March, when this variable was at its lowest level in nearly fifteen years.
The current levels contrast with the 4.5% that, according to the forecasts of analysts such as EY, would be reached in 2023. They are also a long way from the 7.79% that was reached in 2017 or the 4.51% that preceded the outbreak of the pandemic.
Apart from customer discipline when it comes to repaying loans, Spanish banks have been getting rid of portfolios of problematic loans, known as NPLs, in recent years to reduce the risks on their balance sheets. The Alvarez firm
The new delinquency figure is made public just three days before the European Central Bank (ECB) tackles a possible new interest rate hike of a quarter of a point, up to 4.25%, at which point it should reach what its president, Christine Lagarde, has described as “cruising altitude”. This week the Federal Reserve also meets to predictably raise the price of money to a fork between 5.25% and 5.5%.
The May data put doubtful loans at 42,815 million euros, a figure slightly higher than the 42,553 million a month earlier and 17% lower than that of the same month in 2022. Just five years ago the volume of loans in this situation was close to 100,000 million euros.
The increase in bank delinquency is one of the elements that the ECB observes in the face of the review of its monetary policy, in which the main objective remains to reduce inflation below 2%. Despite the containment of delinquencies, the credits subjected to the most risk, the NPLs, are already in the euro zone at their highest level in ten years, according to the estimates of the same institution.
Delinquency also goes by neighborhoods. The Bank of Spain shows that, in the case of banks and old savings banks, it stands at 3.49%, while among financial establishments it grows faster, up to 6.58%.
