The bank delinquency rate will rise in Spain to 4.6% in 2022, according to EY


The bank delinquency rate in Spain will rise to 4.6% in 2022 and will moderate to 4.5% in 2023, compared to 4.3% registered in 2021, according to the first report ‘European Bank Lending Economic Forecast’, prepared by EY on forecasts of bank loans in the eurozone.

These figures contrast with the average expected in the euro zone, where non-performing loans will stand at 3.4% this year and 3.9% next year.

For Spain, the firm has an expectation that mortgage loans will continue to increase in 2022 and 2023, although with “relatively mild” increases, of 0.5% and 1.4%, respectively, in line with the cautious attitude of Spanish banks “after the credit practices of the 2010 debt crisis”.

It also points out that, as in other eurozone countries such as Italy, it is likely that the costs of loans in Spain “are relatively sensitive” to the change in monetary policy of the European Central Bank (ECB), “which could be tightened by inflation”.

Regarding consumer credit, which fell 0.7% in 2020 and 1.4% in 2021, it is expected to grow again by 1.5% in 2022 and 0.7% in 2023. Specifically, it explains that the decline in consumer purchasing power could be offset by an increase in lending through credit cards or personal loans.

On the other hand, he also sees a reduction in loans to companies as likely compared to the rate recorded during the pandemic, when the loans were sponsored by public ICO guarantee systems.

In this regard, the consultant affirms that the “better prospects” due to uncertainty, inflationary pressure, the recovery in demand or sectors affected by the pandemic “should translate into improvements for business investment in 2022.”

“But, as some companies are paying down their pandemic-era debt, corporate debt growth is projected to slow to 2.3% in 2022 and 1.5% in 2023,” it adds.

The report explains that non-performing loan ratios in Spain fell during the pandemic due to the protective effect of ICO guarantees, falling to 4.3% in 2021. In addition, the risk of an increase in loan losses should be mitigated by the “healthy financial position” of households and businesses, which in 2021 was equivalent to 107% of GDP, around 1.3 trillion euros.

Thus, it indicates that the higher proportion of mortgages –which would traditionally register lower default rates– and the “high standards” of bank loan credit –90% with loan ratios below 80%– would help in this regard.

On the contrary, it indicates that debt positions increased in the sectors most exposed to the effects of the pandemic, such as hotels, leisure or transport, so “the vulnerabilities are greater”. “Delinquency has begun to increase in consumer credit, accommodation and restaurants, and in loans subject to overdue moratoriums and public guarantees,” he adds.