The Bank of Spain today released preliminary data showing an increase in the default rate on loans granted by credit institutions in Spain. In May, the bad loan rate was 3.59%, marking the second straight month of gains after rising to 3.55% in April from 3.51% in March.
Although the non-performing loan ratio has increased, it is still below the level of May 2022, when it reached 4.18%. This could bode well for the ongoing economic recovery.
In absolute terms, the volume of non-performing loans in May was 42,815 million euros, an increase of 262 million euros compared to April. The total loan volume decreased again by EUR 8,572 million and is now EUR 1.19 trillion.
If we compare these figures with May 2022, we can observe a decrease in the volume of non-performing loans by 8,249 million euros, while the volume of total loans has decreased by 30,383 million euros.
It is important to remember that the numbers reflect a methodological change in the classification of Financial Credit Institutions (EFCs), which as of January 2014 are no longer included in the credit institutions category. Excluding this change, the non-performing loans rate in May would be 3.68%, considering that the loan balance that month was 1.161 billion euros, excluding loans from EFCs.
Looking at the data by type of company, we see that the default rate of all depository institutions (banks, savings banks and co-ops) was 3.49% at the end of May, slightly up from 3.44% in the previous month but still down from 4.08% a year ago.
The default rate for financial credit institutions, meanwhile, was 6.58% in the fifth month of the year, up from 6.58% in April but down from 7.15% a year earlier.
According to the Bank of Spain, provisions for all credit institutions rose to 30,868 million euros in May, up 122 million euros from April.
This data reflects the current situation in the Spanish banking sector in terms of non-performing loans and provisions. While default rates are rising, it’s important to note that they’re still below last year’s levels. This could indicate some stabilization in the sector and better credit risk control.
It is important that credit institutions continue to implement sound risk management measures and thorough analysis of borrowers’ creditworthiness to avoid a significant increase in defaults. In addition, it is important that businesses and individuals affected by the economic crisis continue to receive support to enable a speedy recovery and minimize the negative impact on the economy as a whole.
To sum up, the NPL ratio in the Spanish banking sector increased for the second month in a row, reaching 3.59% in May. Although the trend is worrying, crime remains below last year’s levels. This points to the need for strong risk management by banks and continued support measures to ensure a stable economic recovery.