The figures highlight the increased stability in the Spanish banking sector.
Having received a positive endorsement during last year´s ECB stress tests, the system now has an efficient and effective way of managing toxic assets. That success is owed in large part to the creation of SAREB, the Spanish “bad bank”, which facilitated the transfer from bad loans balance sheets to a collective pool. The outcome has allowed Spanish banks to outperform other southern European states. Italy´s current rate of non-performing loans stands at 17% while the figure in Greece is 30%.
Indeed, the figures reflect a mood in the Spanish banking sector that NPLs are no longer the main concern for lenders. Improving profitability through lending is now seen as the greatest challenge to the industry. This week´s figures show that lending to small and medium sized firms and households increased in 2014, but a lack of demand from large companies for credit meant that overall lending in the Spanish economy fell by €64 billion in 2014, a drop of -4.6%.
The year ahead may see an improvement on that number following the announcement last month of the European Central Bank´s quantitative easing programme. The ECB announced it would pump as much as €1 trillion into the euro zone economy in a bid to get credit flowing again. The monthly purchase of €60 billion in sovereign bonds will commence in March.