October marks a new low level of NPLs in Spain

Spain banks in 2018Metro station of 'Bank of Spain' with the building under construction in the background.

Spanish banks NPLs ratio fell to 8.22% in October, over one percentage point lower than a year earlier. Recently published figures from the Bank of Spain show that the pace of the decline in NPLs accelerated in October, registering an anual 12.52% drop (-11.64% in September).

As is the case in the last few months, the decline in the NPLs rate would have been much greater if households had stopped adjusting their debt. The outstanding loans balance fell 1.45% on an annual basis in October, but over half a percentage point below the decline in the previous month. In short, it’s increasingly obvious that the double-digit rise in new loans will end up compensating for households’ debt reduction, leading to an increase in the outstanding balance.

NPLs have been one of the consequences for the banks due to losses in the real economy during the crisis. The social measures taken by the banks to facilitate payments to households in difficulty, an active strategy for cutting unproductive assets and the improvement in the economy are fundamental for reducing the amount of NPLs.