The problem loans of the big banks directly under ECB supervision totalled close to 1 trillion euros at end-2015, although they declined to 921 billion in September 2016 (almost 9% of the euro area’s GDP), according to the data disclosed by Vítor Constâncio on February 3. But the problem is that this figure is not distributed homogeneously across the banks.
One of the pending adjustments involved in the process of exiting the crisis is related to damaged assets, mainly property. This phenomenon has prevented the Spanish banks from showing off the huge restructuring efforts they have made with better figures.
The Spanish banking sector earned 28% less in the first six months of the year, it has profitability problems and has seen almost half of its stock market value wiped off in the last two years. But there are two indicators which inspire optimism in the medium-term: bad loans continue to fall and there has been a strong rise in consumer credit as well as in lending to non-property companies.
José Luis M. Campuzano (Spanish Banking Association) | Spanish lenders’ bad loans fell 18.2% to 118.159 billion euros in June from a year earlier, registering their lowest level since 2010, according to the Bank of Spain.
Spain’s banks currently have on their books something close to 213 billion euros in property risks (assets and loans). Is that a lot or not? Judging by the recent reports from the Bank of Spain or Moody’s, the total is rather worrying: and we are not talking about small change but about the fact that our lenders still have an amount of property on their balance sheets equivalent to 20% of GDP.
Jens Bastian via Macropolis | The rising volume of non-performing loans (NPLs) across various eurozone countries, in particular in southern and southeastern Europe, has been a constant challenge for policymakers in recent years. Moreover, their high NPL levels on bank balance sheets have impaired the asset quality of domestic lenders and necessitated an increasing amount of provisioning, thus binding up valuable capital that could otherwise be lent to the real economy.
UBS | Il Messaggero published yesterday a draft memo with some details of Atlante, the system -wide fund that has been created to secure banks’ recapitalisations and purchase NPLs.
The Spanish banks’ non-performing loans (NPLs) ratio fell to 10.35% in November (10.56% in October), with total bad loans standing at 138.894 billion euros. But this simple figure encapsulates the eternal problems of statistics. The fact is that the average NPL figure provided by the Bank of Spain does not reflect the significant differences between the banks.
The Italian banks’ share prices have taken a beating recently on rumours – partially confirmed – that the ECB has contacted some of them regarding their bad loans. And now some of Spain’s domestically-focused lenders are suffering from a contagion effect, posting losses and underperforming as the scepticism spreads to their own NPLs situation. Banc Sabadell analysts highlight that “the risk of the ECB introducing new provisions or reclassifying NPLs would, in general, not make a lot of sense.”
The indicators on credit risk are showing clear signs of improvement. The NPL ratio for the whole of the banking system fell to 11.0% in June (vs 12.5% in December 2014), the lowest level since April 2013.