The volume of non-performing loans (NPL) held by banks on their balance sheets at the end of May was €42.353 billion, an increase of €212 million compared with April, bringing the ratio to 3.60%, slightly above the 3.59% of the previous month, according to the latest data published by the Bank of Spain.

Compared with May 2023, there was a fall in the volume of NPL of €475 million, with a ratio of 3.59%. The difference between one year and the next is therefore due to the fall in the total balance of credit, which increases the proportion of NPL among all the credit that the bank has.

Specifically, at the end of May, the total credit balance stood at 1,174 billion, a reduction of €430 million compared with April. Compared with May 2023, the volume of bank credit has been reduced by €16.969 billion.

The data broken down by type of institution show that the doubtful assets ratio of deposit institutions as a whole (banks, savings banks and cooperatives) closed May at 3.49%, two basis points higher than in April and the same level as in May 2023.

In May, this type of institution recorded a doubtful assets portfolio of €39.073 billion, €170 million more than in April and €698 million less than in May 2023.

Credit financial institutions saw their NPL ratio rise in May to 6.64%, compared with 6.58% in April.

In absolute terms, the volume of doubtful loans of this type of institution was €2.98 billion at the end of May, 41 million more than in April. Compared with the end of May last year, the doubtful balance has been reduced by €313 million.

According to data from the Bank of Spain, provisions for all credit institutions stood at €29.984 billion in May, a decrease of €51 million compared with April. Compared with a year earlier, provisions fell by €885 million.

Original Story: Bolsamania | Author: Europa Press
Edition and translation: Prime Yield

Cerberus Capital Management LP is one of the frontrunners to buy a Spanish bad loan portfolio worth more than €2 billion from Hoist Finance AB, according to people familiar with the matter.

The process is in final stages and expected to close by late July, according to the people, who cannot be named as discussions are private. Cabot Credit Management Ltd and Kruk SA are also vying to acquire the assets, according to the people. 

Officials for Cerberus, Hois, Kruk and Cabot declined to comment. 

Hoist is a long-term investor in the Spanish credit sector and the country is its third largest market by assets, at around 16%, after Italy and Poland. The Stockholm-listed company recently agreed to buy a €270 million portfolio of non-performing mortgages (NPL) from Banco Santander SA, Bloomberg reported.

The sale being negotiated with Cerberus is part of Hoist’s strategy to regularly sell assets to free up balance sheet for new deals.

Cerberus is also in the process of trying to acquire about €7 billion in European bad loans from Norwegian debt collector Zolva Group. The loans are mostly from Spain and Norway.

Original story: BNN Bloomberg | Author: Jorge Zuloaga
Edition: Prime Yield

Defaults in consumer credit have once again experienced an upturn that puts banks on their guard. There are several portfolios of doubtful loans on the market to reduce the NPL ratio, which has once again exceeded 7% and has reached the highest level in eight years.

This is shown by the latest data from the Bank of Spain on doubtful loans in financial credit establishments (EFC), which go up to April. These institutions specialise in consumer credit. Although not all consumer credit is in this niche – some banks channel it without CFCs – it is the best approximation for assessing the trend and health of the segment.

Since the covid crisis, the delinquency rate of SCIs has been on an upward trend, although it is gradually experiencing a significant decline, which can be explained by the sale of doubtful portfolios by these institutions to opportunistic funds that buy unpaid loans at a discount. In this case, the discount applied can exceed 90%.

The latest statistics point to a new increase in non-performing consumer loans, up to €3,060 million, compared with €2,852 million in the same month of the previous year. There has been a year-on-year increase of 7.3%, and the NPL ratio has risen to 7.18%, the highest level since May 2016.

On several occasions over the past four years, NPLs have touched 7%, but have always been reduced afterwards by the loan drain. On this occasion, the increase in NPLs can be explained both by the rise in NPLs and by the fall in the total volume of outstanding credit of SCIs, which acts as the denominator, and which fell by €1,111 million between March and April, to €42,638 million.

The Bank of Spain has observed this further deterioration in consumer credit quality, although it is not alarming. As the deputy governor and acting governor, Margarita Delgado, pointed out at the APIE forum in Santander, there has been an 8% increase in loans under special surveillance in consumer lending.

 Consumer credit is always the first warning sign of a possible worsening of the stock of loans on banks’ balance sheets, as households always default sooner, in case of need, on a contract of this type than on a mortgage. These are loans with higher rates and without collateral.

In the banking balance sheet as a whole, the overall NPL ratio remains contained, and in April stood at 3.6%, with a volume of non-performing loans of €42,141 million, compared with a total outstanding stock of €1.17 trillion.

Original Story: El Confidencial | Author: Óscar Giménez
Edition and Translation: Prime Yield