The Spanish banks are monitoring about €50 billion in loans guaranteed by the Official Credit Institute (ICO) granted to companies from problematic sectors, for fear of non-payment. This is the equivalent to one out of every two euros lent by the sector with the public guarantee, according to data handled by the consultancy firm Axis Corporate.
The firm points out that 50% of the total financing provided with ICO guarantees is concentrated in five economic sectors that, by their nature, “have been significantly affected by the pandemic”.
Specifically, of the €50 billion, €14.8 billion come from the tourism, leisure and culture sector, €10.7 billion from the construction and infrastructure area, €8.8 billion from business and professional services, €8.2 billion from capital and industrial goods and €7.6 billion from food and beverage distribution.
The data compiled by Axis Corporate warns that part of these credits “are deteriorating quite rapidly”. Thus, it points out that in the sectors most affected by the pandemic there has been an increase in the rate of doubtful credit of 30% compared to the previous half-year (with data to half of 2021) and expects this growth to continue to increase in the coming months, which would explain why the Bank of Spain has been reluctant to financial institutions to release provisions.
In addition, Axis Corporate has found that more than 40% of the companies that have requested ICO guarantees to meet their obligations required changes of term and/or grace period, as they were unable to comply with them, and the payment time in the private sector “has grown significantly” throughout 2021, to stand at over 90 days.
“Although this delay in payment has become commonplace in our economy, 27% of companies see the viability of their business compromised if payment delays become structural. Another particularly worrying figure is found in the ratio of non-payment of invoices, which has risen from 3.1% in 2019 to 5.4% in 2020 and 4.8% in 2021, which, if not corrected, would mean an increase in the non-fulfilment of companies’ financial obligations”, the consultancy firm warned.
Axis warns that this situation is aggravated by the current economic situation, with inflation soaring, energy costs at record highs and the war in Ukraine.
Although the government is planning to make available to the most affected sectors another line of guarantees amounting to €10 billion of the €36 billion still available from the line of guarantees of the coronavirus, as well as extending the maturity of loans guaranteed by the ICO and the grace period for the most affected sectors, the firm argues that, “if there are no drastic changes in the economic environment, these measures may only succeed in delaying beyond the second quarter of 2022 the massive influx of defaults”.
Original story: Europa Press| Europa Press |
Photo:Photo by Pablo Rodríguez on FreeImages
Translation and edition: Prime Yield