The NPL ratio rose in August to 3.86%, from 3.85% in the previous month due to the increase in unpaid loans in consumer finance, according to data published by the Bank of Spain.

The default rate on loans granted by Spanish banks in August broke the downward trend it had maintained for the previous six months and did so after the European Central Bank (ECB) raised interest rates for the first time in eleven years in the euro area; and after inflation peaked in Spain at 10.8% in July. Specifically, the NPL rate rose in August to 3.86%, from 3.85% in the previous month due to the increase in unpaid loans in consumer finance, according to data published by the Bank of Spain.

The outstanding loan portfolio at the end of August totaled €1,225 billion, down from 1,233 billion the previous month, while NPL had fallen to 47.237 billion, some 200 million less.

Compared with August of the previous year, NPL fell from 4.43% at that time to 3.86% in August 2022 and the balance of NPL decreased by more than 6.3 billion. In addition to the total data for the sector, the Bank of Spain publishes each month the aggregate NPLs of banks, savings banks and cooperatives (rural banks), on the one hand, and, on the other, those of consumer finance companies.

Thus, although the sector as a whole rose slightly, NPL ratio from banks, savings banks and cooperatives remained at 3.77% in August, exactly the same rate as the previous month. NPL remained unchanged despite the fact that the loan portfolio fell slightly, to 1,174 billion, thanks to the fact that the balance of defaults fell by the same proportion, to 44.343 billion.

In consumer finance, however, the ratio worsened from 6.28% to 6.30%, with a volume of doubtful loans of €2.705 billion, slightly lower than the 2.728 billion in July. The explanation for the rise lies in the fact that the loan portfolio was reduced to a greater extent, to 42.907 billion. As for provisions, or the capital buffer with which institutions face possible impairment or insolvency, they continued to fall in August to €32,981 billion.

Original Story: La Información | Newsroom 
Photo:Photo by Victor Iglesias from FreeImages
Translation and edition: Prime Yield