The Spanish bank dodged a first impact of credits guaranteed by the ICO. Entities and supervisors were watching for a possible rebound in defaults in the second quarter, since between April and June the relief measures (moratoriums and gaps in the payment of credit principal) expired for a large part of the companies which have received funding during Covid-19. 19 pandemic. But far from experiencing a rebound, the major banks have reduced the volume of non-performing loans and improved the level of coverage.
And it is that, until March, the majority of the beneficiaries of these credits only paid the interest. This measure was put in place with the intention that during this period they would recover their billing levels and this would allow them to more comfortably meet their payment obligations later on. Due to the normalization of economic activity, containment measures are gradually ending. For this reason, both the Bank of Spain and the European Central Bank (ECB) have in recent weeks asked banks to be cautious in order to preserve capital until they take the pulse of the payment capacity of businesses.
According to the half-yearly results presented last week, all major banks have reduced the default rate. In this sense, Santander Spain is the bank that has reduced the delinquency the most in recent quarters (239 basis points compared to June 2021), so much so that it fell from 6.22% to 3.83 %.
For its part, BBVA Spain fell from a non-performing loan ratio of 4.2% in June 2021 to 4% at the end of the first quarter (20 basis points). Likewise, CaixaBank improved its delinquency level by 40 basis points to 3.2%, well below the average for the entire sector in Spain. Of the total volume of ICO-backed loans granted by the Catalan bank, 23% have already been repaid or cancelled. And of the remaining amount, 85% have already completed the grace period. According to the bank’s data on the total balance initially granted, 3.7% is classified as overdue.
Sabadell Spain closed the first half of the year with a default rate of 4% compared to 4.23% a year ago. Although he did not detail the ICO loan default figures, he explained that “there are no signs of deterioration” and in fact he expects a second half with a cost of lower risk.
For its part, Bankinter closed the half-year with a default rate of 2.11% after having lowered it by 23 basis points over one year.
Beyond the big banks, medium-sized entities have also reduced the size of their bad debt portfolios. In fact, Kutxabank is the bank with the lowest level of delinquency in the sector, at 1.38%, having lowered it by 57 basis points compared to June 2021. According to data provided by the entity, the delinquency rate in the credit portfolio guaranteed by the ICO is 0.9%.
In the case of Ibercaja, the effort to reduce its default portfolio has been more notable: it went from a non-performing loan ratio of 4.6% in June 2021 to 3.3% at the end of the first half of 2022 (-130 basis points) . .
In the case of Abanca, the Galician entity is positioned with one of the lowest ratios in the sector, 2.1%, despite an increase in this indicator of 20 basis points in the last 12 months. Of the 3,607 million that the entity has granted in loans guaranteed by the ICO, only 2.2% are doubtful.
In the case of Unicaja, the NPL ratio increased slightly (30 basis points) to 3.5%. The entity also specified that 94% of the credits guaranteed by the ICO have completed the grace periods without any signs of deterioration having been identified.
In 2020, the bank has planned billionaire provisions to deal with a possible deterioration due to Covid and they have not yet been released as a precaution. But in addition to having lower and lower levels of delinquency, banks have also increased their coverage levels to deal with these defaults. Thus, the entities have coverage rates ranging from 42.5% at Sabadell Spain to 115.8% at Kutxabank.