Bank of Spain warns of a "slight increase" in loans under special surveillance in the first quarter

MADRID, 4 Jun. (EUROPA PRESS) -

The Bank of Spain has warned of a "slight increase" in loans under special surveillance, also known as 'stage 2', in the first quarter, since the ratio of these loans stood at 7.2 at the end of March % compared to 7.1% registered at the end of 2022.

This was reported by the General Director of Financial Stability, Regulation and Resolution, Ángel Estrada, who participated this week in the 'NPL Days Spain' held in Madrid. He has also indicated, in this regard, that loans classified as 'stage 2' and whose purpose is other than home purchase have shown an "upward trend" during the period.

However, in terms of doubtful loans, classified as 'stage 3', from banks - that is, taking into account only deposit institutions and excluding financial credit establishments - they fell by 3.37% up to 38,916 million euros, compared to 40,277 million in December. In this way, the doubtful debt ratio was 3.4% at the end of March, compared to 3.5% in December and 4.2% at the end of 2021.

In the same presentation, the Bank of Spain indicates that there has been an "extraordinary" amortization in the portfolio that banks have of loans guaranteed by the ICO, which means accounting for 75,300 million euros

However, the credit quality of ICO loans worsened in relative terms, reaching a ratio of 8.2% in March, compared to the previous year, although the supervisor explains that this increase is due to the significant reduction in the 'stock' of these loans. In addition, he points out that the rate of credits under special surveillance of this portfolio has decreased.

On the other hand, the supervisor has indicated that credit had fallen by 1.3% in the interannual rate in March 2023, 0.6 percentage points more than in the fourth quarter of 2022. This decrease was somewhat more pronounced for households that for companies, and this despite the notable reduction in credit activity to SMEs.

However, new credit continued to grow, with an increase of 14.8% in the first quarter, although its progress moderated in recent quarters. In addition, the Bank of Spain points out that new operations signed with households fell, a segment that a year ago was "the most buoyant".

Likewise, the loan amortization rate accelerated in almost all segments, something that the banks themselves already conveyed in the presentation of their accounts for the first quarter.

The supervisor has explained that, in the case of mortgages, this higher repayment rate mainly affected loans with variable rates, although it also extended to fixed-rate mortgages. He has also highlighted that this situation is more pronounced among households with higher incomes.

Regarding the repricing of credit portfolios, he estimates that close to 35% of variable mortgages that were 'alive' in December will see their interest rates rise by at least three percentage points during the year, following the upward trend of the Euribor.