MADRID, 5 (PRESS EUROPE)
Financial delinquency in Spain will stand at 4.5% in 2023, while bank lending will decrease by 1.3%, according to the report ‘Ey European Bank Lending Economic Forecast’, prepared by EY and which includes forecasts on the financial system of the euro area for the next few years.
One month from the end of the year, the company believes that the volume of bank loans to businesses and households in Spain will decrease by 0.2% for the whole of 2022, while non-performing loans will close at around 3.9%. It should be recalled that in May, the consultancy forecast that the bank default rate would rise to 4.6% this year, although through September this metric stood at 3.79%, marking its lowest level since December 2008.
Beyond the contraction in lending in 2022 and 2023, the report predicts that the volume of bank lending to the private sector will recover from 2024, with a 2% increase. As for delinquency, EY believes it will continue to gradually increase to 5.5% in 2026, although these are “far” figures from those reached in the last financial crisis.
By line of business, the advisor expects loans to non-financial corporations to decline by 2% next year, consumer loans by 1.1% and mortgage loans by 0.6%.
On the mortgage market, the report ‘reprises’ the agreement signed between the government and Spanish banks to support people who find it difficult to pay their mortgages due to the increase in interest rates. In this regard, it should be noted that recent data from the report on loans from the European Central Bank (ECB) suggest that the weakness in the demand for mortgages in Spain is less marked than in Germany and France.
“Unlike its European counterparts, Spain has a high exposure to ECB rate hikes, as around 90% of mortgage holders in Spain have floating rate contracts. At this point, it is worth noting the ‘agreement reached in weeks by the government and the financial sector to mitigate the impact on the most disadvantaged consumers of these increases,” commented EY Spain’s partner in charge of the financial sector, Pedro Pérez.
As in major eurozone countries, EY expects a return to growth in all forms of lending in 2024 in Spain, with a 1% increase in mortgages, 2.6% in consumer loans and 2.8% in business loans. It also expects total lending to grow 3.4% in 2025 and 2.8% in 2026.
Compared to the current economic situation, the report highlights that, compared to other European countries, Spain is less exposed to possible gas shortages, although it does not exclude the impact of high energy prices, weakening consumer confidence and the high inflation. Despite this, the consultancy firm believes that the Spanish economy will grow by 0.8% in 2023.
Perez says Spain will face a “mild recession” this winter due to high energy bills, tough financial conditions, lower consumer confidence and high inflation. “The impact of the slowdown and likely increase in delinquency on financial institutions’ P&L accounts remains to be seen, although we believe Spanish firms are better prepared to address these macroeconomic externalities than they were a few years ago,” he added.
