The current insolvency situation is changing the credit market. The number of bankruptcies of companies with a turnover of 5 million euros or more has increased by 60 percent in the past six months, according to the FCF Interest & Credit Monitor Q1/2024. The reason for this is an interplay of many factors: the persistently gloomy economic situation, high inflation and the rapidly rising and sustained high financing interest rates (Euribor + bank margins). The increased number of corporate bankruptcies is now slowly also showing up in the banks’ loan portfolios, as the credit monitor shows.
Experience has shown that bankruptcies at the financing banks only have an impact on their non-performing loan ratio or loan default rate with a time delay. However, the proportion of non-performing loans has been rising again significantly since the third quarter of 2022, as data from the ECB shows. In March, the NPL ratio averaged 1.61 percent. The same trend is evident in the eurozone. “The NPL ratio will roughly follow the insolvency ratio and will tend to rise even further this year,” estimates Kai Frömert, Managing Director at FCF.
