The bank closes the credit tap to the ‘hot’ sectors of the covid

Large Spanish banks order their teams to quarantine HOT clients: hospitality, leisure and transport (of passengers, not merchandise). Financial entities have been watching closely new loans to these segments and in recent weeks they have decided be even more cautious, given the economic uncertainties derived from the sixth wave of the pandemic, the supply crisis and inflation, according to financial sources consulted by this medium.

“We maintain a special prevention in the selection of risks of companies in the most damaged sectors, taking into account their historical, level of own funds compared to the leverage, profile of shareholders, adaptation to new modes of consumption … “, they point out from a medium-sized entity.

For example, CaixaBank reduced its loan portfolio to ‘hot’ sectors of the covid in 5,000 million during 2021, from 21,100 million registered in March (first accounts after the merger with Bankia) to 16,100 million last September. The Catalan entity has especially lowered the weight of the transport business.

The sources consulted indicate that this change in trend occurred mainly in the second half of 2021, due to restrictions on foreign tourism and the worsening of forecasts derived from the supply crisis and the rise in inflation.

“Those sectors (especially the HOT) that had had more aid, if this has not been enough to cover their needs, now face these more restrictive risk criteria“explains a banker consulted by this means. This greater restriction can translate into more expensive loans or less financing. In some countries like Germany, what banks automatically do is lower the ‘rating’ of customers one notch of sectors most affected: “In Germany there are entities that are analyzing the speed of recovery of borrowers depending on the sector of economic activity to which they belong. Given the lack of statistical evidence to estimate new probabilities of default by sector, the entities advocate applying ‘shocks’ in the ‘rating’ of borrowers that become economic capital surcharges. Are new grades they can have two implicit consequences: either they make it difficult to admit new operations for these sectors or they increase the cost of the operations “, explains Borja Sánchez, general director in Spain of the TNP international consultant.

This change in trend occurred especially in the second half of 2021, since until the middle of last year all the large entities except BBVA increased their credit to the HOT sectors: Santander, 35% more between December 2019 and June 2020, according to its prudential relevance reports; Sabadell, 11% more, and Bankinter, 31% more. In the case of BBVA, It is difficult to make the comparison because during this period the US business, sold this year, has gone off balance, but its financing figures for transport, tourism and leisure have decreased quarter by quarter.

The ICO effect

Part of the increase that some entities have registered in this field is mainly due to the ICO (Official Credit Institute) lines that were granted mainly in the spring of last year. Of the 122,000 million that banks have lent with collateral of the State in the last year and a half, 20% has gone to the HOT sectors. With this, the bank has managed to expand the financing lines of clients with the business touched and have transferred part of the risk to the ICO, which is the one who will have to assume the potential defaults.

Industry sources point out that companies in sectors such as restaurants, hotels and companies that depend on airlines have difficulties in accessing financing, and they are giving work to the ‘shadow banking’. The same sources indicate that small and medium-sized companies are the ones that suffer the most from this situation, since the large ones have greater negotiating power with the banks.

Banks brace for first losses due to supply crisis

Jorge Zuloaga

–

Along with the sectors most closely linked to hospitality, leisure and transport, in banking there is also a lot of concern with the car, touched by both the pandemic and the supply crisis. In fact, as this media announced, there are entities studying to assume the first provisions in this sector and in other industrial sectors due to the perception of “some worrying symptoms.”

“The strong mismatches between supply and demand that have been registered recently in the semiconductor and integrated circuit industry have had a very significant negative impact in the automotive sector, where many manufacturers have been forced to stop or cut your production plans“, exposes a recent report of the Bank of Spain.

Although the bank is reluctant to assume more losses for all the preventive provisions made in 2020Before the arrival of the covid, the signals that arrive from some sectors invite caution. This was stated a few days ago by the European Central Bank (ECB) in the publication of its supervisory priorities: “The general rebound in economic activity has contributed to the improvement in the outlook for the corporate sector, whose profits are recovering. However, the solvency risk could increase after the withdrawal of support measures, especially in the sectors of economic activity most affected by the pandemic. The commercial real estate it has especially suffered this impact and has registered a notable decrease in the number of operations and prices “.

–