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April 23, 2021

Spanish bad loan ratio hits new record

The banking sector in Spain has suffered another setback with the bad loan ratio in lenders’ books climbing to a new high, Wall Street Journal informs. The negative trend is a result of more defaults by households and firms. The proportion of non-performing credits weighing on Spain’s banking sector reached a record of 11.7 percent in June amid an unabated wave of individuals and small and medium-sized companies defaulting as recession lingered on in the debt-stricken southern European nation.
The country’s central bank announced recently that bad loans totaled EUR 176.4 bln, up from EUR 170.21 bln a month earlier. Back in 2007 – before Spain’s property market collapsed – the ratio stood at just 1 percent and has increased steadily since, with the nation being in recession for most of the past four years. Spain had been forced to apply for a huge bailout package for its bank. Ballooning budget deficits and the EUR 40 bln bank rescue measure have increased debt levels further. In June, public debt amounted to EUR 943.7 bln, or 90.2 percent of the nation’s gross domestic product (GDP).
The government hopes its austerity measures and labor market reforms will enable the country to struggle out of recession later this year, but international experts appear less optimistic. Some Spanish banks at least have made big strides in leaving their crisis behind them. Santander, for instance, reported a half-year surplus of EUR 2.3 bln, a rise of 29 percent.

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