Spain | The banking sector — key to supporting recovery

More than year after the start of the pandemic, the number of non-performing loans (NPLs) in the Spanish banking system continues to fall, though at a slower rate than before.

Key points

• Key points:
• In the years up to the start of the COVID-19 crisis, the NPL ratio in Spain declined from 13.6% in December 2013 to 4.8% in December 2019.
• This trend slowed, however, with the arrival of the pandemic. Since December 2019 the NPL ratio has dropped—down to 4.5% in April 2021—due to the double effect of a slight increase in the stock of loans (+1.7% since December 2019) and the reduction of 3.9% in the volume of NPLs in the system.
• The main reason for this favorable trend in NPLs in Spain is the combination of the extraordinary measures launched since March 2020 to combat the crisis — especially those programs of state guarantees for business loans and the moratoria provided for certain mortgage and consumer loans.
• There is more likely to be a spike in household NPLs before those relating to corporate lending, as most of the moratoria granted to families are about to end around now or have already done so.
• Although the NPL rate has not risen since the start of the pandemic, the banks made heavy provision in 2020 (EUR 11.28 billion vs. less than EUR 4 billion the year before) for the expected loan impairment in the system, which, as we say, is yet to occur.

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