Spanish banks' secular lending contraction coming to an end

Loans by Spanish banks may start growing again, says Scope Ratings, after several years of contraction. But the rating agency expects volume growth to remain moderate for the foreseeable future.

Despite the widely reported pick-up in new loan production and the generally bullish tone of many banks, outstanding loan volumes continued to decline in 2017, albeit more slowly. This was driven by repayment and amortisations of old exposures, mainly residential mortgages.

From peak annual growth of over 25% before the crisis, Scope calculates that performing loan growth gradually decelerated and went negative, as severe as -14% in 2013. Since then, the contraction has eased. Performing loan volumes were essentially flat in 2017.

BBVA’s (A+, Stable) loan production in Spain (+10.4% for businesses +34.7% in consumer finance) was offset by a reduction in mortgage and public-sector portfolios. Performing loans under management in Spain fell 1.1% year-on-year.

An increase in new loans in Spain at Santander (AA-, Stable) relative to 2016 – positive across principal segments especially consumer and SME lending – was offset by a decline in mortgage lending. The overall balance was down 2%.

Bankia (BBB+, Stable) said customer loans fell 2% (excluding BMN) although new mortgage, consumer and SME loans helped offset the gross decline in the stock of mortgage lending.

“As to when exactly loan books will start accelerating again; that is anyone’s guess. It will depend on macro factors, regulatory considerations and demand for credit. Spanish households and companies continue to struggle with higher debt than the Eurozone average as a percentage of GDP”. said Marco Troiano, bank analyst at Scope Ratings.

“Till then, fast top line growth can only come from market share gains. But garnering market-share gains is a zero-sum game,” he added

Next Finance March 2018


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