The measures promoted by the sector and the Government have helped keep delinquencies at bay since the coronavirus crisis broke out. But the end of the moratoriums granted to clients to meet their loan installments raises concerns about a rise in bad debts in the near future.

The first entities that have begun to notice and for the purpose are the consumer loan establishments , companies that for the most part belong to banks, car manufacturers and department stores. According to data from the Bank of Spain, the doubtful assets of financial companies have shot up 54% in just two months (March and April), going from 2,265 million to 3,496 million euros . In this way, the downward trend that they had maintained since June of last year has been broken.

With this escalation and the decline in the volume of assets, as a result of the low activity to date due to restrictions, the delinquency rate of credit institutions has shot up to 7.2%, a figure that contrasts with 4 , 7% February .

Experts and the sector trust that the recovery that began in May , with the culmination of the state of alarm and the vaccination campaign against Covid-19, will allow, on the one hand, to increase the rate of concession and, on the other, to alleviate the rise in bad debts.

In fact, the different projections on non-performing loans have experienced substantial drops throughout the pandemic. In general terms (including mortgages and business financing), initial estimates suggested that the doubtful debt ratio in the financial sector was going to reach double digits and close to 12%. The latest forecasts set this threshold at 7% -8% .

Likewise, activity has already started a small comeback, although it still registers significant declines. In May, the latest data available, new consumer financing fell 17% compared to the same month in 2019, to 2,500 million. It must be taken into account that in May of last year there was a total limitation of mobility and only 1,300 million were granted for the acquisition of durable goods and leisure, that is, 58% less than in the same month of the previous year.

Activity and results
The decline in business is being reflected in the decline in assets controlled by consumer finance companies . If just before the pandemic, these entities had total assets that exceeded 60,000 million, currently the amount is below 49,000 million. This decrease is due to the low origination of loans and the maturity of a significant part of them. This type of credit tends to have shorter maturity terms than others and in many cases they do not even reach twelve months.

This whole situation has led to a sharp drop in the profits obtained by the establishments . In the first four months of 2021, its profits stood at 158 ​​million euros, which represents a decrease of 26% compared to the period January-April 2020. Last year the result of consumer finance companies reached 715 million, that is, 24.5% lower than the accumulated in 2019..

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