Home » Business » S&P believes that Bankinter and Sabadell will be the hardest hit by damaged loans

S&P believes that Bankinter and Sabadell will be the hardest hit by damaged loans

Bankinter, Sabadell and Cajamar will be, according to S&P, the Spanish financial institutions that more may suffer from the deterioration of credit quality after Covid-19. This is highlighted by the credit rating agency in a report on the banking sector in Spain in which it points to the need for the financial market as a whole to increase its provisions during this year of 2021 before a increase in blackberry what could come to 9.5% by mid-2022, when the peak of this indicator is expected.

The aforementioned report indicates that the banks with the greatest exposure to SMEs, a group that includes the three entities, “They could see credit quality eroded further”, since it considers that this segment could be more vulnerable to a slowdown in the economy. The credit rating agency recognizes that the state guarantees provided mainly to SMEs -through ICO- have covered around 15% of corporate debt of the national entities, for which they indicate that these figures will be “manageable”.

It was recently own S&P the one that recognized that until now there had not been a general drop in ratings, although certain companies had been put on negative surveillance. Despite this, the short-term forecasts are not promising and the American expects more delinquencies in the sectors that have suffered the most from the pandemic, such as accommodation and restaurant services, retail trade, transport and leisure.

In this same sense, S&P considers that the business and consumer loan portfolios of Spanish banks are the most prone to defaults during 2021. According to its figures, business loans represent around 47% of the national loan portfolios of the banking system Spanish, in line with what we see in most other European banking systems. Instead, there are some actors, like Santander, Sabadell or Cajamar, which have a higher proportion.

The Spanish banks have spent months making billions of provisions to try to alleviate the economic consequences of the pandemic. On the other hand, for the American agency these will not be enough and during this 2021 they will have to put in the piggy bank even more amounts to avoid a blow when the peak of the arrears arrives, estimated for the last semester of 2022. This idea is endorsed by the Bank of Spain that through its governor, Pablo Hernandez de Cos, has manifested it on several occasions.

In this sense, and to prevent companies from reaching extreme debt levels, which would harm banks, the national regulator has recalled that sometimes it is better to refinance or capitalize debt before letting companies fail. Hernandez de Cos This Tuesday in the Hotusa Forum ‘Save tourism’ divided the companies into three types with independent recommendations for each of them.

The Bank of Spain advocates restructuring debt and giving direct aid to avoid bankruptcies and default to the banks

In the first place, there would be those companies whose demand is not going to change as a result of the pandemic but which are heavily in debt, so the recovery will be slower. For these types of companies, Hernandez de Cos recommends capitalization, restructuring or direct aid, avoiding bankruptcy and, as a consequence, damage to banks. This same solution is the one proposed for the second group of companies, those that despite losing demand can survive thanks to internal adjustments.

On the other hand, there is a third group, those companies that are not viable after the pandemic due to the structural changes in demand, for which the Bank of Spain indicates that “it does not make sense to maintain permanent support”, since it would mean wasting money public. With these movements, the banks and large creditor funds are already preparing a wave of restructuring to avoid an increase in arrears that damages the financial sector.

– .

Leave a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.