Last September was a historic month for consumer finance companies in Spain, since they added a profit of 177 million. It is a worthy figure since it is equivalent to the benefits accumulated in the whole of the previous eight months.
It’s more, manages to far exceed the monthly average of 70 million that was obtained in the period prior to the outbreak of the crisis. However, however large the September figure is, it must be recognized that it does not offer a solid basis to conclude that we are facing a sign of a reliable recovery in household demand. Sudden and large improvements of this nature often occur just after some unexpected event that profoundly altered the statistics. This is what happens with consumer credit in a year like 2020 in which there was a period (between April and June) of constant losses and there was even a month (July) in which the gains were zero. The means to which the sector has to resort to revive demand must also be taken into account. It is no coincidence that, according to the Bank of Spain, this type of loan has an interest rate of at least ten years (less than 8%). And, above all, it is urgent to consider the quality of the new credit that is being released. The rate of defaults dragged by consumer finance companies reached more than 7% during confinement and is still at 6.6%, with the prospect of growing again at the end of the year.
Financial companies show a historic September in profits that will be difficult to sustain over time
Overall, therefore, it is very hasty to expect an improvement in household demand. Quite the contrary, the harsh effects of the second wave of Covid threaten to push it back even further, causing new problems for the financial sector.
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