August 7, 2020

Analysis of the delinquency rate: downward trend

The bank default rate in our country continues its downward path. After learning last month that the default rate was in December for the first time since 2011 below 6%, the feeling that this figure will continue to decline is evident. This reduction in the number of delinquent loans, calculated as the number of unpaid loans among the total living credit volume, is even more important if one takes into account that the volume of outstanding credit continues to decrease during the last months.

Once again, the unpaid debt of Public Administrations and that linked to non-residents continues to be the most difficult to reduce compared to that of residents who contract more and more. According to the known data, our country ended January with a volume of unpaid loans close to 70,000 million euros, a figure that represents a reduction of about 29% compared to the same data from just one year ago.

The economic improvement and especially in the unemployment figure is, without a doubt, behind the reduction in the delinquency rate. That is why the recent slowdown in job creation is one of the factors that can hurt this rate at the time of continuing its downward trend. In view of the latest known data and especially the trend observed during the last year, it would be expected that the default rate in our country continue during the coming months little by little reducing to continue marking minimums of the last eight years.

Javier Urones is an analyst at XTB


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