The bank warns of a "change in trend" in delinquencies due to the increase in mortgage defaults

Family defaults begin to grow. Banks have begun to detect signs that point to greater difficulties for clients to meet their payment commitments as the rise in rates has been passed on to the economy and all forecasts indicate that the difficulties will get worse..

Gonzalo Gortázar, CEO of CaixaBank, described it yesterday as a “change in trend” in which large entities and banking supervisors agree.. “In the last quarter the sector figures indicate a small increase in mortgage delinquencies. “We are talking about a change in trend, but very gradual, where there is a certain logic given the impact of the rate increase on mortgage payments,” he said during his speech at the XIV Financial Meeting organized by the newspaper Expansión and KPMG..

This is the general impression in the sector and also among banking supervisors, who thus confirm the effects of the tightening of monetary policy by the European Central Bank (ECB).. At a general level, the default rate remains at a minimum of 3.5%, but the signs accumulate in the microdata of the entities. For example, the percentage of loans under special surveillance, those up to date with payments but with doubts of possible deterioration, stands at 6.8%, one point more than before the outbreak of the pandemic.

Large banking groups closely follow developments, but avoid alarmism. “We are busy but not worried,” said BBVA CEO Onur Genç during his participation at the event.. In his opinion, the strength of the labor market in Spain and the reduction in household and company debt in recent years are helping to mitigate the impact of the rate rise.. Even so, Genç was cautious. “We must be cautious,” he added..

Along these lines, Gortázar predicted that the deterioration of these indicators will be “smooth, and not with the slope of 12 years ago”, when delinquency exceeded 6%. It will be a “gradual, orderly and logical” increase, said the CEO of CaixaBank.

The increase in defaults is one of the consequences of the transmission of monetary policy to the cost of financing and this despite the fact that this transmission, according to the governor of the Bank of Spain, Pablo Hernández de Cos, “has not occurred in its entirety”. In his speech, Hernández de Cos assured that “a little more than 50%” would still be pending, which would mean that a greater increase in the cost of financing is pending, for example, in consumption. And all of this will end up leading to an increase in credit delinquencies.. Hence, their message to financial institutions remains the same: they must carry out a prudent policy of provisions and capital, which allocates part of the short-term profits to increase their resistance.. “It is not only about maintaining resilience but also increasing it to better cope with possible future losses,” he added.

His message reinforced the one launched a few hours earlier by the vice president of the ECB, Luis de Guindos, at the same event.. De Guindos warned that we may be “witnessing a mirage effect of improved profitability” of banks despite the rise in interest rates and pointed out that delinquency could be one of the factors that affects profitability in the next months. “In previous states there is beginning to be an accumulation of arrears,” he added.

To delinquency, De Guindos added other risks that make the sustainability of the sector's profitability vulnerable, such as lower credit activity, lower economic growth, an increase in provisions (precisely due to the possible increase in defaults) or political decisions such as the bank tax. And he appealed to the “prudence” of the entities in the distribution of dividends, the repurchase of shares and in remunerations.

less credit

Another consequence of the ECB's monetary policy is the fall in credit, both in companies and households, something confirmed by the CEO of Banco Sabadell, César González Bueno.. “If there were not this fall, monetary policies would not be working. Monetary policies aspire to a certain reduction in credit and we are seeing it in companies and in mortgages […] I would be worried if there was no slowdown at all and I think it is moderate, but it obviously affects our activity,” he confirmed..

Regarding the expected remuneration of deposits in Spain, the CEO of Santander, Héctor Grisi, defended that they are “doing things intelligently and in a coordinated manner with what we are seeing in the market” and defended the competitiveness of Spanish entities in the mortgage market.