The overall levels are now lower than midway through 2012 but only because a large tranche of properties and their loans were transferred to SAREB in the months of December and again in February 2013.
The overall number of doubtful loans totals 163 billion this is 10.47% of the loan books. Whilst the level of loan capital in trouble has increased the percentage of bad loans has stayed very similar to February levels.
It is clear for most of us that whatever is said in the press or by the pundits that bad loans as a percentage of the mortgage book in Spain are going to increase throughout 2013 for two key reasons.
The first is the Spanish Banks are shrinking their mortgage books. The affect of this is that the amount of bad debt rises as a percentage of your total book. This does not necessarily mean that the book is getting worse but in order to reduce bad loans as a percentage you have to be adding new performing loans to the book.
The second reason and of more concern is that redundancies, particularly in the professional sectors will increase this year. Whilst the loss of jobs has affected many sectors these have tended to be the blue collar workers. This year far more employees from large businesses and big companies will lose their jobs. This is particularly true for the management of these companies. So far the bulk of repossessions have come from the more risky end of the social spectrum. This year those who were considered really safe bets will start to default.
As with most things in Spain recovery will only happen when rock bottom is hit and we are still a little way off at. The pain is inevitable, as is a rising doubtful loan scenario. SAREB will struggle to keep taking it out the bottom end as it piles in at the top end.
As with everything there are some silver linings for people who will be in the right place at the right time. Property will surely drop lower again this year. Banks at some point will be forced to sort some of the problems by taking on new good business rather than just trying reduce loan books, and new business opportunities, as always raise their heads in times of trouble, will be taken up. Perhaps this will be by the managers who are currently employed and who will find themselves out on a limb and on their own in the next few months.