Spanish banks set to revive corporate lending in 2015

Spain banks set to revive corporate lending in 2015

Spanish banks set to revive corporate lending in 2015

A revival is expected in Spanish banks’ corporate lending to businesses as the economy emerges from a prolonged slump and returns to growth. Households are also set to benefit from improved access to mortgage lending, a factor which will be key to ensuring that the fledgling recovery in the country’s property market is sustainable.

Credit terms in Spain tightened much more sharply than in most of its Eurozone peers during the global financial crisis but the conclusion of the European Central Bank’s asset review last October and its efforts to boost liquidity should allow banks to turn the credit tap back on again.

This in turn will fuel companies’ confidence, while also encouraging further foreign direct investment to Spain, seen as a key driver of future GDP growth – so it’s definitely a virtuous circle! Also, the banks themselves will be keen to kick-start their corporate lending, cashing in on the traditional high-margins to be made on that business.

 

CORPORATE LOANS TO RISE SHARPLY IN COMING YEARS

Getting their lending strategy right will be important to the recovery of the Spanish financial sector after a 2008 housing crash left many banks saddled with massive unpaid property loans. Hefty provisioning on these bad debts quickly eroded these lenders’ capital, leading to restrictions on credit for both companies and private individuals. However, thanks to government reforms and a 41 billion euro bailout from the European Union in 2012, the banks have bolstered their capital base and are now ready to contribute to the country’s economic turnaround.

Consultancy and accounting firm Ernst & Young Global Ltd estimates that corporate and business loans from Spanish banks will rise 1.8 percent in 2015 and 5.4 percent in 2016. According to a recent EY report, business lending in Spain will grow faster than any large European economy except Germany. So the outlook is rosy, but it is important that the up-tick in lending benefits small and medium-sized enterprises (SMEs), still the core of Spain’s industrial fabric.

 

SPAIN SMES TO BENEFIT FROM LENDING RECOVERY

SMEs account for 70-80 percent of the Spanish economy and rode the crest of the country’s decade-long economic boom but once the crisis hit, many of these companies were forced to close down as bank financing either dried up or became prohibitive, due to the high interest rates charged for these small firms compared to larger companies. SMEs which export around 150,000 businesses according to sector data could be the biggest beneficiaries of the banks’ fresh lending attempts, as Spain’s external sector continues to drive the economy’s revival.

For information on investment in Spain, contact corporate law firm Argali Abogados.

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