An EU report out this month shows nonperforming loans were a staggering €1.092 trillion as of the end of 2016.
The average non-performing rate in the EU is 5.1%, down from 5.7% in 2015. For comparison purposed, a World Bank Report has the US at 1.3%, Japan at 1.5%, and Canada at 0.6%
In contrast, Greece and Cyprus have NPL ratios of 46% and 45% respectively. Bulgaria, Croatia, Hungary, Ireland, Italy, Portugal, Slovenia, and Romania all have NPL ratios between 10% and 20%.
Non-Performing Loans
Notes
- I am unsure why the graphs sometimes use different country codes than appears in the first column. Where different, I show both symbols. The list of country codes is shown below.
- Forb ratio stands for forbearance ratio.
- Cov ratio stands for coverage ratio: (Loans – Reserve balance)/Total amount of non-performing loans. It’s a measure of how prepared a bank is for losses.
Country Codes
Italy, Greece, Spain, Portugal, and Ireland have a combined €606 billion in non-performing loans.
Clearly, the EU banking system is quite troubled.
Mike “Mish” Shedlock
Waiting for the other shoe to drop
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The other shoe is more like a ton of bricks. Stunning revelation.
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“Non-performing” is such a negative term. What if we referred to them as “consistently stable”?
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Funny.
“Patience reserves” or “Bailout stock”.
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in nominal terms, italy, spain and france account for more than half the trillion euros.
italy is just awful at 276 billion of NPL (15.3% of all loans), france isn’t far behind with 150 billion but only considers 3.7% of loans to be NPL which is a joke, but not as big a joke as Spain with its 141 billion and just 5.7% of NPL – these countries have zombie banks that have turned hiding NPL into an art form.
these countries are living the life of communist russia that claimed record crops and output regardless of the actual level of crops and output.
bleh!
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I don’t have recent ‘realer’ figures for Spain, but the below graph and article outlines the accounting tricks used. If Spain can do that without notice, I suppose any other country is able to, including the US. In Spain the shift was 3.5% down @.
From
https://www.gurusblog.com/archives/morosidad-real-banca-2/18/09/2014/
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i wonder how long it will be before anotherbank buys santander for a single euro…
http://www.dw.com/en/spains-santander-buys-banco-popular-for-one-euro/a-39139913
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I’m not sure Popular was worth a Euro, and sort of insulting to be paid in the money that helped ruin it too.
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It is not just Spain, the “non-performing” category is universally defined as narrowly as possible.
There are are a lot of loans “in forbearance”, that is technically non-performing, but that have been temporarily “rearranged”.
In the UK in 2011 according to a BoE study they were 30% of commercial real estate loans, 12% of household unsecured loans, and 8% of household mortgage loans, but only 1.4% are “officially” classified as non-performing. Since 2011 study got a reaction the BoE have stopped even mentioning “forbearance” in their ironically named “Financial Stability Report”.
http://www.bankofengland.co.uk/publications/Documents/fsr/2011/fsrfull1112.pdf
I will take “Where cheap and easy money goes to die” for $500, Alex…
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Can someone explain to me how a bank stays in business with 10% NPLs?
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You place a collect call to Mario “The Bazooka” Draghi…
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H Minsky explained already in 1986, in his excellent “Stabilizinbg an unstable economy: experience and prospects”:
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Wouldn’t some us love to peruse the credit ledgers locked up at the PBOC…I have a feeling it would make the Euroland look like financial tightwads…
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Knowing precisely what the ECB has been buying would be useful as would what the providers of the bonds are doing with the capital raised.
If it’s going to “healthy” companies the bond buying is a form of state aid but the capital might be being allocated wisely.
If it’s going to “unhealthy” entities then it’s prolonging the death throes and probably wasted.
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«If it’s going to “unhealthy” entities then it’s prolonging the death throes and probably wasted.»
Probably both, but mostly to “unhealthy” entities. R Koo, who is very perceptive, but works for the sell-side unfortunately, argues that most financial conglomerates are technically insolvent, in that they have negative capital as the “assets” they have on book are largely “impaired”, but they have positive cash-flow still, so they are going concerns and need only to earn enough cash flow to compensate for the losses on the assets. He gives some excellent graphs in this long but very useful talk: https://www.youtube.com/watch?v=8YTyJzmiHGk
R Koo does not mention several important details, among them that the financial conglomerates have a positive cash flow only because central banks lend them (and only them) at 0% allowing them to get as gross profit the entire spread with the much, much higher rates the financial conglomerates charge their customers, or from the profit they make by using 0% funds to speculate on ever-rising asset prices. This is not a new technique. Two relevant quote:
http://www.interfluidity.com/posts/1160447599.shtml
globaleconomicanalysis.blogspot.co.uk/2016/01/former-dallas-fed-governor-richard.html
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Into the corn field they go.
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Reblogged this on World4Justice : NOW! Lobby Forum..
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Rockville Bridge Milky Way and Grafton Ghost Town
https://mishmoments.com/2017/07/28/rockville-bridge-milky-way-and-grafton-ghost-town/
Mish
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it’s going to unhealthy entities then it’s prolonging the death throes and probably wasted…
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But deficits don’t matter. That nice Mr. Cheney said so. What’s all the fuss about?
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That was sarcasm folks. My sarc tags got erased in the submission process.
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NPL = Free Money. A disguised Helicopter Drop. Look for more of it.
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I mean, in the name of equality, 50% + of all lending should be subprime, no?
No worry, just buy Amazon with your home equity and MasterCard, and head for the beach. Life is gooood in the United States of FANG.
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With US at 1.3% and Canada at 0.6%, the question is: are they ahead or behind the bust cycle? It is getting so confusing.
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What a load of steaming doggy doo.
Non performing loans in Europe are at least EUR5 trillion… at least 5x more than the liars from Brussels are admitting to in this bogus “report”.
They will steal European taxpayers savings (“freezing” accounts in a bail in) — but Europe will end up just like Venezuela.
The problem with all socialism is that sooner or later you run out of other people’s money.
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….sooner or later you run out of other people.
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If we can just get the EU and China back to something approaching post-WWII levels of (non)competition with the US, it’ll be great for the US. Let’s work on that… assuming that isn’t the goal already. After all, the Middle East has been successfully destabilized and welfare benefit seeking “refugees” from there are on their way to destroying the EU welfare state with that same ME destabilization also preventing -stable- governments there which are the only ones capable of developing the only true counter to western hegemony in the ME – nuclear weapons.
Best regards,
Niccolò Machiavelli
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Another step in the direction of the above:
Europe Warns Against Tightened U.S. Sanctions on Russia
https://www.theatlantic.com/news/archive/2017/07/house-russia-sanctions/534936/
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