North vs South? No longer just a matter of debt, virtuosi against Piigs. From now on, it will increasingly be a branch problem, with the banks of the South further contracting credit. A research just published by Ernst & Young, Eurozone for Financial Services Forecast, finds that while in the northern markets the credit forecasts are the slight improvement, on the other hand the situation in the southern countries will be much more complex due to bad debts and strong pressure on the regulatory aspects.
"The outlook for non-performing loans has been getting worse in a short time – writes Ernst & Young – while credit quality in the Eurozone has deteriorated faster than expected. Bad debts are estimated to have reached a very high 2012% in 6,8 and, for 2013, the percentage is expected to rise to 7,6% (up 1% on previous estimates)”. And unsurprisingly, the rise in doubtful debt is driving ever-tighter lending standards.
At the same time, the latest regulatory directives have pushed banks towards a debt reduction process to meet the strictest capital parameters. But while larger banks have managed to take advantage of the situation, smaller ones are still experiencing difficulties and excessive costs in accessing credit. "The consequences - says Guido Celona, responsible for Italy for the Financial services sector of Ernst & Young - can only have a negative impact on the granting of new loans, both to individuals and to companies". For Italy in particular, the 2013 estimates on non-performing loans indicate an increase to 10,2% (from 9,1% in September 2012), the highest level in the last 14 years.
According to Ernst & Young, the reduction in loans in 2013 will amount to 132 billion euros in the Eurozone (from 12.132 to 12.264 billion). In particular, in terms of business credit, it is expected that in 2013 it will grow by 1-2,5% in France, Germany and the Netherlands. In Italy there will be a slight decrease (-0,5%) while in Spain the decrease could reach 4%. However, if the last two years are taken into consideration, the gap becomes even more marked. During this period there was an increase in loans to France, Germany and the Netherlands of 18, 72 and 28 billion respectively. Conversely, in Italy there was a drop of 43 billion during the same period and in Spain of 100 billion. “The effect of this contraction in credit for companies in Southern Europe – said Celona – will thus cause the recession to worsen and prolong itself. As a result, growth may not return for some markets until 2015."
