European banks are holding around 1.05 trillion euros (1.3 trillion dollars) in non-performing loans (NPL) - credit that is in or close to default - according to accountancy firm PriceWaterhouseCoopers (PWC). A PWC study released in Frankfurt on Wednesday revealed that many European consumers, homeowners and companies were unable to repay their loans, especially in the southern eurozone member states worst affected by the euro crisis.
The new figure, from 2011, was almost 9 per cent higher than the previous year. The increase was especially skewed towards banks in the countries where the euro crisis is at its most acute. German and British banks had bucked the trend, showing little change from 2010, with 196 billion euros and 172 billion euros in NPLs respectively. The German figures had in fact gone down in the last two years.
In comparison, unserviceable debt had risen drastically in countries such as Greece, Spain and Italy, hard hit by unemployment and recession. Greece saw NPLs rise in value by almost 50 per cent, to 40 billion euros, while Spanish banks' figures rose by 23 per cent to 136 billion euros. Italy saw a 37-per-cent increase to 107 billion euros. Portugal had a lesser increase in NPLs of 20 per cent, to 12 billion euros, and in Ireland the figure rose from 109 to 119 billion euros. "The poor economic development in southern Europe led, as expected, to more payment defaults by debtors," said PWC's Markus Burghardt in Frankfurt. Recently, however, he said the overall volume of NPLs had not risen as drastically as in previous years.
Nevertheless, the figures show that the volume of such loans was only slowly being cut back, as institutes struggled to find buyers for their credit portfolios. Alongside the NPLs, European banks are also holding billions of euros worth of bonds from southern European states mired in the eurozone crisis. While banks have cut back on such bonds, experts say it has been hard to sell bonds with very long runtimes. "Most banks that quickly want to reduce their positions can usually only do so with significant reductions," Dirk Mueller-Tronnier of accountancy firm Ernst & Young told the financial daily Handelsblatt.