credit to businesses has reached historical figures during the first six months of the year. The 88,695 million euros of debt they account for 22% of all loans to the services sector and 15.6% of total loans to companies in Spain.
This is what the report details Evolution of Credit to Companies in Spain by sectors of activity 2022, prepared by the consulting firm AIS Group, a specialist in the application of artificial intelligence to credit risk management.
Not even in the boom years of the housing bubble, in the mid-2000s, loans to these companies reached this figure. The indebtedness of retail It has been growing since 2016, although in 2020 the need for financing triggered the volume of loans in the sector to levels close to 10%. In 2021 this growth stopped and the balance of the portfolio was reduced. However, the first figures for 2022 show a new rise in debt of 3,000 million euros in the first half, 3.3% more.
“Retail is, in fact, the only business segment in the services sector whose indebtedness is growing in 2022”, comments David Fernández, commercial director of AIS. A scenario where the macroeconomic situation, marked by the post-pandemic, the war in Ukraine, the rise in energy prices and inflation, “suggests that the need for trade credit will continue to grow in the coming months“, Add.
According to the AIS Group report, all these companies are the ones with a largest portfolio of defaults, concentrating 27% of the total doubtful loans granted to service companies. At the end of the first half of 2022, this total was slightly above 4,945 million euros, which places the default rate for this business segment at 5.6%. In this way, commerce registers the third highest rate among all productive activities after hospitality (8.41%) and construction (8.39%).
Although, and despite the fact that its non-performing loan rate is above the average for all companies, the aggregate of merchant defaults has been on the decline since the beginning of 2015 and has left behind records that doubled the current one. In fact, the balance of the portfolio of doubtful loans, which doubled between 2010 and 2013, exceeding 10,000 million euros, began a downward path a few months later that not even the years of the pandemic have stopped. And the data for the first half of 2022 confirm the consolidation of this trend.
Smart risk management
“In the current macroeconomic scenario, artificial intelligence (AI) has become an invaluable instrument to generate efficiency in the management of credit risk of entities and keep it within the parameters desired by each entity”, comments Fernandez.
The ability of AI to analyze countless variables of a diverse nature and its high predictive power make it an ideal tool to automate processes, optimize resources and improve results. “Its application offers efficiency improvement ranges higher than 25% in many cases.”, affirms the director of AIS. “This improvement -points-, Evidently, it is transferred to the business level, since it translates into increases in the contracting of products, evaluation and approval of a greater number of credit applications, reduction of the default rate, etc.”.
AI can be implemented in many facets of risk management, but AIS highlights four very relevant applications at the present time: open banking tools to have information at real time of clients (individuals or companies); machine learning models to have more accurate credit profiles; alert systems that give room for maneuver in situations of deterioration, avoiding falling into the increase in provisions; and bad debt recovery tools in which AI helps define profitability strategies.
