Tuesday , May 17 2022

Increased credit losses and sharp decline in stocks for consumer loan banks: – Market scared – Consumer loans – Stock market and Finance


In recent years, more niche banks have been set up to smuggle some of the lucrative and strong growth market for unsecured loans.

Following Bank Norwegian, banks such as Komplett Bank and Monobank were launched by Instabank, Easybank, and the recently-coming BraBank, as well as travel and airline Per. Braathen.

Banks have grown into growth machines, but this year also increased credit losses. All listed consumer banks handed over their financial reports for the third quarter and the figures show significantly more credit losses.

As of the third quarter of the previous year, it has been observed that the allowance for loan losses has more than doubled in the listed banks. There has been a sharp increase so far this year (see table below).

There was a shock in the market, says Sparebank, bank analyst Odd Weidel at the Market.

When Norway Finance Holding announced its figures, the stock fell 16 percent and fell 6 percent in the following weeks. Komplett Bank declined by 13 percent on reporting date and then decreased by 9 percent.

– The price in DNB fell, Swedish banks fell. But even if you correct it for, mortgage banks fell. This is the fear of credit loss. Analyst E24 says the market is very scared.

E24 +: Consumer loan investors are obviously afraid

See two reasons for increased credit losses

He points to several co-operatives, who put more damage on banks. Some niche banks leaped out of the country and invested in other Scandinavian markets, at least Fin.

Var In Finland, there is probably a market that is harder than expected in the first place. , It took longer for credit losses to fall to a normalized level in Finland, Anal the analyst says.

According to Weidel, the introduction of IFRS 9 accounting standards from 2018, which has a new loss model, had an accounting effect on the loss calculation.

According to the Danish Financial Audit Authority, the new standard requires banks to damage new loans for expected credit losses due to the expected default for the next twelve months.

"IFRS 9 may be an unexpected situation. One is the problem of accrual. Let's assume that the last day of the month ends on Saturday or Sunday, then there are some customers who don't pay the bill. Under IFRS 9, the losses will depend on it," says Weidel.

Norwegian Finance Holdings, the largest player among the niche banks, presented its quarterly report, while continuing to show customer and revenue growth, but increased loan losses and costs kept residues in place.

Read more: – There's more about the leg

The other is that Bank Norway should allocate for higher losses. This stems from the fact that in the fourth quarter of 2017, there was little allocation in Finland and the allocation in the first quarter of 2018 due to a model error. Weidel said that the recovery of lower damages in the fourth quarter and the first quarter brought harm to others. and the third quarter.

. The sum of losses in Finland and the pattern cuts took place in the market too much, "he says.

Norwegian Compression

The sharp increase in consumer loans has raised concerns about the authorities, not the Danish Financial Supervision Agency, which most households warn about for high interest rates and the risk of reputational risk for the sector.

The market for unsecured loans is now reaching 110 billion NOK. It is the total credit of a small number of people, but growth is much higher than other types of loans.

For this reason, the rules were clarified, including how much marketing and capital banks should be set aside.

There have been tightened requirements for the borrower's repayment, serviceability, debt ratio and rating. The debt record on the stairs should also provide a better credit rating.

However, the audit is unhappy with the fact that many actors violate the requirements of the sharpened requirements and have suggested that the guidelines are transformed into regulations, which means that the rules should not be followed only, but in practice, the requirements of the banks providing consumer loans require more stringent implementation.

Waiting for low credit losses

Weidel believes that a clean-up effect on the debt register will lead to an increase in credit losses in Norway, before giving the tightening opposite effect.

"Two years ago, after lending and tight regulation, sufficient credit losses will be reduced as volumes increase, and a more cautious lending practice will help reduce credit losses.

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