October default rate is the highest in 2023

In the month of October, the highest delinquency rate of the year was reached, reaching 4.72% on average in the financial system, when in January it was at 4.40%, according to data from the Superintendency of Banking, Insurance and AFP (SBS) analyzed by economist Cesar Antunez.

This trend would continue upward until the middle of next year, depending on the impacts of the El Niño phenomenon, according to the CEO of Equilibrium Financiero, Ronald Casana, but it will hardly reach double digits. “These rates must be taken with moderation, because in fact they are going to go down, taking into account the asset strengthening that must occur,” he noted.

In addition, Casana specified that for December financial companies will carry out strong write-offs—credits classified as losses—to reduce their delinquency ratio by a couple of percentage points.

For his part, the economist Antunez explained that there are several types of delinquencies, and that the most accurate for many specialists is the one measured in the heavy portfolio (deficient, doubtful and loss credit, and direct credit), and that as of October It is at 7.9% in the private financial system.

MSMEs default more

Financial companies (7%), rural savings banks (6.4%) and credit companies (6.2%) register the highest delinquency ratios, followed by municipal savings banks (5.9%) and banks ( 4.4%).

Regarding the first three entities, Antunez explained that they are the ones that most serve the credit needs of micro, small and medium-sized businesses (MSMEs), which are those that do not have guarantees or a good credit history.

Unlike banks, which have a portfolio of consumer loans, of which 90% are guaranteed, in addition to the fact that they are entities with more restrictive credit control.

For example, between every 3 or 6 months, banks recalibrate the credit scoring to grant credit to a client. “What some financial institutions do is recalibrate the scoring, they feed it back and with that they require a higher score to be qualified for a type of credit. Maybe a client wants S/50,000, but, according to the scoring, he can only access S/20,000,” he stated.

Regarding delinquency by productive sector, construction (11.3%), commerce (7.8%) and agriculture (6.5%) accumulate the highest rates in the period from January 2022 to the ninth month of this year. They are followed by services (4.7%), manufacturing (3.7%), fishing (2.7%) and mining (0.9%).

While by region, as of September, Loreto has the highest delinquency rate with 8.38%, followed by Tumbes (8.33%), Áncash (8.31%), Lambayeque (8.16%) and San Martín (8.13%). On the other hand, Lima (3.99%), Huancavelica (4.16%) and Cajamarca (4.89%) present the lowest levels.

Regarding these data, the expert said that the jungle regions are the ones that have been most affected by climatic phenomena, such as Cyclone Yaku and El Niño, since the variation in temperatures has a direct impact on production and, therefore, therefore, in the payment chain. “Precisely, there is the credit to agriculture,” he said.

The economist indicated that if the trend continues upwards in 2024 due to the effects of the El Niño phenomenon, thus limiting the economic recovery, “this would affect the financial industry, increasing the provision requirements of the entities, thus harming their profitability rates. ”.

Financial system is more conservative with credits

According to the latest report on financial stability from the Central Reserve Bank, credit to larger companies shows a slowdown due to lower demand for financing.

Meanwhile, credit to MSEs and consumer credit continues to grow, although at a slower pace than the previous year, “converging to the growth rates observed prior to the pandemic.”

Furthermore, in the face of non-payment, entities in the financial system are taking more conservative policies, especially with sectors that show greater delays in payments, and have been strengthening their collection activities.

Figures

• 151,000 consumer credit clients were added in the last 12 months.
• This portfolio registers 0.3% annual growth, that is, 28% of the EAP, according to the BCRP.