Four years after the pandemic shook the economy, public-backed bank loans guaranteed by the ICO, created by the government to prevent a massive collapse among businesses, SMEs, and sole traders, continue to show a more favorable performance than expected at the outset of the 2020 lockdown. Yet they also register a predictable and gradual deterioration. By the end of September, the delinquency rate on these loans—defined as more than 90 days past due—rose from 1.67% in January (2.3463 billion euros in default) and 2.004% in April (2.8155 billion) to 2.3% (3.231 billion euros, up 38% and 15% respectively). The figures come from an ICO report, the state-owned bank now facing the challenge of deploying around 40 billion euros of European loans.
Delinquencies have obliged the State to compensate banks with 701 million euros (180 million and 34.5% more than in April) under the guarantees granted to ensure continued financing to the economy during the early coronavirus phases. The state committed to covering 80% of losses from morose loans to sole traders and SMEs, and between 60% and 70% for loans to larger companies. The amount disbursed remains modest because overall delinquency is contained and because the ICO pays banks the guaranteed portion of overdue installments, not the entire outstanding capital, in case the borrower regains the ability to meet payments.
Concurrently, lending institutions have paid the ICO 1.92579 million as remuneration for the guarantees received (204.5 million and 12% higher than in April). The balance remains positive for the State, though a reversal is likely at some point given the size of outstanding delinquent credits, which are expected to grow as customers in weaker situations struggle to keep up with payments. Additionally, the outstanding balance of guaranteed loans on which banks pay a commission to the State shrinks as borrowers amortize their loans.
Autonomous workers and SMEs
The number of delinquent operations rises to 55,439 (up from 48,034 in April) and concerns 38,781 sole traders, SMEs, and larger companies (34,135 in the prior report). The overdue loans, in comparison with the 1,192,484 loans granted and the 674,922 beneficiaries who received 140.737 billion euros (of which about 107.0 billion were guaranteed), indicate that the smaller loans, typically to sole traders and SMEs, are showing more difficulty in meeting installments. Delinquencies accounting for 4.6% of total loans exceed the delinquency amount of 2.3%, implying that some clients with smaller credit lines are struggling more than those with larger facilities.
Thus, delinquency is higher among micro-SMEs and sole traders (2.89%) than in larger enterprises (0.8%). The overall default rate sits at 2.3% because the vast majority of loans (98% of the total) went to self-employed workers and small and medium-sized businesses. In any case, these figures remain low relative to what was expected four years ago and to historical delinquency levels. The grace period for many loans funded by the moratorium on principal payments ended in June 2022, but there has not been a notable rise in delinquency since then.
The tourism, leisure, and culture sector stands out with a delinquency rate below the average at 1.98%, despite being one of the hardest hit during lockdown. The strong recovery after the economy reopened helped these entities reach a sturdier financial footing than anyone might have predicted in the spring of 2020, a trend that applies to other sectors as well. Among regions, Navarra, La Rioja, and the Balearic Islands show the lowest rates around 1%, while the most populous areas—Andalusia, Catalonia, and Madrid—hover around the national average. The Valencian Community and Extremadura report rates near 3.4%.
Difference with the Bank of Spain
The ICO report results, which will likely grow in the coming quarters, differ from the Bank of Spain figures (8.3% non-performing loans by mid-2023, versus a 4% general corporate default rate) due to methodological differences. The ICO uses the maximum granted credit as a reference, arguing it offers the most realistic picture. It defines a closed portfolio with no new entries (the guarantee period ended in June 2022) and a balance that declines as loans are amortized, mainly by sound customers. Non-performing or highly stressed loans are not removed from the portfolio, so their weight tends to rise relative to the latest live balance. The ICO accounts only for delinquent loans, since these most clearly obligate it to compensate banks for defaults.
The Bank of Spain, in contrast, uses the latest live balance of credit allocated (even if some approved funds were not ultimately drawn). It calculates the non-performing rate not as delinquency but as a broader category that includes both overdue loans and loans judged potentially uncollectible (subjective default). For the supervisor, the key concern is stability in the banking system, rather than the public sector balance alone.