Despite inflation squeezing family budgets and corporate balance sheets, Alicante residents continue to shrink their debt with banks. Unlike during the pandemic and the prior year, households and businesses in the region have less money to boost salaries, and existing accounts show only modest growth.
This inference comes from the latest quarterly balance sheet published by the Bank of Spain, tracking the evolution of outstanding loan balances and deposits up to September. Provincial banks remain owned by individuals and firms. Some indicators point to an improving financial situation for Alicante residents during this period, supported by a stronger labor market and a revival of economic activity, though the pace was slower than in the previous year.
Between September 2022 and September 2023, credit supplied to households and companies fell by nearly 2.6 billion euros, bringing total outstanding loans to 29.888 billion euros. While the decline was smaller than the prior twelve months, when the state saw a 3.555 million reduction, the figure remains meaningful given the broader economic context.
Moreover, the outstanding amount of 29.888 million euros marks the lowest debt level in two decades and is roughly half of what Alicante residents owed when the real estate boom burst, according to the comptroller data.
A development closely tied to the ECB rate increases. Families chose to direct savings toward expenses, paying down mortgages and other loans early to avoid higher fees, says Fernando Moner, president of the Valencian Consumers and Users Association. He notes that home loan cancellations surged by 18% over the last two years, according to a recent INE report.
Early repayment policies are also common among the best-positioned companies, yet they may curb new investment and potentially disrupt operations in the coming months.
Overall, the decline in loan balances is not unique to Alicante. On the national level, there was a decrease of almost 41 million in the same period.
recording
Unlike the previous year, when Alicante residents reduced debt and inflated their accounts to 1.583 million, September 2023 data show that income did not keep pace. The total cash held by individuals and companies in branches at the end of the third quarter reached 36.270 billion euros, 65 million more than a year earlier, a growth of just 0.017%.
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The real shift lies in how savings are being distributed. Savings are increasing again after years of decline in term deposits. In September, Alicante residents held 3.755 billion in term deposits, more than double the amount from a year ago, though this still represents a small share of total savings, with much of the money, about 32.515 billion, kept in checking accounts and equivalents.
Most expect these deposits will not regain their former dominance. Much of the rise is driven by offers from foreign banks and neobanks, while large online lenders have generally held back from aggressive competition, notes Antonio Gallardo, an expert at the financial comparator Banqmi (iAhorro). With Euribor beginning to ease, even these institutions have reduced profitability rates that had surpassed 3.5% in the summer.
As Gallardo explains, banks currently enjoy ample liquidity, reducing the urgency to compete aggressively for customer deposits as they did in other times.
From mandatory savings to precautionary savings
Financial sector analyst Antonio Gallardo highlights a shift in saver behavior. While account balances grew during the pandemic due to limited spending, recent months have seen a rise in precautionary savings amid inflation and economic uncertainty. “Uncertainty about the economy is affecting many households,” he says, noting that inflation-driven price gains were offset early in the pandemic by accumulated savings, enabling a temporary lift in consumption. But once that cushion erodes, spending trends slow again. Fernando Móner, president of Abreu, recalls that many families could not save and some lost purchasing power as the pandemic hit.