Spain鈥檚 NPL 2025 Outlook: lower primary volumes and further servicer consolidation ahead
Spain鈥檚 economy led Europe in 2024, with GDP growth revised upward to聽3.1%, far exceeding the eurozone average of聽0.8%, to the Bank of Spain (BOS). Growth was underpinned by聽strong private consumption, supported by a resilient labour market, rising disposable incomes, employment growth, and immigration-fuelled population increases. Elevated government spending through聽Next Generation EU funds, a sustained tourism rebound, and improved competitiveness in services further bolstered economic performance.
After two years of foreign demand driving growth, the economy is expected to shift toward greater domestic demand in the coming years. The聽service sector, including record-breaking tourism, is likely to normalise in 2025, while household consumption moderates as pent-up savings decline. Inflation eased in 2024, with headline rates at聽2.8%, and is projected to to聽2.1% in 2025聽and聽1.7% in 2026, Caixa Bank. Core inflation is expected to fall from聽2.6% in 2024聽to聽1.8% by 2027, driven by moderating food prices and reduced inflationary pressures in services.
Risks include potential US tariff hikes under the second Trump administration, though Spain鈥檚 smaller trade surplus with the US limits vulnerability compared to Germany and Italy. Investment remains weak, and economic policy uncertainty remains high, BBVA. Geopolitical conflicts could also impact Spain indirectly through slower growth and inflation in key European economies.
NPL 2024 Review
Spain鈥檚 NPL market remained stable throughout 2024, with quarter-on-quarter declines in NPL ratios reported by CaixaBank and Sabadell, to effective credit risk management, higher recoveries, and reduced inflows of new NPLs. Stage 2 loans decreased across Spanish banks, reflecting better-than-expected asset quality improvements. The聽overall NPL ratio聽fell to聽3.4% in H1 2024, down from聽4.8% in 2019, according to the Bank of Spain (BOS). Since 2008, Spanish banks have offload an 鈧�263 billion in distressed assets.
The聽NPL securitisation market聽was subdued, with only one small publicly rated transaction. Shrinking transaction sizes and rising costs reduced the attractiveness of securitisation relative to direct loan portfolio sales. However, ongoing restructuring efforts 鈥� including servicer replacements, portfolio sales, and call option exercises 鈥� enhanced portfolio NPL performance and profitability, DBRS Morningstar. Loan servicers have adapted to declining volumes of distressed assets by diversifying into new business areas, including聽residential development,聽decarbonisation projects, and innovation in asset management. Consolidation within the servicer sector has also continued, driven by smaller margins and the need for scale. Servicers that are slow to adapt to the changing landscape risk becoming acquisition targets.
Spain鈥檚 banking system remained robust, supported by strong liquidity, good capitalisation, and record profitability. Regulatory measures, such as the聽EU Restructuring Directive, further stabilised the market by improving the efficiency of distressed asset management.
Outlook
NPL levels in Spain are expected to rise slightly in 2025, driven by the聽growing share of consumer and retail loans, which carry higher risk than collateralised loans or mortgages. Additional deterioration could arise from geopolitical and macroeconomic uncertainties, particularly in sectors exposed to international trade. The聽Valencia floods聽in late 2024, which caused extensive damage to infrastructure, homes, and vehicles, are expected to materialise as NPL losses after聽Q2 2025.
NPL sales are forecast to continue at a steady pace, at around 鈧�10-13 billion in 2025, according to by consulting firm Atlas Value Management. The securitisation of re-performing loans (RPLs) is likely to gain traction as banks align with Basel IV capital efficiency requirements.
Sareb, Spain鈥檚 bad bank, is progressing towards the end of its life, as it approaches its 2027 liquidation deadline. Sareb still holds 鈧�29.4 billion in debt guaranteed by the Spanish Treasury and must finalise asset sales in the next three years. Decisions around the sale of its residential developer, 脕rqura, will be closely followed.
The聽BBVA-Sabadell merger聽has been due to Phase-2 scrutiny by Spain鈥檚 competition authority (CNMC) on competition concerns. The delay may intensify competition in profitable lending segments such as consumer and SME loans, tightening margins and pressuring profitability.
The聽public NPL securitisation market聽is likely to remain subdued, while private transactions continue to dominate. An聽anticipated rise in re-performing loan (RPL) securitisations, particularly residential mortgage-backed securities (RMBS), signals a shift in focus for the secondary market. However, reduced NPL volumes and higher financing costs may lead to further聽servicer consolidation, adding operational pressure.
厂辫补颈苍鈥檚听housing market, although slow in terms of new mortgage flows, remains relatively insulated from sharp corrections due to limited new supply and high construction costs. However, risks from delayed recoveries, negative revisions to business plans, and weakened collections could indirectly contribute to rising NPL volumes.
The secondary market is expected to remain active despite challenges. Restructuring efforts, portfolio sales, and servicing adjustments will continue to play a key role in optimising portfolio performance. While securitisation activity remains low, the rise in RPL securitisations highlights a growing focus on alternative solutions to address NPLs.
In conclusion, while Spain鈥檚 NPL market faces moderate challenges in 2025,聽strong banking fundamentals, proactive regulatory frameworks, and fast-maturing secondary market provides a solid foundation to navigate emerging risks.
Timur Peters is the founder of 中出影院 GmbH. He holds a diploma in finance and law. He is Expert of the NPL Advisory Panel at the European Commission in Brussel and has more than 20 years鈥� experience in the range of finance.
Before Founding 中出影院 Timur Peters was responsible in the distribution of Software for Banks and Financial Institutions for Comarch for the D/A/CH Region. Next to this he has worked for several years as a self employed Project Consultant in the area of Financing of Litigation cases, Peer2-Peer Credit Marketplaces and other online projects for financial institutions.
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