Chart of the day: Breakdown of 1 trillion euros in European bank NPLs by country
I recently wrote two member posts on the NPL problem in Europe. The source is a study by PwC’s Frankfurt office that was released to the German-language media. Frankly, this report is everywhere in the German media and I think it’s a big deal, so I am surprised it hasn’t been picked up in the English-language media.
Here’s what the breakdown looks like in chart form (chart in German):
The chart only includes the periphery, the UK and Germany but that’s where most of the NPLs are right now. The total from 2010 was 965 billion euros. In 2011 it was 1.048 trillion euros.
Some of these countries are clearly underreporting their NPLs. But, as a whole 1 trillion euros is a lot of bad loans to cover. That’s one reason European bank shares are so depressed. And as the current deflationary policy path has continued, expect these numbers to get even bigger in 2012 and 2013.
Much more in my daily post yesterday, "PwC: European banks are sitting on 1.05 trillion euros of non-performing loans", and the weekly one from today, "Study of European bank NPLs suggest underreporting and large losses for equity and bond holders".
Source: Wirtschaftsblatt
Personally I would suspect that all of these countries are under reporting their NPL because otherwise they would find that the sovereign credit ratings would be even worse. If the true levels were reported then the banks would be closer to insolvency and the sovereigns closer to bailing them out as lender of last resort even though they are seriously constrained by eurozone membership. The UK has flooded the banks with additional liquidity to mask these facts.