Consumer finance companies are following in the footsteps of banks and reducing staff to gain operational efficiency and adapt to the unstoppable technological environment. According to the latest figures available from the Bank of Spain, credit institutions reduced their workforce by 9.5% last year.
After this adjustment, which affected 422 people, the sector fell below 4,000 workers for the first time since 1995. These entities – some of them linked to the banks themselves and others to department stores and car manufacturers – began the cuts in 2019 Then they reduced the workforce by another 457 employees, which in the last two fiscal years add up to a decrease in personnel of 18%.
The finance companies had managed to fully recover from the 2008 crisis, to the point that they had become high-growth companies due to the reactivation of consumption. However, the coronavirus stopped its activity in its tracks, a situation that has not been completely reversed to date. In addition, delinquencies have begun to appear , which will cause credit institutions to be led to greater cost reductions and, therefore, further reductions in the number of workers.
The employers’ association of the sector, Asnef does not hide its fears and predicts that there will be an increase in defaults, although these are still controlled, so it considers that efficient management of risks and portfolios is key to minimize the impact on provisions and future losses, with appropriate rocobro policies.
Asnef maintains in its latest situation report that throughout 2021, despite the uncertainty, recoveries of bad loans have grown, to the point that it is setting records . In May, for example, it indicates that there was a maximum of three exercises in recoveries.
This will alleviate the burdens that finance companies will have to face in the coming years, since the new demand for credit will present worse risk profiles , another factor that will prevent a less active increase in the recovery of formalizations and, therefore, of capacity to generate income and results.
Credit institutions are coping with the situation without suffering, for now, joint sectoral losses. While its profits have suffered substantially from the pre-covid era and its loan balance has fallen sharply as new operations fall and many others expire. In addition, in the last year, they have had to grant moratoriums to clients, which has reduced their interest margins.
In this way, between January and May of this year, their earnings barely reach 159 million. In the whole of 2020, these reached 718 million, which represented a decrease of 21%. As for the volume of loans, it has decreased by 22% since the end of 2019 , to below 40,000 million, an amount that was not seen since 2015, when the boom in this segment began after the financial crisis.
The last major personnel adjustment carried out by consumer loan establishments occurred between 2008 and 2013. During that period, they cut their workforce by almost 2,600 workers, which represented 36% of employees. Starting in 2014, they stabilized their workforce and even increased it for several years, unlike the banks, which have been laying off workers for more than a decade. In the coming years, the entities will also see at least 15,000 workers leave their offices and central services.