Nonperforming exposures of Austrian banks – decomposing aggregate measures

We analyze bank-level loan data to better understand the development of aggregate nonperforming exposure measures of large Austrian banks. We employ quarterly data from Q3 2014 to Q4 2017 for all 18 commercial banks in Austria that apply the International Financial Reporting Standards as well as for all their foreign subsidiaries (this leads to slightly different results than provided in other publications). We focus on the distribution of nonperforming exposure measures across time and banks as well as across economic sectors and borrower types. We find large heterogeneity across banks, economic sectors and borrower types. If we take a closer look at what lies behind the aggregate NPL ratio of about 3.6%, we find that the 10th percentile of the NPL ratio is close to zero whereas the 90th percentile is still at about 8% in the fourth quarter of 2017. Higher NPL ratios across relevant economic sectors do not seem to be concentrated in larger sectors. With regard to borrower type, we find NPL ratios of 5.3% for nonfinancial corporations, 3.8% for households and 2.2% for other financial institutions. Subsidiaries record substantially higher NPL ratios than parent institutions, e.g. over 7% for exposures to nonfinancial corporations (under 5% at parent institutions) and about 5% for households (3% at parent institutions). This points toward higher financial vulnerability among nonfinancial corporations as well as indebted households in CESEE, the region mainly responsible for nonperforming loans in the portfolios of Austrian banks’ subsidiaries.