Savings hit a record high in Malaga despite cost of housing and inflation

During the long year that the pandemic was at its most virulent in Spain, many residents of Malaga province saw their bank savings grow like wildfire. Thhe 26.21 billion euros they had at the beginning of 2020 had risen by around 20% to close to 31.50 billion euros by the end of 2021. With the economy at a standstill and social contact severely limited, there were few options for spending. Still, once Covid-19 was over, the rush firstly to make up for lost time spent with family and friends, then the sharp rise in inflation brought on by the Russian invasion of Ukraine and, lastly, the rise in housing prices have not put the brakes on what individuals, companies and governing bodies are hoarding in current accounts and bank deposits. So the 31.50 billion euros at the end of 2021 are now more than 37 billion euros as at the end of the first half of 2024, according to the latest data published by the Bank of Spain (Banco de España). In other words, since the beginning of 2022 the bank savings of the province's residents have grown by another 20% to levels never seen before.

So far in 2024 the balance of Malaga province's residents' instant-access accounts and term deposits has risen by almost one billion (from just over 36.1 billions to over 37 billions), which represents an increase of around 2.5%. So, in the last 12 months the increase amounts to more than 1.5 billion euros, over 4% up.

Of these 37.07 billion, some 1.41 billion corresponds to banking products in which Malaga's public administrations have their liquid assets. The rest, 35.66 billion euros, belong to individuals and companies and are mostly in instant-access accounts (over 30.2 billions as to the almost 5.4 billions in term deposits). Official interest rate hikes, now in retreat, have not been sufficiently tempting to leave money stuck in deposits.

These figures make Malaga the eighth province in Spain on the list for most savings, behind Madrid (more than 420 billion), Barcelona (with almost 188 billion), then Valencia, Vizcaya, Alicante, Seville and A Coruña.

Although Seville has more savings than Malaga, one out of every five euros hoarded in banks in Andalucía is held by a Malaga resident, that amounts to 37 billion of the 170 billion euros accumulated in the region in total.

Looking at Spain overall, bank savings follow a similar pattern. They are also at a record high of over 1.6 trillion euros, a figure that exceeds Spanish GDP (gross domestic product) - in other words, the value of all the goods and services produced by the Spanish economy in a single year. Of this volume of savings, 150.61 billions correspond to all levels of governing authorities. Of the remaining 1.455 trillion euros held by the private sector, the bulk - almost 1.2 trillion euros - is made up of instant-access accounts compared with 237.3 billions in deposits.

This growth in savings in the province, which can be explained by how dynamically the province is growing in terms of population and commercial activity compared to most parts of Spain, is only halfway consistent with the current pattern of borrowing from banks. There are more than enough players who could get into debt, but they choose not to do so because they are more prudent than before, or because they cannot find sufficiently interesting projects in which to invest, or because banks are more reluctant to lend than in previous economic cycles. Taking the latter reason, housin is today as expensive as it was in 2008, but the banks no longer finance 100% loans and mortgages. Moreover, the financing channels have diversified, so nowadays there are more and more funds and venture capitalists active in the markets.

At the end of the first half of this year total debt in Malaga stood at just over 34.1 billion euros, a figure that is somewhat higher than at the beginning of the year (just over 33.79 billion euros) but still below that of 12 months ago (34.72 billion euros). Moreover, while savings have increased by more than 40% since the pandemic, debts have risen by barely 10%, from over 31.24 billions in the first quarter of 2020 to nearly 34.12 billions in June. This figure also contrasts with the more than 48 billion euros in bank debt accumulated by individuals, companies and governing bodies in Malaga in 2008.

So, if the bank savings of the people of Malaga today exceed 37 billion euros and are 75% higher than in 2008, debts have gone in the opposite direction. The little over 34.1 billion euros owed to banks in the province at the end of June are almost 30% below the 2008 figure (more than 48 billion euros).

Malaga province is in seventh place in terms of the volume of bank debt across Spain after Madrid, Barcelona, Valencia, Alicante, Seville and Vizcaya. Just as it represents one out of every five euros put into savings in Andalucía, it accounts for the same proportion in terms of the region's debts.

What is even more interesting to look at is the contrast between the evolution of savings and bank credit. Back in 2008, when the property bubble was just at bursting point, the people of Malaga owed more to the banks than they had in savings (48 billion euros owed versus approximately 21 billion euros deposited in bank products). Now the opposite is true: the 37 billion euros in savings exceed the 34 billion euros in debts. The same applies at the national level: at the end of the first half of this year, while bank savings went up by 1.6 billion euros, debts only went up by 1.2 billion euros. What this means is that banks can now cover, actually more than cover, what they lend out with their customers' savings deposits. That, in a nutshell, reduces the likelihood of a financial crisis.