Credito Real’s portfolio deterioration goes beyond the simple NPL ratio, which has been in the 2.1%-2.7% range in the last two years. Since CREAL acquired a majority stake in Instacredit during 1Q16, the loan portfolio has grown by 54%. As the portfolio matures, we see a pace of annualized provisions in the order of 17.9% as a better indicator of the delinquency rate than the NPL of 5.4% recorded as of 3Q17.
In the case of used cars, the story is similar. An annualized pace of provisions of 10.8% during 3Q17 better reflects the situation than the 1.2% NPL. Here, the explanation resides in the fact that the company recovers the cars before the borrower being 90+ days delinquent, but still there are several costs CREAL incurs.