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Banks expect to maintain the good tone in profits for the rest of the year thanks to the ECB

Date: July 13, 2024 Time: 00:41:19

After the hangover of results, it is time to balance. Spanish banks have presented profits above what was expected by the market consensus collected by Bloomberg. The rise in interest rates by the European Central Bank (ECB) and its effect on the Euribor, the index to which most variable-rate mortgages are referenced, has served to make us forget the decade of negative rates and the little bank profitability, which barely covered the cost of capital. In the first six months of the year, listed financial entities have improved their profit by 20% to 12,385 million euros.

Facing the second half of the year, the prospects continue to be, as the CEOs of the different entities have been well acknowledging at a press conference. To begin with, because the ECB had at least two interest rate hikes left, one of which was confirmed this Thursday, which raised the price of money in the euro area to 4.25% and the deposit facility to 3 .75% On the other hand, the credit portfolio was repriced in the following quarters, although with less intensity.

Indeed, Banco Sabadell recognized that the rise in rates has been greater than expected. This Thursday the organization undertook its ninth promotion, the fifth so far this year. And this has led the bank to raise interest margin growth estimates from around 15% to above 20% for this year driven by customer margin. This would lay the foundations to put an annual profit on track that would exceed 1,000 million euros, after presenting profits of 567 million euros in the first half of the year, 44% more than for the next six months, now without the charges of the extraordinary tax on the banking sector and the Single Resolution Fund, would remain the contribution of the Deposit Guarantee Fund, which is smaller.

María Dolores Dancausa, the CEO of Bankinter, also explained that they are optimistic for the second part of the year and hope to continue improving results. “I hope that the results of the second semester are just as satisfactory and I hope that the success that I foresee will count in January as a sign of the success of the Spanish economy in general,” said Dancausa, who is already pointing to a profit of 780 in the market. million euros in the coming years.

Héctor Grisi, CEO of Banco Santander, also trusted this evolution, since credit will continue to appreciate due to the rise in interest rates, although it is true that with less intensity. It should not be forgotten that the Euribor a year ago started at 2.233% while now it would be around 4.15%. In fact, Spain became the main engine of the bank, something that has not happened since 2009, due to the boost of the Euribor, which turned out to boost the profit of the region by 77% to exceed 1,000 million euros. The rise in rates, for Onur Genç, CEO of BBVA, would serve to offset the drop in credit, which comes from higher repayments and lower production.

In this sense, the CEO of Caixabank, Gonzalo Gortázar, also expects this trend to continue, at least, in the third quarter of the year. The bank has shot up its interest margin by 55%, which made the entity raise its guides for the end of the year in the first three months of the year to 8,750 million, although the market consensus already sees it at 9,000 million.

Unicaja Banco, on the other hand, has not updated its estimates, but after presenting better-than-expected results, it has reiterated its guidelines for this year, which contemplate an interest margin growth of 15% or higher due to the rise in the Euribor. In this sense, the impact on mortgages goes with a certain lag, of two months, so there would still be room for margin improvement.

rents for the market

The rise in interest rates by the ECB has another interpretation. And it is that the bank’s profitability continues to recover until reaching the cost of capital in general terms. Bankinter has already achieved this, while Banco Santander confirmed at a press conference its ROTE targets for this year, around 15%, which would be enough for them to achieve it. The CEO of Banco Sabadell, González-Bueno, has followed the same line, predicting that ROTE will close the year at around 10.5%, a level that will allow the cost of capital to be reached.

However, Caixabank still sees it as far away. For them, the cost of capital would be around 12.5%, compared to the ROE presented at 10.8%. Yes, he is confident, on the other hand, he will meet his profitability target for 2024, set above 12% after having placed it at that figure in the first six months of the year.

* This website provides news content gathered from various internet sources. It is crucial to understand that we are not responsible for the accuracy, completeness, or reliability of the information presented Read More

Puck Henry
Puck Henry
Puck Henry is an editor for ePrimefeed covering all types of news.

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