Spanish banks are probably experiencing their best moment in decades, or at least since the mortgage boom in the years after the entry of the euro. Investors suspect something good in the short term in the balance sheets as predicted by stock prices. The Ibex 35, with almost a 30% weight in the banking sector and six banks in its composition, was one of the least bad indices in 2022 and is being one of the best in 2023.
Much of the blame for this new scenario ahead is due to the radical shift in the interest rate framework. The profitability of the typical banking business has changed overnight. From living on oxygen assistance and the crutch of the European Central Bank (ECB) with subsidized liquidity injections, he starts walking alone, starts jogging and will surf the best wave possible: a year-on-year tsunami of several percentage points in interbank rates at Most of the mortgages to homes or corporate loans to companies are referenced.
For example, the 12-month Euribor now moves 380 basis points above the same month in 2022 in January, while the 3-month index has made the cost of business financing more expensive by only 300 basis points compared to just one year ago Among the bankers they rub their hands despite the fact that the repricing of the asset portfolio goes game by game and will take time to be renewed depending on the review clauses of each product.
What is indisputable is that the impact on the profitability of Spanish banks will be notable. It will begin to emerge in the fourth quarter and annual results of 2022. Pay attention, therefore, to what the listed Santander, BBVA, Caixabank, Sabadell, Bankinter or Unicaja show. The change in margins is radical, it will be something that had not yet been clearly seen in the accounts until September 30.
Goodbye negative rates, hello rising margins
From the sad explanations for the negative types that were heard in the conference call with analysts, we are going to move on to the happy tone. The interest margin of the G6 Bloomberg. The intermediation -which also includes dividends from investees- will be seasoned by the full recovery of payments to the shareholder after the containment policies due to the pandemic.
There are experts who warn that the increase in the intermediation margin will not be linear and that there may be temporary anomalies, as explained by Marta Alberni, Ángel Berges and María Rodríguez, from AFI, in this article in Funcas. According to his thesis, the rate at which bank assets and liabilities are adapting to the Euribor curve causes an initial effect of falling margin and a progressive migration to positive territory, a phenomenon already visible since September. The banks have had their jaws wide open since the end of the summer for this leap in income and contained costs. In addition, the cost of liabilities for banks is growing rapidly when financing in the markets but is much slower with customer savings.
However, not everything is rosy. The threat of recession and the general blow of inflation in the pockets of its clients threatens its solvency, bad news that will begin to appear from 2023 in the delinquency ratios of the banks. The risk, however, seems under control on all fronts. In case anyone sees ghosts, you have to remember for your peace of mind a big difference between the 2002-2007 boom.
The sector enjoys iron health thanks to the era of unlimited liquidity, its construction in terms of costs (offices and staff) and also due to strict checks by supervisors. Plus there is less competition. Faced with the more than sixty-odd boxes that competed in Spain until 2008, with a knife between their teeth for selling a mortgage or capturing a deposit door-to-door, the handful of players that remain now have fewer incentives to bite the contrary.