The debt of Spanish banks with the European Central Bank (ECB), which reflects the gross appeal of the entities to the issuing institution through regular financing operations, decreased by 12.1% in December compared to November, reaching at 28,156 million euros, according to data published this Friday by the Bank of Spain. Compared to December 2022, the reduction is 85.4%, which represents 164,813 million euros less. In this way, the debt of the Spanish banks with the ECB remains at its lowest level since September 2007, when it reached a total of 20,992 million euros.
It is important to note that at the end of June, European banks, including Spanish banks, had to face the return of part of the liquidity they still had from what the ECB offered in 2020 at more advantageous conditions within the TLTRO-III auction program. . . In this way, the debt with the ECB of the entire eurozone sector stood at 466,306 million euros, 7.3% less than in November, equivalent to 36,986 million euros less.
The drop compared to December 2022 is 71.5%. Furthermore, it has fallen to its lowest levels since March 2015, when the debt was 485,208 million euros. Thus, the appeal of banks resident in Spain to the issuing institute represented 6.03% of the Eurosystem’s total in December, three tenths below November and below the 11.7% registered in December 2022.
On the other hand, the aggregate volume of assets acquired in Spain within the framework of the different asset purchase programs implemented since 2009 by the ECB amounted to 606,510 million in December, 0.3% less than in November and 2.8% less than in December 2022. In the Eurosystem as a whole, the aggregate import of asset purchases stood at a total of 4,705 trillion in the last month of 2023, 0.2% less than in November and 4.8 % less compared to December 2022. .
According to data from the Bank of Spain, the aggregate volume of asset purchases in Spain represents 12.8% of the total corresponding to the consolidated balance sheet of the Eurosystem, in line with the November data and above the 12.6% of one year before. On the other hand, the volume that Spanish banks have in permanent facilities has increased by 8.3%, up to 249,456 million, where they can benefit from the increase in rates applied by the European Central Bank (ECB) to deposits.
The profitability on equity slows down.
In parallel, it was also known this Friday that the profitability on equity of the largest banks in the euro area slowed slightly between July and September 2023 when compared to the previous quarter despite the European Central Bank (ECB) continued to raise rates during that period. As reported by the regulatory body in a statement, the RoE of the 109 banks that the Frankfurt-based body supervises fell in the third quarter to 10.01%, compared to 10.04% in the previous quarter, although it is still much higher than 7.55% from a year before.
This indicator, which is obtained by dividing the net profit by the equity, shows the profitability of a bank and its ability to remunerate shareholders with the capital they have invested, so the higher it is, the greater the return. the entities. According to the ECB, the increase in operating income due to higher billing due to the rise in interest – which increased by 24% year-on-year – was the main factor contributing to the increase in the aggregate net result compared to the previous year.
In the third quarter of 2023, the ECB raised interest rates by 0.5 percentage points (0.25 points in July and 0.25 in September), reaching 4.5%. the credit facility – which lends to banks overnight – and the deposit facility – which remunerates excess reserves overnight – up to 4.75% and 4%, respectively. The return on equity ranged between 6.65% in Germany and 25.63% in Latvia and, in the case of the ten Spanish banks that supervise the ECB, it stood at 12.5%.
During the third quarter of 2023, the intermediation margin increased to 1.56%, compared to 1.23% a year earlier, although with many structural differences between countries, since this ratio was between 0, 89% from France. and 3.9% from Latvia. Common equity tier 1 (CET 1), which measures the financial solvency of banks, remained unchanged at 15.61% in the third quarter, with Spain as the country with the lowest value (12.6%) and Estonia the most. high (23%). In the case of this ratio, the higher it is, the more guarantees of the bank’s solvency.
The non-performing loan ratio of eurozone banks remained stable at 2.27% in the third quarter, while stocks of problem loans increased by €2 billion to €345 billion. In addition, the cost of risk remained at 0.43%, while the ratio between loans under special surveillance and total loans increased to 9.29%. The total of this type of loans amounted to 1,356 billion.
