The customer margin of Spanish banks, the differential between what banks charge for loans and what they pay for deposits, will reach maximums this first semester as a result of the repricing of the credit portfolio impacted by the rise in rates of interest and its effect on the Euribor. However, there will be differences between financial institutions when it comes to achieving this due to the different composition of their credit portfolio.
This phenomenon has already been seen in the results of Bankinter, the first entity to reveal its accounts for the first quarter. Thus, the entity led by María Dolores Dancausa saw the customer margin grow to 3% (specifically, it stood at 2.96% at the end of March), since the yield on its credit portfolio reached 3.26 % in the first three months of the year, while the cost of deposits stood at 0.30%, despite having multiplied by 10 in twelve months, since only slightly less than half of the bank’s mortgage portfolio has been repriced , but almost all loans to companies.
Precisely, Jacobo Díaz, financial director of the insured entity, during the press conference on the results, that this profitability “will gradually adjust over time to levels of 2-2.5% because they come from interest rates well below normal “. In the case of Banco Santander, which will publish its accounts this Tuesday, this margin could comfortably exceed 3% and this period, analysts explain, as a result of the different composition of the portfolio by the entity.
In this regard, Nuria Álvarez, a financial analyst at Renta 4, recalls that the weight of the mortgages of the entity chaired by Ana Botín is only 24% of the total, corporate credit and SMEs being the majority, which “is repriced faster than the mortgage”, so he believes it is feasible that we are facing high historical levels. On the other hand, Bankinter has a strong exposure to housing credit, hence the differences that may exist between the different entities.
For example, and for Banco Santander, despite the fact that the cost of deposits has been rising quarter by quarter in 2022, the greater has been the evolution registered by the performance of credits, 46.8% more in the last period of the year, up to 2.48%, since it started twelve months earlier at 1.69%. This means that the customer margin in 2022 ended at 2.3% for the business in Spain, a percentage that climbed to 2.53% for the group as a whole.
BBVA and Banco Sabadell will also publish their results this week (on April 27) and there will be some improvement in this section. In the case of la, there was already a strong increase in its customer margin at the end of 2022, when it stood at one of the highest within listed banks: 2.53%, due to its second strong exposure to small companies and mortgages. For its part, the entity chaired by Carlos Torres Vila improved profitability per customer to 2.21%.
This bank customer margin could improve in the case of some entities during this second, due to the fact that the entire rise in the Euribor has not yet been transferred to mortgage loans, because, despite the fact that the index at which it is referenced by most of the variable-rate mortgages, it was already positive, it was not until the summer that it accelerated, so from the third year on, it could be said that it would have reached its turning point, according to the experts consulted by ‘ Information’.
The rise in the cost of deposits will not put you in danger
Despite the fact that the experts expect the customer margin to moderate due to the increase in the remuneration of deposits and because the repricing of the loan portfolio would have already reached its ceiling. But this will not mean that this drop from highs is significant. The key will be the remuneration of wholesale and institutional deposits, which could ultimately make the cost of liabilities more expensive, and less for retail deposits, which, despite the reluctance of the depositors, will end up being captured from the second half of the year.
Estimates set a deposit beta (the predisposition of banks to improve the remuneration of deposits) of between 25-30%, according to the entities themselves. In other words, taking into account that the repos of the European Central Bank (ECB) are located at 3%, this would imply a remuneration of fixed-term deposits of 0.75%. “3% of the deposits will not be repaid because it would mean a beta of 100%,” says Álvarez.
What would be the reason for this contention? The slowdown in the volume of credit would be the main reason why the banks would not speed up the remuneration of deposits. “The slowdown in demand for credit implies less need to raise funds to finance it and, therefore, less need to repay it better,” the experts explain.
