While the large US banks have registered a general drop in profitability in 2022, the situation has been totally different for Spanish banks. The big Spanish banks have seen how their ROE (return on capital) has improved in the past year and entities such as BBVA, Bankinter and Santander have ended the year with double-digit levels, surpassing JP Morgan, Citigroup, Bank of America or Goldman Sachs, among others. This reversal has been possible, firstly, due to the rise in interest rates that has boosted the profitability of the retail business, but at the same time because the great volatility in the markets caused by the war in Ukraine and the rise in inflation have damaged the investment banking.
In this sense, the national entities “have navigated in the midst of a perfect situation”, they point out from the consulting firm Accuracy, with the confluence of three factors. On the one hand, the rise in interest rates and especially its effect on the Euribor, which will use an appreciation of credit portfolios in the last quarter of the year and which should continue, at least, in the first half of 2023. But it also influences the evolution of the economy, which despite the obvious slowdown as a consequence of the former and the increase in prices maintains a positive trend without an increase in default and, finally, the abundant liquidity that exists in the market and that has propped up the interest margin. All of this suggests that the ROE will continue to improve this year as well, which will allow entities to increase their ability to finance themselves without having to resort to the market.
In contrast, the large US banks have been penalized, especially Goldman Sachs and Morgan Stanley, by a drop in income from the investment banking business, which has had a negative impact on gross margin. On the other hand, they have also been penalized by an increase in provisions, which have gone from adding in the profit and loss section due to the reversals of the pandemic years to significantly subtracting in this 2022, they point out from Accuracy.
BBVA leads ROE in Spain
Within Spanish banking, BBVA is the entity with the highest ROE ratio. Specifically, it closed 2022 at 14%, 3.2 points more than in 2021, when it stood at 11.4%, while in the year in which the health crisis caused by the pandemic broke out, it stood at 6.9% You have to go back to 2011 to see similar levels of profitability in the bank, when it stood at 15.8%. This ratio presented by the bank chaired by Carlos Torres equals that of JP Morgan, but almost doubles that of Citigroup (7.7%) and Wells Fargo (7.5%). Likewise, the improvement of Goldman Sachs and Bank of America, which barely beat 10%.
Bankinter is another of the entities that has seen its ratio improve in 2022, reaching 12%. The bank headed by María Dolores Dancausa has raised it by 2.4 percentage points compared to 9.6% in 2021 and not only is it among the highest in Spanish and European banks, but it is also within reach of pre-pandemic levels ( when it had a ROTE ratio of 13%). Banco Santander has also improved its return on equity after placing it at 9.7% at the end of 2021. During the pandemic it stood at 5.68%. Also, you have to go back to 2010 to see a figure similar to last year. In that year, the ROE of the entity, which was under the presidency of Emilio Botín, was 11.8%.
Regarding Banco Sabadell, it obtained a positive evolution of its own resources in 2022, which allowed it to go from 4% to 6.3% in the last year, exceeding pre-covid levels, when this metric was 5.94%, while Caixabank also improved its ROE to 9.8%, from 7.6%, above the profitability levels of Wells Fargo, which saw its ratio fall from 12% in 2021 to 7.5% last year. For its part, Unicaja is the entity that lags the furthest behind despite also having increased its return on equity to 4%, from 2.3%.
Within the large US banks, the biggest blow was taken by Goldman Sachs, which went from an ROE of 23% in 2021 to 10.2% in 2022, while Morgan Stanley maintains a solid position with 15.3% despite to fall 4.5% percentage points.