The country’s listed banks, with the exception of Sabadell , already have a profitability (ROE, return on capital) close to 10%, which is expected to be achieved throughout this last semester. The financial sector is rebuilding after the worst of the pandemic and turns 180 degrees in just one year: the most significant entities in the country had a negative return of 3.5% at the end of September 2020.
In fact, with the exception of Bankinter, which in recent years has consolidated ROE levels above 10%, the current photograph shows the best profitability data for the country’s large banks since 2015, the date on which the European Central Bank (ECB ), set interest rates to zero.
While waiting for the banks to present results this week with Bankinter as the starting signal, Santander placed its ROE in the first half of the year at 9.53%; BBVA , at 10.4%; CaixaBank , at 8.2% and the bank headed by María Dolores Dancausa, at 9.5%.
The relief measures implemented during the pandemic for families and companies, such as the mortgage and consumer credit moratoriums, among others, together with the ERTEs, prevented a wave of defaults in the financial sector that, unlike the last major crisis, where the NPL ratio climbed to 13%, is currently down.
Specifically, the whole of the sector in Spain closed July (the last month for which there is data) with a default of 4.39%, the lowest level since March 2009. The worst default forecasts, which pointed to a default of 10% With a view to the end of this year or the beginning of the next , they have already dissipated, and are currently between 5% and 8%, with a ceiling in 2022, and manageable for the financial sector with the provisions made throughout last year.
The terror of defaults, although no one rules out a rise, only a worse scenario, is added the recovery of the economy, a tailwind for the banks, given the expected recovery of consumer credit, and the improvement in the markets. For now, this accelerated recovery of the economy has already given way to inflation (as in most countries) which, while the ECB still considers it transitory, an argument with which it avoids a rate hike, the market discounts that it is going to stay longer than expected, registering great volatility.
In fact, the CEO of CaixaBank, Gonzalo Gortázar, asked the supervisor on Friday not only to work with a scenario in which inflation is transitory, but to assess its prolongation over time. In this case, if persistent inflation above 2% were to be confirmed, the supervisor could raise interest rates to correct prices, blown in favor of the financial sector. It should be noted that a rise of one point in the Euribor (something that is not expected in the short or medium term)supposes an income of 2,000 million more to the year for the great bank .
The market consensus already expects better results for the end of September than before the pandemic (specifically 40% more), with profits of 14.6 billion.