Cinco Dias / The main Spanish banks have already submitted their 2015 Many of these entities have finally announced earnings results below initial forecasts, except in Bankinter , entity that ultimately surprised by their results in the year of its 50th anniversary. Its profit was 376 million, an increase of 36%. The sector had predicted a good year, with income statements to recover their normal after a hard journey of setbacks in recent years, following the economic and financial crisis that began in 2008.
unexpected last minute, however, have undermined their accounts between the third and especially the fourth quarter. Provisions for the crisis of Abengoa; SAREB for losses as a result of the implementation of its new accounting circular; Provisions for predictable contrary sentence and may retroactive clauses floor; by the collapse in prices of investments, which has resulted in the odd case to put to market their portfolios, to take the share of losses in the case of Repsol CaixaBank; unforeseen changes in the rate of exchange; Provisions for the expected avalanche of lawsuits that will result from the Supreme Court on the IPO of Bankia; the negative impact of the Turkish bank Garanti in BBVA; or, in the case of Santander, by different provisions among which the one made against possible claims for the marketing of payment protection insurance in the UK.
To this must be added the fund assets Deposit Guarantee, which takes place in the last quarter.
the bank and suffered a host of contingencies that have added to the pressure on margins as a result of operating under interest rates almost 0%. 2015 thus has been “a full year” as defined by the president of Santander, Ana Botin. While it is true that for the first time since the crisis erupted in 2008, cutting supplies is widespread in the income statement, at least in Spain despite the unexpected.
The sector also it has been, along with raw materials and oil, the hardest hit on the stock exchange, and has started the year as he finished the last, with sharp falls. So that Spain has become the most battered collective traded. Several investment banks, in fact, believe that the bank will not recover its former appeal and glamor to the crisis, it is not a good sector to invest in the coming years. The European Central Bank (ECB), the Bank of Spain, the International Monetary Fund (IMF), analysts, and even the industry itself, have repeatedly in recent months that the bank will never repeat the returns before the crisis. Just remember the words of Ana Botin in international banking conference last November. In this act, the banker said that despite the “great efforts” to have institutions, “the intense change” experienced by the sector in recent years prevents the performance prior to the crisis is reached, by factors such as high cost of capital, which is almost 10% for European banks, so that the profitability of it has fallen from 20% in 2007 to the current 4% or 5%.
And if we add to this “very low interest rates and weak growth in developed economies,” it is a challenge for the sector, Botin said.
Benefits
the seven banks listed on the IBEX 35, Santander, BBVA, CaixaBank, Bankia, Sabadell, Bankinter and Popular- closed the year with a net attributable profit of 11,651.7 million euros, compared with earnings of 10.779 million last year, up 8.1%. This result, although positive is lower than expected at the beginning of the year. In Spain these entities totaled a profit (the rest of the financial institutions and have not yet reported their results) of 4,452,000, up 42%. This percentage can be considered very high, but if the income statements are analyzed it is found that the benefits come from the bottom, ie the departure of the provisions that have been adding about 34,824,000 in 2014 to 29,758,000 euros last year, down 14.5%.
the good news of lower delinquencies allows this reduction in provisions, which in turn, offset the fall in net interest income . The NPL rate for the whole sector at 10.5%, with declines widespread for months. For this year, according to a study by International Financial Analyst (AFI), the default rate will stand at 8%.
Bankinter institutions remains firm with the lowest rate of defaults, with 4 , 13%, compared with 4.72% a year earlier. Next in Sabadell Spain, with a rate of 7.79%, compared with 12.74% a year earlier. CaixaBank recorded a bad debt rate of 7.88%, Santander Spain’s NPL ratio was 9.8% (in the group is 4.36%), BBVA in Spain adds 9.97% (the low group 5, 4%), Bankia reaches 10.8%, while the delay in Popular exceeds 12.8%.
this year, all banks have presented results announced increased profits for the current year while recognizing that continue to operate under the pressure of low interest rates is a challenge that will cause revenues on top of the tight mind, to be offset as this year, with a cut in supplies. Commissions and especially cost cutting also impact positively on the bottom line of the income statement.
The president of BBVA, Francisco González, stressed on Wednesday at the presentation of the Bank that “powers not prepare you for this, we are entering a completely unknown territory”, referring to operating rates almost to 0%.
the new circular provisions of the Bank of Spain, which still is in consultation period will help, according to all experts, to lower supplies in a large number of entities. The reason: banks will no longer wait for the loss of an asset has materialized to constitute provisions, as they must make the topping in advance. Following the entry into force of this circular the possibility (already present in the circular 2004, but not activated so far) for institutions to use their own internal calculations to fix the provisions opens.
Several experts consulted always ensure that an internal method is more lax one mandatory the Bank of Spain.
Regulation
One of the challenges that have yet to face banking is that called “excessive” regulation and higher capital requirements, which according to the sector, not only reduces the yield but also a brake on lending. The governor of the Bank of Spain, Luis Maria Linde, also referred to these challenges on several occasions. “The increasingly stringent regulatory requirements and strong competition, pressure on profitability. This can be concerned to achieve higher returns with higher risk, something that supervision should be monitored closely,” said Linde in a financial conference held in October.
This year, European banks must also undergo additional stress tests. The ECB has cited entities for next February 17. That day the body that presides Mario Draghi will be informed on the methodology of the next stress test for the industry will be subjected, and whose results are expected in October this year.
Forecast for 2016
in a display of transparency, the ECB announced financial institutions work priorities for this year. Their concern focuses on five areas, which will be submitted to special surveillance. That is, the business model and profitability risk, credit risk, capital adequacy, risk governance and data quality, and finally liquidity.
Within these five area the ECB shows concern over the prolonged period of low interest rates. According to a recent report by Goldman Sachs, overcoming the pressure on margins from this cause is one of the main challenges for the sector. Ensures that there will be banks in Spain may not offset this pressure by almost exhausted lowers the interest rate on deposits. In addition, expected loan volumes in Spain continue to be virtually flat in the coming years, which will put additional pressure on the top line of the income statement of banks.
The leading bankers have agreed in the presentation of the annual results that have been held over the past two weeks that the net credit will have positive growth this year. so will be the first time the lending offset depreciation, especially mortgages, and the final credit growth since the financial crisis began.
The amount of credit, except in certain entities in which the ECB will tighten their supervision will be of better quality than so far influenced by the improving economy, which will allow further cuts in default. According to forecasts by Afi, the default rate will rise from 10.5% today to 8% this year. Also it provides that the profitability or ROE (return on equity) in the sector to rise slightly to stand at 6.1%.
For now, the company is Bankinter higher ROE, 10.9 %. Your goal is to reach 12% this year. Followed by Bankia, with an ROE of 9%, and whose claim for this year will be announced this spring, once made public its new strategic plan 2016-2018. Santander has managed to overcome its profitability slightly and stands at 7%. BBVA, however, has declined to move from 5.6% in 2014 to 5.3% in 2015. Sabadell has managed to boost its ROE to place at 6.34%, compared with 3.7% the year previous. CaixaBank continues with a yield below 5%. He finished 2015 with an ROE of 3.4%. Popular but the bank that has suffered more punishment on their profitability, which now stands at 0.83%.
The Associate Minister of Bankinter remains focused this year to banking ” the pursuit of profitability and the entry of new digital competitors who are already here. “
Gonzalez and Botín also referred in their interventions in the presentation of results to the entry of new digital competitors as a threat that we should start to consider, although it is now less. CaixaBank wanted to take the first step and has launched a mobile bank to attract those younger customers who are not used to stepping on a bank branch and other online operations. It has beaten him to BBVA. Bankinter already had a similar application for some time and is now promoting. All banks are now trying to recruit these young customers to avoid being alone users of Fintech. For now, the strong competition in the sector and the pressure on margins has led a battle to capture and especially link the client. Best course of action to overcome the unexpected and obstacles this year.
The bankers place the new mergers in three years One issue that is on the table from the Bank of Spain and the ECB is to mergers . For more than six months ago the Spanish supervisor stresses the need to launch another wave of mergers as a means to improve particularly the efficiency and profitability of the weaker entities. The solvency seems, however, has left for the moment, to be a problem, according to the latest revisions of the ECB. The heads of the seven banks listed on the Ibex 35, Santander, BBVA, CaixaBank, Bankia, Sabadell, Popular and Bankinter seems, however, to have moderated his discourse on new corporate operations in Spain, to place them in two or three years, and all linked to the degree of pressure resistance margins. Goldman Sachs also sees mergers this year. Candidates: Unicaja, Liberbank, Ibercaja and BMN Abanca resist, but has now joined them more likely candidate, Popular, explains the odd expert to its low price. Yes, and Bankia BMN be privatized between now and 2017, according to fixed national law, unless the rule is changed. Ibercaja and Unicaja are preparing its IPO, although it is not a good time to undertake this adventure. The president of BBVA joins the margin pressure the great transformation that is suffering the sector as a reason for the disappearance of thousands of entities in the world in the coming years. The banker says that BBVA “It will be a qualified player for any operation,” the same as hinted Isidro Fainé, Chairman of CaixaBank. But Gonzalez acknowledged that “it is a matter of two, three or even four years (the merger) will depend on pressure from shareholders.” The number one Bankia, Jose Ignacio Goirigolzarri explained that only “a negative trend in income would lead to mergers in the financial sector.” Occur or mergers this year, banks will do what it does is keep trying to improve its efficiency, very uneven between Bankia 43.56% and 59% of Santander in Spain ratio. Responsible banking CCOO, Juan José Giner, estimates that the new wave of mergers joined the search for improved efficiency will exit another 20,000 employees
SPAIN. Another year of confusion for Spanish banks
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