Spanish banks are once again the red lantern of the sector in Europe by capital ratio. Its solvency has risen to 11.8%, just three tenths above what was registered three months earlier, last March, and it remains the lowest in Europe, according to the European Banking Agency (EBA, for its acronym in English) .
In its transparency report published on Friday, which compiles a large number of financial indicators from a sample of 135 banks from 27 countries (129 from the European Economic Area and 6 from the United Kingdom), the EBA notes that the solvency of the 12 Spanish banks taken in his sample is well below the 14.7% of the European average. These are the first data analyzed three months after the Covid paralyzed the Spanish economy, and in general European, to a greater or lesser extent.
The Greek banks are even more solvent than the Spanish, according to the analysis, having a capital ratio as a whole of 12.2%. Hungary and Estonia also outperform Spain, with a capital ratio of 12.8% and 13%, respectively.
Kutxabank has once again repeated as the most solvent entity in Spain, followed by Unicaja. Kutxabank has a fully loaded CET1 ratio (anticipating future regulatory requirements) of 16.6% and the second of 14.3%. They are followed, in this order, by Liberbank (13.9%), BFA-Bankia (13.2%), Abanca, Banco Corporativo and Ibercaja (all three with a ratio of 12.3%), Sabadell and CaixaBank (both with 11.8%), Bankinter (11.7%), Santander (11.5%) and BBVA (11.2%).
The ratio of the bank chaired by Carlos Torres, however, now stands at 14.46% proforma, after the sale of its US subsidiary.
Spanish banks have reduced their delinquency rate, from 3.47% previously to the current 2.4%, but their profitability has worsened as a result of the red numbers in June from Banco Santander and BBVA, mainly.
Also in default there are clear differences between the entities and Kutxabank and Bankinter have the lowest rates, 2.1% and 2.2%, respectively, while the Cooperative Bank, with 5%, presents the worst data, followed far behind by Unicaja, with 3.6%.
The transparency exercise shows the exposure of the financial system to the productive sectors most affected by Covid-19 as a novelty. It also shows the portfolio subject to moratorium as a novelty.
The EBA highlights that in the face of the loan drought that occurred with the global financial crisis a little over a decade ago, banks have now increased financing of the economy, to which the extraordinary measures of the European Central Bank have contributed to guarantee liquidity.
Despite an increase of 7% in total assets in year-on-year terms, the proportion of non-performing loans for European banks as a whole decreased by 50 basis points to 2.9% at the end of the first half. However, the body chaired by José Manuel Campa warns that there are some indicators that point to a deterioration in the quality of loans.
This worsening, together with the losses of a part of the banking system due to higher provisions due to Covid, has already been reflected in a collapse in the profitability of the sector in relation to equity, which between mid-2019 and mid-2020 it fell very significantly, from 6.7% to 0.5%.
The situation is not likely to improve, among other reasons, because interest rates will remain low or negative at least until the end of this decade. “Low interest rates may remain lower for longer than expected before the pandemic,” notes the EBA.
In addition, supervisors have already recommended that banks continue to increase their provisions for the Covid. Added to this is a deterioration due to increased competition for banks, since the explosion in the use of digital technologies during the pandemic crisis has further boosted the emergence of new players in the financial business, “which adds pressure on central bank revenues ”.
The EBA recipe remains in a cost cut and mergers. He assures that the fall in operating expenses in banking has partially offset the pressure of provisions, but after the end of the pandemic these could increase.
The problem of profitability
Record low. The EBA confirms in its transparency exercise “the solid capital and liquidity positions of the banks”, but warns “about the prospects for asset quality and structurally low profitability”. In fact, he calls it “record lows.”
Dividend. The EBA’s analysis is known just a few days before the ECB communicates its decision on whether it will lift the veto for the distribution of dividend by the bank or not, or it will only do so on a case-by-case basis or with a minimum on profit ordinary obtained by each entity.