Spanish banks’ market capitalisation is still in the doldrums. Six of the seven lenders listed on the Ibex 35 occupied the top positions in the ranking of European banks with the worst stock market performance in 2015. And investors are continuing to punish Spain’s banking sector at the start of 2016.
Since the December 20 general elections, Spain’s banks have lost an average 13%
(before yesterday’s close) while the rest of the sector in Europe has dropped an average 7%, according to a report by Afi. Political uncertainy is having an impact particularly on those banks with a greater bias towards the domestic market (Popular and CaixaBank) and those which have weaker credit ratings.
Apart from the political risk, each lender has its own problems which are penalising its share price. In 2015, Santander saw 35% of its market value wiped off, five times more than the average for the European banking sector. This was due to the collapse of the economy in Brazil, a country which generates over 20% of the bank’s profits. So far this year, the share price has lost 8%, despite the bounce back in yesterday’s session.
Popular, which lost 27% of its market value in 2015, is basically a domestically-focused bank and profitability is its main problem. So far this year, it is the banking stock which has suffered the worst, with falls of over 12%.
CaixaBank and Sabadell’s shares lost over 25% in 2015, depressed by investors’ misgivings about the future of Spain’s mid-sized banks. But the uncertainty generated by the general elections and, more importantly, by the independence movement in Catalonia, also weighed on the share price of both these lenders.
Bankinter’s shares have also suffered, but to a lesser extent. That said, there are still some doubts about the bank’s ability to grow in a low interest rate environment. BBVA, and also Bankinter, are the best performing banks, although they have both lost over 5% in the first two weeks of 2016.
Analysts agree that profitability is the problem for Spanish banks. And, as the Bank of Spain insists, one solution could be a new wave of mergers, which would probably affect the mid-sized lenders.