UBS | President Draghi surprised the market positively, both in terms of the magnitude of some of the expected moves (QE extension in the upper end of the range) and also implementing new measures (acquisition of non-financial IG bonds in its asset purchases, and new targeted TLTRO). For (retail) banks like the Spanish, the balance of ECB’s actions has to be considered as positive, especially if trends seen in the swap market are confirmed in Euribor fixings.
The Spanish banks’ non-performing loans (NPLs) ratio fell to 10.35% in November (10.56% in October), with total bad loans standing at 138.894 billion euros. But this simple figure encapsulates the eternal problems of statistics. The fact is that the average NPL figure provided by the Bank of Spain does not reflect the significant differences between the banks.
The indicators on credit risk are showing clear signs of improvement. The NPL ratio for the whole of the banking system fell to 11.0% in June (vs 12.5% in December 2014), the lowest level since April 2013.
Spain, along with the UK and Ireland have been the most active portfolio transaction markets in Europe given that banks locally have been very active in cleaning up their balance sheets, a report by PwC points out.
The recovery in Spain’s property market is good news for the country’s banks as it will provide a boost for the economy as a whole, while helping reduce the “toxic” real estate assets on the lenders’ balance sheets, says the rating agency.
Confusing costs with revenues, or assets with liabilities, is lethal if you are analysing the situation of the banks. It now appears that, according to some so-called experts, the ECB and its low interest rate policy is to blame for the weakness and lack of profitability amongst Spanish banks.
Renta 4 | Spain’s big banks H2 results expected to be weaker.
Spain’s top five banks posted a combined net profit of 7.989 billion euros in the first half of 2015, up 48 percent from a year earlier, thanks to the improving economic situation and a decline in bad loans provisions.
The Corner | July 27, 2015 | Spain’s bailed-out lender Bankia saw its first-half profit rose 11.5 percent from a year ago, as it reported on Monday. Net profit rose 10.3 per cent to €311m, versus a consensus of analysts’ expectations of €277.8m. Charges against bad debts fell and offset weaker revenue from lending.
The Corner | July 26, 2015 | Spanish listed banks’ Q2’15 earnings season starts today. Analysts at AFI are less optimistic than consensus estimates.