The approval by Abengoa’s board for its viability plan led us to hope that it could be going in the right direction. But as the days pass, the balloon is beginning to deflate and the company, which was the first big Andalusian multinational, is now doing everything it can to avoid being engulfed in Spain’s biggest ever insolvency situation. But it’s not having much success.
Regardless of the disappointments, the one-off items, a few little surprises and all kinds of explanations regarding their earnings and provisions, the so-called big banks’ results are what they are. And none of them have anything to celebrate. They remain vulnerable and unable to reach cruising speed.
It has been 1 year since Telefonica closed a deal to merge O2 (Movistar) with Three, the UK subsidiary of Hong Kong-based Hutchison Whampoa. And the two protagonists are still waiting for the UK and EU regulatory authorities to give the operation the green light.
For the last few months, the European Commission has been warning Spain that it will certainly not comply with its public deficit targets for 2015 and 2016. Many analysts are in agreement with this, while Economy Minister Luis de Guindos rejects it. This is the panorama facing the new Spanish government which, for the moment, King Felipe VI has asked socialist leader Pedro Sanchez to form.
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.
It’s good news for Spain’s automobile sector. And it’s not only because sales grew 20% to 1.034.232 units in 2015 from a year ago, leaving behind the bad memory of 2008 when they started what would be as much as a 50% drop from their peak.
In December, the number of jobless in Spain fell by 55,790 people, bringing the total number of unemployed for the full-year to 4.039 million. So the government’s hopes that the jobless number would fall below 4 million in 2015 were dashed. And those who were expecting a significant slowdown in the labour market in the second part of the year, after the strong rise in the first half, were proven wrong.
It looks as if 2016 will be the first year to bring some normality to Spain’s banking sector in terms of capital requirements since the start of the deep financial crisis. The most important consquence of this crisis has been the sharp drop in the industry’s profitability – a 6.8% decline in return on equity (ROE) to 5.3% in six years. But AFI analysts estimate that the Spanish banking sector’s profitability will be around 6-7% over the next few years.
The Spanish bourse was the worst performer in Europe in 2015. But it is not yet ready for a rally. According to influential Anglo Saxon newspapers there are some extremely negative and toxic elements in Spain with regard to regulated sectors following the December 20 elections. These could affect the risk premium and the risk-free rate etc, with the consequence negative impact on companies’ WACC and valuations.
Spain closed 2015 with a zero inflation rate, after a 0.3% rise in December. This is a disturbing figure, after months of the ECB’s expansionary monetary policy, recently reinforced, which is targeting a fairly demanding annual inflation rate of close to 2%. Experts say the limited effectiveness of the ECB’s measures is due to the fact that it has not been able to generate strong expectations for eurozone growth.