The Bank of Spain plans to change the method for calculating provisions in H1 2016, in advance of the European Commission’s new accounting regulations due to be implemented in 2018. Under the new rules elaborated by the International Accounting Standards Board (IASB), provisions will be calculated based on the expected loss in credit operations and not on the loss already incurred, as has been the case up to now.
Investment in Spain’s property sector rose 67% to a record 11.7 billion euros in 2015, according to a study by consultancy firm BNP Paribas Real Estate. This figure is 25% higher than the total investment recorded in the pre-crisis years. But the consultancy predicts that the scarcity of adequate investment opportunities will see investment stabilising at around 8.5 billion euros.
Spain’s renewable energy market is expected to see further consolidation activity in 2016, with transactions estimated at around €4 billion euros, in line with a year earlier. The fragmented nature of the industry and asset disposals by European firms will fuel M&A.
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.
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. 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.
A last-ditch attempt on the part of separatist parties has brokered a deal for a new government in Catalonia. It came just in time, as the clock was ticking on new regional elections. The agreement forced incumbent President Mr Mas to step down, meeting the stone wall prerequisite imposed by the far-left CUP movement for providing its support. However he secured the job for a second-ranking member of his own party, thus keeping a firm grip on the political agenda.
BARCLAYS | 2015 was a surprisingly strong year for the Spanish labour market. Social security affiliations increased by 533k while the number of unemployed fell by 354k, according to figures released by the Ministry of Employment. December delivered another sizeable drop of 55.8k in registered unemployment and an increase of 85.3k in social security affiliations relative to November.
The global economy in general, and the Spanish economy in particular, are experiencing turbulent times. China, the emerging markets, raw materials, the weak recovery, inflation or exchange rates are entangled with the domestic problems of each individual country. In Spain, these are focused on a political map with a lot of question marks and a worrying level of private debt, which Abengoa’s crisis has accentuated.
In the corporate world, size is also important. One of the areas still pending reform in Spain, and one of the economy’s biggest weaknesses, is the size of companies. According to studies published by groups like the Circulo de Empresarios (Circle of Entrepreneurs) or research institution Fedea, Spain’s GDP would grow 13-15% if the average size of its companies was closer to that of neighbouring countries like Germany or the UK.
JM Martí Font via Macropolis | Spain is not Portugal, although we cannot completely rule it out. Brussels and Frankfurt want Spain to look like Germany. A grosse coalition will reassure the markets, guarantee the prevalence of budgetary orthodoxy and, on the surface, maintain at least the status quo, something very important to the European institutions, the financial powers and the European political class who doesn’t like changes.