Ibex 35 Companies Earnings Up 46.7% yr-on-yr To 34.1 Bn in 2016

Why are the banks a problem for the Ibex?If it is no increase in interest rates in Europe before 2020, it will continue to weigh on Ibex banks

The Ibex 35 companies ended 2016 with earnings of 34.1 billion euros, up 46.7% from a year earlier. This figure includes the results of Inditex, which on Wednesday reported a 10% rise in profits last year to 3.157 billion euros.

According to the data provided by the companies themselves to the Stock Market Regulator (CNMV), and picked up by Europa Press, 2016 was the fourth positive year in terms of results for those firms which belong to the blue-chip index.

The provisions made for possible contingencies derived from the floor clauses affected the profit and loss account of some of the banks, except for Santander and Bankinter. On the other hand, companies like Dia and Ferrovial have been disadvantaged by the fact they had fewer one-off items last year. Other companies have suffered from the low interest rate environment, exchange rates, or the ‘Brexit’ effect.

All the Ibex-35 companies ended 2016 in profit, with the exception of Popular, which was ‘in the red’ to the tune of 3.4 billion euros after registering a profit of 105 million euros the previous year. Santander was once again top of the list in terms of Ibex-35 earners, with net profit of 6.2 billion euros in 2016, up 4% from a year earlier. BBVA came next (3.4 billion euros), followed by Inditex (3.1 billion), Iberdrola (2.7 billion) and Telefonica (2.3 billion).

Popular made provisions of 5.6 billion euros in 2016 to strengthen its balance sheet. The bank was particularly affected by the decline in profitability of Targobank, as well as the provisions made for the floor clauses, loans and property. Meanwhile, Telefónica was the firm which saw the biggest rise in profits in 2016. It multiplied its earnings by 3.8 times to 2.3 billion euros compared with 616 million a year earlier, when the company registered a one-time negative impact in the fourth quarter of 1.2 billion euros related to restructuring costs. Excluding this non-recurrent item, Telefónica earned 4 billion euros, up 4.8% from 2015.

Looking at the Ibex-35 companies’ results as a whole, Repsol, ArcelorMittal and Indra deserve a special mention, given that they succeeded in coming out of the red in 2016. Repsol beat estimates and posted profits of 1.7 billion euros, compared with losses of 1.3 billion a year earlier. The energy company flagged that these figures showed the strength and flexibility of its various businesses, particularly after the acquisition of Talisman, as well as its efforts to deal with the fall in oil and gas prices. In the case of ArcelorMittal – which posted profits of 1.6 billion euros compared with losses of 7.4 billion – its good performance was the result of an improved market environment, its Action 2020 plan and the fact that various governments have implemented measures to combat unfair commercial practices. For its part, Indra returned to profits of 69.9 million euros, compared with losses of 641.2 million in 2015.

In 2014, the Ibex-35 companies succeeded in putting an end to the bad results resulting from the economic crisis. In 2012, they registered the biggest fall in net profit since the start of the crisis in 2008, when they earned 5% less than in 2007. This decline increased to 22% in 2009. A year later, these firms saw a drop in earnings of 24%, while in 2011 the decline was 35.42%, rising to 63.58% in 2012, without taking Bankia into account. In 2014, the companies had clocked up two consecutive years without losses, although the following year they posted a loss of 27% to 20.3 billion euros.


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The Corner
The Corner has a team of on-the-ground reporters in capital cities ranging from New York to Beijing. Their stories are edited by the teams at the Spanish magazine Consejeros (for members of companies’ boards of directors) and at the stock market news site Consenso Del Mercado (market consensus). They have worked in economics and communication for over 25 years.