2013 Spanish banking industry’s results can be labelled as positive if looking into profits as a whole, but when analizing how they were generated the question change. Lower provisions, sale of assets and gains from financial operations have enabled big entities to rise their profits fourfold. However, their unfinished business remains profitability.
Bailed-out Bankia closed Spanish annual earnings season by announcing a profit of € 509 million just one year after it suffered the bulkiest losses in Spain’s corporate history: € 19.000 million. This bank was injected more than € 22,000 million which are still to be repaid with its stock market price growing dramatically in last months.
Big entities’ profits (Santander, BBVA, Caixabank, Bankia, Popular and Sabadell) have shot up over € 8,000 million, but they need to increase their recurrent revenues in order to make their Spain’s business profitable again.
The task will not be easy. 2014’s forecasts point out to increasing non performing ratios, very weak credit and regulatory uncertainty as a consequence of stress tests. Concerns about possible penalisation to available-for- sale sovereign exposures have forced Spanish banks to alleviate their public debt portfolios in last months of year 2013.
Spain’s banking sector has done its homework regarding reorganisation and provisions, but profitability is not only a question of good management: it is also needed a recovery of economy . Unfortunately, estimations with an unemployment rate of 25% and a GDP growth of 1% are unpromising.
On Monday, the FT applied a more optimistic reading, which is really noticeable. The economic daily wondered if time to invest on Spanish banks has come, especially on medium size entities. “Not thrilling, but a slow and steady recovery would do wonders for lenders”, Lex column underlines, although it also recognizes that valuations are not so attractive as six months ago.
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