Spanish banking: NPLs stable at 3.56% in September 2023; BBVA, Sabadell and Caixabank, preferred stocks

bancos espanoles

Bankinter : NPLs remain stable despite the adverse denominator effect of the fall in the stock of credit (+0.03% month-on-month; -3.31% year-on-year; -2.99% YTD/2023).

Most importantly, the balance of non-performing loans stands at €42,081m (+0.05% month-on-month; -9.2% year-on-year) and accumulates a decline of -2.5% YTD/YTD (vs €43,159m in Dec 2022). This is good news because: (1) there is no significant deterioration in credit quality despite rate hikes and inflation. It should be recalled that the ECB has raised its benchmark interest rates +325 bp to 4.0% (deposit)/4.50% (credit) in the last 12 months and (2) the evolution of the volume of NPLs suggests a low cost of risk/CoR in 4Q 2023. Indeed, loan-loss provisions fell -7.8% YoY in Sept (-0.1% m/m).

Conclusion: We reiterate our strategic bet on Spanish banks because: (1) they are enjoying a good momentum in earnings (NAB: +22.7% in Sept.), (2) the sector’s fundamentals are solid (excess liquidity and solvency) and (3) valuation multiples are attractive. Our favourites are, in this order: BBVA (+48.9% in 2023/YTD), Sabadell (+50.5% YTD) and Caixabank (+13.1% YTD). These three entities have a significant weighting in our model equity portfolios.

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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.