Banks have achieved record results in 2023 and seem to have money for everything, including to hedge against future inclement weather. In Spain alone, they have increased by 39% in the last year the item of expenses intended to cover possible deterioration of the business, up to 2,816 million euros. More or less, the increase comes after the repeated messages from the European Central Bank (ECB), the Bank of Spain and the European banking authority, the EBA, about the need for extreme caution due to the possible unwanted consequences of interest rate hikes.
The increase in provisions in Spain has been particularly significant among the three largest banks in the country. Santander has supplied 984 million euros to the domestic market, 82% more, compared to CaixaBank’s 344 million, 76% more, and BBVA’s 145 million, 51% more.
All the data has been compiled by the Neovantas consultancy, which also offers an interpretation of what has happened. It is mixed, according to him, the exit from the stage caused by the covid with a new environment of high interest rates. “The big Spanish bank has been releasing the provisions linked to the pandemic, but without losing focus on those that must be set up to be prepared for the complex economic scenario that has been getting tougher in recent months,” he says.
There is, he asserts, a “sourcing strategy taking advantage of the exponential rise in interest margins and recovering from a more serious future problem”.
The increase in provisions has, in reality, been more in proportion to the increase in earnings than to delinquencies, which have receded against all odds. Santander, BBVA, CaixaBank, Sabadell, Bankinter and Unicaja collectively earned 26,000 million euros last year, most of it outside Spain. In the country of origin, the profit was 11,727 million, 53% more, after paying 1,120 million for the extraordinary tax.
Instead, delinquency appears under control, at least for now. The Bank of Spain put the figure at the end of December at 3.54%, compared to 3.45% a year earlier, according to the data released yesterday.
The banks have reported separately on their delinquencies in Spain. It oscillates between the rates of BBVA and Sabadell, which slightly exceed 4%, and the lowest levels, which are those of CaixaBank, of 2.8%, and Bankinter, of 2.1%. These are very positive percentages if you compare them with the experts’ forecasts regarding interest rate hikes and they are mainly due to the good performance of employment.
An Accuracy report concludes that “credit quality in Spain is still under control”, even with a slight decrease in the default rate among large institutions. If the provisions increase, he says, it is for “greater prudence”.
This word, prudence, has been dropped by ECB Vice President Luis de Guindos in almost every speech since the central bank began raising rates in mid-2022. It is usually accompanied by the warning that the banks’ profits can be “a mirage” in the face of a more complex situation.
In Spain, banks mainly report a decrease in the granting of loans, especially those intended for the purchase of housing. They also agree to highlight the high level of family savings, which has allowed many households to pay off mortgages and reduce the risk of default.
