The new tax proposed by the Government to the main Spanish banks could “erode” the benefits of 2023 that the sector obtains from the rate hikes, reducing them between 35% and 55%, according to the new analysis on the results of banking in the second quarter of the year carried out by Scope Ratings.
Specifically, the associate director of the financial institutions team, Chiara Romano, pointed out that if the tax is implemented as it is currently contemplated, with a temporary surcharge of 4.8% on the interest margin and on the net commissions obtained by the entities in 2022 and 2023, it would “considerably” harm the profits that the entities obtain from the rate hikes.
Thus, he estimated that the benefit obtained from the rate hike could be reduced between 35% and 55% in 2023 due to the new tax, a figure that would be “significantly” higher in 2024, as the higher rates are transferred gradually to customers.
In addition, he pointed out that CaixaBank would be the most affected, with an impact of more than 400 million euros in 2023, followed by Santander (around 300 million euros), BBVA (250 million euros) and Sabadell (just under 200 million euros). millions of euros).
Romano considered that the results presented by the bank in the second quarter are “solid”, with a “positive” interest margin. In addition, he highlighted that most entities confirmed or improved their forecasts for this year.
At the national level, Scope Ratings pointed out that the impact of the rate hike was different in each bank, but in cases where the effects of the revaluation were insignificant, the increase in volumes would have compensated. The firm also highlighted that the increase in commission income reinforced the positive trajectory of the second quarter, while the decrease in non-bank commissions was “more than offset” by the growth in banking and insurance commissions.
“Operating expenses tend to rise for more geographically diversified entities, albeit below compounded inflation and, more importantly, below revenues, leading to flat or slightly better operating leverage,” Romano said.
In most of the entities analyzed, the asset quality indicators improved. The firm highlighted that the second quarter was “very productive” in terms of the sale of doubtful loans (NPL) in Spain, for which the ‘stocks’ of CaixaBank, Sabadell, Santander and Kutxabank decreased.
Likewise, he highlighted the non-payment coverage ratios, especially in Ibercaja and KutxaBank, in which the rate stood at 81.6% and 100%, respectively, excluding contingent risks and prudential coverage. The cost of risk was mostly in line with or below initial forecasts, with most banks keeping forecasts for 2022 unchanged.
On average, the cost of risk in Spain stood at 34 basis points, less than half compared to 2020. BBVA and Bankinter adjusted downward by five basis points, to 25 basis points and 35 basis points, respectively. Romano indicated that more than 90% of the loans guaranteed by the ICO are being repaid and the delinquency rates are “manageable”.
However, he pointed to the prudence of the banks in the face of the possible impact of the macroeconomic deterioration. Lastly, Scope Ratings added that capital adequacy ratios remained relatively stable in the second quarter, with “solid” organic capital creation, although distributions and buybacks, risk-weighted asset inflation and market effects offset most of the increase.