The stock price of a security reflects the evolution of that company in recent times but, above all, the expectations that exist on it in the short and medium term. And if this principle is applied to the banking sector, what the Stock Market evidences is that Spanish banks as a whole are at a very difficult time since, only in this year, the value of the entities listed on the Ibex has collapsed more than 20,036 million. This figure is equivalent to 15% of the average value of the six main listed entities in the country: Santander, BBVA, CaixaBank, Bankia, Sabadell and Bankinter.

At the end of 2018, and after a year that was also disastrous for the sector with a collapse of more than 25%, the sum of the capitalization of these groups reached 134,000 million euros; Today, the figure is just 114,000 million, including losses suffered this last week linked to the worsening economy and the foreseeable prolongation of the current scenario of negative rates in Europe. That is, in the last year and a half the entities have left a 39% value in the parquet.

The most bulky losses are those of Banco Santander and CaixaBank, whose value has been reduced by more than 6,000 million in both cases. In the case of the entity chaired by Ana Botín, the decline is directly linked to the fact that it is the largest entity since its shares, despite leaving a notable 10%, are not the ones that fall most in the year. For its part, the price of CaixaBank has plummeted more than 30%, a figure that only Bankia is able to match, due to the high exposure of both groups to the domestic market that prevents compensation of the type situation in Europe with the largest Margins of other international markets.

The shares of the nationalized bank headed by José Ignacio Goirigolzarri fell 36% in the year and traded at 1.63 euros when at the beginning of the year they did so above 2.5 euros. The result is that its value has gone from 7,897 million to slightly exceed 5,000. This situation directly affects taxpayers, since the amount that the Government can recover at the moment in which it privatizes the entity will depend on the stock market value. Last week, the Minister of Economy, Nadia Calviño, referred to this situation and said that "there is no hurry" to carry out the sale, which in principle is set for the end of 2021 but will depend on the future evolution of the bank , since the objective of the divestment must be the recovery of the "huge" aid that was injected into the entity, Calviño added.

Bankinter and Banco Sabadell also suffer losses of more than 20%, which means that their value on the stock market does not reach 5,000 million. Especially bleeding is the situation of the Catalan group led by Josep Oliu, which already last year became the smallest bank of the Ibex and whose actions move over 0.77 euros. And finally, BBVA is the entity that least yields on the stock market with a 5.8% drop in its shares. Although the Villarejo case has splashed directly on the bank's reputation, investors have not punished the entity and only the sharp declines in recent days have pushed it back. In terms of capitalization, its fall is 1.8 billion.

A suffocated sector

As you anticipate in the last 20 months, the turbulence that affects your actions begins to be reflected in your income statement. After achieving in 2018 the highest profit in its history - 16,676 million only among the entities of the Ibex -, the sector already feels in its balance the impact of the current environment of low and negative rates in the Old Continent. The forecast for the year as a whole is that profits be reduced up to 12% weighed down by a reduction in margins in the financial intermediation business, not counting the potential extraordinary impact of the numerous lawsuits that are coming for these groups in autumn: case Villarejo for BBVA, liquidation of the Popular and termination of the contract of the Italian Andrea Orcel in the case of Santander and the resolution of the European Court of Justice on the IRPH index of mortgages.

The great hope of the sector passes because the European Central Bank (ECB) once again hits a hose of monetary stimuli to the economy and decriminalizes the cost for entities to keep their money every night on the balance sheet of the European body. This is what is called the deposit rate, currently with a negative cost of 0.4% for the groups.

Financial analysts believe that the regulator could cut this figure even further to -0.6% in an attempt that banks do not save money and grant more credit to stimulate the economy. However, this reduction would include a series of modifications to reduce that cost in some tranches, since the bank has not yet transferred that negative cost to its retail customers.

But what really looks like a banking stimulant is the simple idea that the ECB itself can buy shares of the most punished groups, as published on Thursday's Wall Street Journal. This strategy, hitherto unheard of, would add to a potential restitution of the asset purchase program through which the Frankfurt-based institution purchases debt from states and companies, concluded on December 31 after four years in force.

The purchase of securities would be outlined as well as a tool to compensate for indefinite maintenance in 0% of official rates in Europe. The region has been in this strip for more than three years and the possibility that the ECB will rise has vanished after the US Federal Reserve has started a new round of cuts this summer.

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  • BBVA
  • CaixaBank
  • Europe
  • Bank of Madrid
  • Bankia
  • Federal Reserve
  • Nadia Calviño
  • Santander Bank
  • Sabadell Bank
  • European Central Bank
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