fter a 2012 in which the group of Spanish credit institutions presented losses of 50,000 million euros (according to data from the Bank of Spain itself), banking returned to the path of profits in 2013. Even the nationalized savings banks ( BFA-Bankia, CatalunyaCaixa and Novagalicia), which led the red numbers during the past year, are showing positive results . The three companies received direct aid for an amount of more than 43,000 million euros.
The financial sector recorded a joint loss of 50,000 million in 2012, according to the Bank of Spain The nationalized (CX and NCG just presented results) return to the numbers in black, although much of these results are due to “extraordinary benefits” obtained by the sale of participated companies or other divestments, as academics and analysts have pointed out to this newspaper. In total, the old savings banks, now controlled by the Fund for Orderly Bank Restructuring (FROB), have earned at least 1,368 million euros from this sale of assets and other financial operations.
The problem is that these extraordinary results can only be obtained once, since entities no longer have those assets. “These sales report capital and results – although they also sacrifice sources of dividends – in the short and medium term, but as long as the business and the recurrent (ordinary) results are not sufficiently recovered, we can not speak of a sustainable and healthy path of the banking and banking sector. each individual entity “, explains a Professor of Economics at the Complutense University of Madrid, who has preferred not to give his name.
The carry trade , another round business
Along with the non-recurring income from the sales of these non-strategic assets, the investment in public debt (the so-called carry trade ) has been another of the most profitable businesses for the entities . The operation is as follows: The banks obtained cheap, almost free, money from the ECB. With this, they bought sovereign debt from European countries such as Spain, while the risk premium was triggered. As a result, a clean and risk-free benefit via interest paid by the taxpayer . “The recovery of national public debt values in 2013 accounted for 14% of total financial income,” as the analysts of the study service of La Caixa point out.
The technicians of La Caixa also indicate that the sale of this same public debt has yielded substantial profits to the bank in 2013. In particular, the “closing of positions”, now that the prices are higher, has generated more than 11,000 million euros. euros in income.
” The sector remains vulnerable, ” according to the rating agency Fitch, as toxic loans continue to rise and the interest rates with which entities lend continue “stubbornly high,” as they point out in their latest report on Spain, to which This newspaper has had access.
A margin of interest to the downside
The IMF recognizes that the result of the banks is being obtained with activities far from its traditional activity International authorities and analysts consulted by this newspaper point out that the apparent profitability shown by the Spanish banking system so far this year is far from being solid The International Monetary Fund (IMF) itself stated in its report reviewing the financial system in Spain that entities have increased their profits “with operations not related to their core business” , which leaves the real capacity to generate capital in the air. the usual activity of banks: capture deposits and lend money.
“The capacity to generate income with the traditional activity of the bank continues to be reduced “, point out the IMF inspectors, who also point to swaps of hybrid instruments (preferred and subordinated debt) as a source of extraordinary income. However, interest margins – the profit they get from borrowing and granting credit – have fallen due to the low rates imposed by the European Central Bank (ECB) and the closing of the tap on financing for families and businesses.
The Monetary Fund estimates that the generation of banking income will remain at low levels “until the economic recovery is more robust” . And is that a large part of the interest margins are still earmarked to provision assets on balance that continue to deteriorate (for example, delinquent loans, which continue to increase month by month, the default rate is already touching 13%). This same concern for the profitability of Spanish banks is maintained by analysts from international banks such as Danske Bank, which in its latest report speaks of a “high risk” in the sector.
This circumstance is especially hard for the nationalized entities, which as a whole suffer ratios of arrears above the average . Bankia, for example, registers a percentage of loans with at least three months of non-payment of 13.56%, according to the accounts of the third quarter. The three nationalized savings banks have had to provide more than 3,400 million euros , well above their net benefits. Even so, it has been precisely the reduction in the volume of provisions, another of the reasons why the accounts of the entities have presented better results in 2013.
The accounts, entity by entity
- BFA-Bankia: The entity chaired by José Ignacio Goirigolzarri has obtained a net profit of 818 million euros in 2013 (that of the entire group, that of Bankia alone is reduced to 509 million). A good part of these results have been obtained thanks to the divestments, which have allowed a positive balance of 330 million. Among the crown jewels sold by BFA-Bankia are the participation in Indra, the financiers Finanmadrid and Inversis, and the City National Bank of Florida (CNBF) . According to statistics from the Bank of Spain itself, the entity has received a total public aid of 22,424 million euros so far.
- CatalunyaCaixa (CX): The Catalan entity obtained between January and September a net result of 532 million euros , according to the accounts deposited with the CNMV. This benefit was achieved after allocating more than 650 million euros to cover losses and thanks to obtaining more than 563 million euros with “financial operations” such as preferential swaps and the sale of investees. CX has needed more than 12,052 million euros from the public treasury to recapitalize .
- Novagalicia (NCG): The nationalized Galician bank resulting from the merger of Novacaixa and Caixa Galicia -recently sold to Venezuelan Banesco for 1,003 million- obtained a net profit of 18 million euros , after having allocated more than 1,309 million to provisions. NCG returned to the benefits, although it could not have done it without the more than 652 million obtained with financial operations (hybrid swaps and divestments). Among the “non-strategic” assets sold by the bank, there are 29 business shares (in Sacyr, Elecnor, NH Hoteles …) with which 222 million euros have been obtained, in addition to the sales of EVO Banco, 66 other offices of Banco Etcheverría. The entity has needed 8,981 million euros of public aid.