The big bank expects 3,100 million extra in the interest margin if the rates rise a percentage point | companies

Spanish banking is counting the days for the European Central Bank (ECB) to give the green light to a rise in interest rates. And it is that, according to the estimates of the entities based on the sensitivity of their portfolios, an increase of 100 basic points (one percentage point) would allow increase the net interest income by around 3,100 million euros 12 months ahead, which is the time that banks estimate must elapse for their accounts to reflect this increase.

In general, the sensitivity of the net interest income of Spanish banks to a rise in rates is quite high, due to the type of business, which is highly specialized in mortgages, loans and deposits. In that sense, CaixaBank would be the bank most benefited by an increase. The entity led by Gonzalo Gortázar as CEO has a sensitivity of around 25% to a rate hike of 100 basis points. This means that its interest margin, after a year, would increase by 1,500 million euros, taking into account the figures at the end of 2021.

BBVA is in a similar context. In Spain, its interest margin has a sensitivity of 20% and that would translate into an increase of 700 million euros after 12 months, as recently explained by its CEO, Onur Genç. For its part, Santander reflects in its latest quarterly report that the interest margin in Spain would increase by 590 million with a 100 basis point rise in rates, which represents a sensitivity of 15%.

In the case of Bankinterbank sources explain that the impact on the financial margin would be greater than 10%, about 128 million more, taking into account the figures recorded at the end of 2021.

For its part, Sabadell reflects in its annual financial report that the sensitivity of the interest margin one year ahead is 5%, which would mean an additional 171 million. However, sources from the entity explain that the most accurate data is a sensitivity of 14%since the time it takes for the rate hike to be reflected is 24 months and not 12.

In addition, they detail that in the case of the Catalan bank the impact on profit is greater than in other competitors due, among other factors, to its policy of prudence against risk and the higher provisions made. In that sense, they point to an increase in the interest margin of 175 million quarterly to two years ahead. UBS already pointed out at the beginning of the year that Sabadell would be the Spanish bank most favored by a rate hike precisely because of its risk-adjusted profitability.

In any case, this is a theoretical estimate carried out by banks at a given time and the portfolios evolve quarter by quarter, so the data could vary. Likewise, as has been mentioned, it is also necessary for a certain margin of time to elapse from the time a rate hike occurs until it ends up being reflected in the income statement. And in any case, the expected rate hikes will not yet reach 100 basis points.

Before the end of 2022

At the end of April, the president of the ECB, Christine Lagarde, announced that there was a “high probability” that interest rates would rise before the end of the year. The vice president of the European supervisor, Luis de Guindos, went a little further and assured that this rise could be in the month of July, coinciding with the end of net debt purchases, or perhaps later, depending on data from inflation and growth.

Along these lines, the deposit facility is still at -0.5%, but the market already discounts that it will be at zero or even positive at the end of the year, after up to three rate hikes. Similarly, the refinancing rate remains at 0% and the marginal credit facility at 0.25%.

In recent years, interest rates had become a kind of shackles that limited the income of the typical banking business and the profitability of the sector due to the difficulty in generating income, since they had been at historical lows. However, with the expectation that the ECB will decide on a gradual rise in rates at the end of the year as one of the measures to deal with the strong inflation in the European Union, the large Spanish banks would receive this news as an oxygen balloon .

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