Tuesday, March 21

Banking soars on the Stock Market benefited by the historic rise in ECB rates

The Ibex 35 has recorded this Thursday a growth of 0.78%. The outcome in green of the selective Spanish stock market has been fundamentally driven by banks, which have benefited greatly from the rise in interest rates announced by the European Central Bank. The announcement of the ECB aims to be a shock, along with the previous rise, to the profitability of the bank, after having dealt for more than a decade without increases and five years with negative rates. Bankinter, CaixaBank and Sabadell have headed the Ibex 35.

The new rise in ECB rates will lead 20% of mortgagees to exceed the red line of indebtedness

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The press release and the subsequent speech by the president of the ECB, Christine Lagarde, has served the banks to boost their actions, given the forecast that the significant increases agreed by the body will improve the results of the banks. The higher the interest rate levels, the more expensive the loans it grants and the better yields it recovers from the variable-rate mortgages it has granted. This is the justification that the Government found to implement a tax on interest income and bank commissions, trying to limit the extraordinary benefits that the rate hike will grant.

Bankinter has been the entity that has led the selective stock market with a rise of 6.57%, followed by CaixaBank, with 6.25%. Sabadell has been the third largest increase with a growth of 5.58%. More moderate has been the evolution of BBVA (+3%) and Santander (+2.77%). The first three entities are called to be the most benefited in their profits from the rate hikes since practically all their business, especially mortgages, is in euros. The presence of these three groups is eminently Spanish. On the contrary, BBVA and Santander have their main profit grounds in countries with other currencies such as the US, Mexico, Brazil or Turkey.

Other notable increases were those of Solaria (4.74%), Grifols (3.94%) and Rovi (2.99%). On the contrary, in the negative terrain, Telefónica (-2.19%), Aena (-2.02%), Red Eléctrica (-2.02%), Enagás (-1.98%), Colonial (- 1.62%), Inditex (-1.17%) and Naturgy (-1.05%).

The ECB has agreed that the interest rate for its refinancing operations will be 1.25%, while the deposit rate will reach 0.75% and the loan facility rate, 1.50%. In this way, the price of money is at its highest level since 2011, when the ECB began a path of stimulus at the monetary level that has lasted more than a decade and that led it to place interest rates in negative territory.

On the other hand, the ECB has updated its quarterly macroeconomic projections and in them it reflects, although without mentioning it, that the eurozone economy will fall into what is known as ‘stagflation’, that is, stagnation of the economy but with high price increases. The president of the organization, Christine Lagarde, has stressed that the ECB’s commitment is to lower the current high inflation rates and return to the 2% target, but she has recalled that monetary policy cannot act on energy prices. On the other hand, the market has been awaiting the appearance of the president of the US Federal Reserve (Fed), Jerome Powell, who has insisted that they will do what is necessary to control inflation.

In this scenario, the rest of the European stock markets have presented increases in the case of London (+0.33%), Paris (+0.33%) and Milan (+0.88%), while Frankfurt has yielded 0 .09%. The Spanish Stock Exchange has thus led the main trading floors of the continent.

Likewise, a barrel of Brent quality oil, a reference for the Old Continent, was at a price of 89.45 dollars, with an increase of 1.63%, while the Texas was placed at 83.83 dollars, after up 2.34%. Finally, the price of the euro against the dollar stood at 0.9950 ‘greenbacks’, while the risk premium stood at 116 basis points and the return on the 10-year Spanish bond stood at 2.828%.