Thursday, October 28

Spanish banks are already worth 21,000 million more on the stock market than before the pandemic


At the beginning of March 2020, eight Spanish banks were listed on the Stock Exchange. Six of them on the Ibex 35 and two on the continuous market. A little over a year and a half later, the figure has dropped to six (five on the Ibex), due to the two mergers that have taken place this year. Then, the combined value of those eight banks was around 108,000 million euros, taking as a reference the beginning of March 2020, days before the stock market crash that occurred from the 9th. Today, 19 months later, there are 21,000 million more adding the six that continue after the concentration. And with a historic crash during 2020 in between.

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Banco Santander, BBVA, CaixaBank, Sabadell, Bankinter and Unicaja make up the half-dozen of the best-listed entities in Spain. Other relevant groups such as Ibercaja, Kutxabank or Abanca remain outside the stock market, so it is not so easy to know their market value. The six that do appear on the Spanish Stock Market have a capitalization of 129,000 million, which means not only having recovered the value lost during the pandemic but also being more than 14% above it. This same Tuesday they have monopolized five of the six best performances on the Stock Market.

BBVA has been the entity that has increased its value the most compared to the period prior to the outbreak of the health crisis, by increasing its shares by 50%. CaixaBank follows, with 22%. Unicaja is around a 10% improvement compared to March 2020, while Bankinter and Santander are around a 5% improvement. Sabadell is the only one that is below that prepandemic level. Analysts have pointed out that the prospects of an increase in interest rates, the return of the banks to the dividend or the plans to cut costs have allowed these values ​​to recover.

The problems of banking in the Stock Market came from old and were not only motivated by the pandemic. The doubts about profitability and business meant that the value of listed entities were significantly below their best times. Added to this was the crisis caused by the pandemic, which placed banks on the stock market as one of the sectors most affected by investors. Added to the problems that were already dragging on were the strong adjustments made to save provisions, the fear of an increase in non-performing loans or that interest rates would remain negative for longer than expected.

To these arguments that weighed down the sector in the Stock Market was added one more, much regretted by its managers: the prohibition of dividends. During the last year, the different entities regretted that the fact that the ECB prevented the shareholder from being paid, as a tool to direct that excess capital to finance the economy at a time of crisis, was punishing the value of the banks more than other sectors of the stock market. Finally that measure was partially lifted at the beginning of the year and definitely a few days ago. In fact, large groups such as Banco Santander or BBVA have not been slow to announce their plans to reward their investors.

With those wickers, the banks closed the year 2020 with historical losses in value. Sabadell was the worst of them, losing 65%, affected by other added problems, such as the failure of the negotiations for the merger with BBVA. Bankinter and Santander also lost more than 30%, BBVA around 20% and CaixaBank and Bankia, despite the progress made by the merger, left around a quarter of their value on the market in 2020. In fact, the low value of the rescued entity was one of the motivations of the State to promote its merger with CaixaBank.

This situation, which affected the Spanish banks, had a consequence on the stock market as a whole. A report presented by BME, the company that manages the stock market in Spain, at the end of last year highlighted that banking had lost its traditional throne as the main sector in the country’s Stock Exchange. The energy sector, accounting for almost a quarter of the market value in Spain at the end of 2020, surpassed the textile sector – mainly Inditex – with 14%. The bank went from agglutinating 20% ​​to staying at just over 12%.

Two antagonistic years

But 2021 is being a very different scenario for Spanish banks. It has gone from being one of the sectors most affected to star in some of the increases accumulated so far this year in the selective Spanish stock market. Four of the ten stocks that have grown the most so far this year are banks. And, precisely, the one who starred in the biggest fall of the Ibex 35 in 2020, Sabadell, is currently leading the annual evolution of the Spanish selective, having doubled its value since January 1.

Bankinter, which was the second worst hit bank value in 2020, now has a value 56% higher than it had at the start of the year, being the third highest rise in the entire Ibex 35 and despite having segregated its insurance subsidiary Línea Directa, which is now independently listed on the stock market with a value of 1.8 billion. BBVA scores a 50% increase this year.

The next biggest rise is the one starring Banco Santander. The group chaired by Ana Botín has increased the value of its shares by just over 29% in 2021. This progress has helped it to regain its second position among Spanish companies by capitalization. The first, outstanding, is Inditex, with a value of around 100,000 million euros. Santander surpassed Iberdrola on Tuesday in second place, reaching 56.2 billion euros, some 500 million more than the electricity company, which took that position from it at the beginning of 2020. Iberdrola, in full battle with the Government over the electricity tariff , loses 22% of its market value so far this year

CaixaBank has also recorded a 29% increase in the value of its shares since the beginning of the year. It should be remembered that the group chaired by José Ignacio Goirigolzarri absorbed Bankia at Easter. Separately, both had a capitalization of just under 17,500 million euros just before the pandemic broke out. Now, already united, their value on the stock market is 21,530 million. 16% of that amount, about 3,400 million, is the value of the State’s participation in the entity. Despite the advance of more than 70% of the value of state securities in banking, first in Bankia and now in CaixaBank, the figure is still far from the 20,000 million pending to be recovered from the bank’s rescue in 2012. The other entity merged this year , Unicaja, which has just absorbed Liberbank, has increased its value by 25% in 2021.



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