The great Spanish banks, made up of Santander, BBVA, CaixaBank, Sabadell, Bankinter and Unicaja, has achieved profits of 20,849 million euros in 2022. This figure represents 21.69% more than what they earned the previous year and occurs in a context of high political noise due to criticism from the most radical sectors of the Government, who criticize what they consider excessive earnings and demand that they be freeze the rises in mortgages. These gains take into account the extraordinary impacts derived from corporate operations in 2021. On the one hand, the two mergers of CaixaBank and Bankia and that of Unicaja and Liberbank, and on the other, the capital gains of Bankinter from the IPO of Línea Directa.
The increase in interest rates in Europe contributed notably to the increase in bank profits, mainly in the second half of the year, which is when it began to be transferred to the balance sheets of the entities, whose profitability, however, continues to be low, since it does not cover the cost of capital in the sector, according to experts. This is one of the main arguments of the banks to reject the tax created by the Government to apply a rate to the sector that taxes the new income that the sector obtains from the rise in rates in Europe and that Bankinter has already advanced that it will appeal before the courts.
Of course, this increase in the price of money returns profitability to the traditional banking business, focused on loans. In a context in which rate hikes are going to continue, retail banks have a great year ahead. Both the mortgages and the loans made by the entities will be more profitable. This is an advantage for those banks with a business focused on this type of credit, as is the case with Caixabank. “Both in Spain and in Europe, retail banking has very good prospects thanks to the rise in rates. Intermediation margins, which are the main business of entities that keep deposits and lend money, have increased and have a long way to go with a view to 2023”, points out Óscar Martínez, head of portfolio management at Norbolsa.
This is not the case of BBVA and Banco Santander, which compensate for the stagnation of their business in Spain with the strength of some of their activities abroad. Santander achieved more benefits in 2022 in Brazil (2,544 million), than in Spain, where it reaped some 1,560 million benefits. In Brazil, earnings would have been down 6.7% had it not been for the favorable exchange rate. For BBVA, México has generated 4,182 million profits, 63.9% more, and continues to be the main driver of its results. In fact, it contributes 53% of the group’s profits.
The weight of Brazil and the United States is decisive for the results of Banco Santander, as well as its presence in Mexico, the United Kingdom and Poland. How the economy evolves throughout 2023 will be key. To all this we must add the uncertainty about the political evolution in Brazil after Lula’s victory in the country’s presidency and the response from Bolsonaro’s followers.
The rise in interest rates is good business for banks, although it will also push up the cost of deposits and, although it is still at very low levels, delinquency may begin to rise due to the tightening of the economic situation and the higher cost of mortgages contracted at a variable rate. “The increase in default is always a risk for the sector, but the strength of the labor market and the good macroeconomic indicators, despite the risk of recession, keep the default ratios at very low levels. At least for now” explains Óscar Martínez, from Norbolsa.
The best results in history
CaixaBank was the last bank to present results and has followed the positive path of its predecessors. The entity chaired by José Ignacio Goirigolzarri has announced a net profit of 3,145 million euros in 2022, 29.8% more than the previous year, when it obtained 2,359 million. In addition, it is the entity that most of its profits will allocate in remuneration to the shareholder. However, the discordant note of its results appears if we add the extraordinary accounting impacts from the merger with Bankia: the group’s result fell by 39.8% from the 5,226 million euros registered in 2021.
Both BBVA and Banco Santander have registered the best profits in their history in 2022. In the case of the entity chaired by Carlos Torres, profits of 6,420 million have been obtained in 2022which represents 39% more than a year before. For Santander, profits have been 9,605 million euros, 18% higher than the previous year and the best since the entity was founded in 1857.
Banco Sabadell, this one scored profits of 859 million euros in 2022, which is 61.9% more than in 2021 and the highest result since the real estate bubble, which was 908.39 million in 2006.
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The bank has exceeded the objectives it had set for 2023 one year ahead of schedule, which has allowed it to increase the percentage of the profit that you dedicate to remunerate the shareholder up to 50%, compared to 31.8% in 2021 and the “minimum of 40%” that it announced in October. With this, it equates to the most widespread practice in the sector and leaves behind the higher profit retentions it had to make to capitalize after the problems it suffered in 2020. The council has proposed a cash dividend of 0.02 euros per share and the repurchase of 204 million of euros in titles. Added to the dividend of 0.02 euros in December, it gives rise to 0.04 euros per share, compared to 0.03 in 2021.
Regarding Bankinter and Unicaja, the benefits have been 560 million and 260 million, respectively. The entity chaired by María Dolores Dancausa has managed to increase its profits by 28% and has exceeded the results prior to the pandemic and the segregation of Línea Directa. For his part, The Malaga bank has closed the 2022 financial year with a profit of 260 millionwhich is 89% more than in the same period of the previous year.