Following the recent announcement by the Government of the imposition of an “extraordinary” tax on banks and electricity companies, These sectors have been described as “powerful.” This is possibly due to the idea among many citizens that ownership of banks it is highly concentrated among a few billionaires. But this view is totally wrong. Currently, ownership of the country’s main banks is widely distributed among millions of shareholders.
In the attached table we can see that the five banks listed on the Ibex have a total of 5.7 million shareholders. In this figure there could be some that are duplicates, that is, that they own shares of more than one of those entities. In any case, we will start from the basis that there are some 5 million people who have invested part of their savings in shares of one of these banks.
In addition, there are a few million more who own shares in mutual funds or pension plans holding bank stocks in their portfolios. This great dispersion in ownership means that the ‘free float’ (percentage of capital listed on the market) is very high, reaching 99% for Santander and 98% for BBVA (see attached table), which confirms the great atomization existing in the capital of said entities.
To justify the power of the banks, the argument is also put forward that the directors have large packages of shares in these companies. Returning to the attached table, it can be seen that, except for Bankinter, the directors of the rest of the banks hold a very small percentage of the capital of the entity to which they belong (0.02% in BBVA and 1.06% in Santander). This is due to the fact that, today, most of the directors of these entities are “independent”, and as advocated by the European Central Bank (ECB), they either do not have shares in the bank, or they have very few.
On the 28th it was announced that the way to apply it would be charging 4.8% (and why not 4 or 5%? They would be rounder figures) of the net margin of the business in Spain of the entity, amount not deductible from corporate income tax. This is a very considerable figure, which will have a strong impact on the income statement, especially in banks focused on domestic operations, such as Caixabank, Sabadell and Bankinter. Some initial estimates anticipate that for these banks it will entail a profit cut of between 15 and 20%.
The entity that has the largest investment in the sector is the La Caixa Banking Foundation. This body receives dividends from Caixabank (with operations mainly in Spain), which in 2021 amounted to 355 million. Invest these resources in sustaining a social work that provides coverage to disadvantaged sectors of society, in addition to promoting science, art and culture.
With this tax, Caixabank will obtain lower profits, will distribute fewer dividends, and the Foundation will have fewer resources to finance the important social work it carries out. The second investor in volume of resources is the FROB, that is, the state. The stake that the FROB owns in Caixabank today has a market value of around 3,800 million euros. A tax that reduces Caixabank’s profits will result in a lower distribution of dividends for the State, and a lower share price. Therefore, the ability to recover the aid that it once received the bank of the FROB will be significantly reduced.
With respect to the rest of the investors with significant participations (more than 3% of the capital), 10 in total, in fact, are reduced to 7, since BlackRock participates in four of these banks. These 7 shareholders have shares amounting to 4,700 million. Of these, 5 are foreign investors: BlackRockInc, CQG Partners LLC, Fintech Europe S.À.RL, Lewis A. Sanders and Lazard Asset Management What will be the opinion of these investors, and of many other foreign shareholders, if applied suddenly this tax? Well, the logical thing is that they think that in Spain there is a great legal uncertaintyand that the Government applies taxes that can clearly be branded as populist, from unreliable states, and therefore think twice about continuing to invest in the country.
As for the effects of this tax among the millions of small and medium-sized shareholders, who hold around 70% of the capitalization value of the five entities analyzedsuch a measure will undoubtedly mean that there are 5 million people upset by the effect it will have on the profits of these entities, on their ability to distribute dividends, and on the expectations of revaluation of their shares.
This is especially painful for these shareholders, since Bank prices are the ones that have suffered the most the effects of the crisis, due to the fact that they have had to provide for the great delinquencies that have entered them during those years, and without aid from the State (the aid from the State was granted to the savings banks in default, but not to the banks).
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In short, we ask ourselves, is it rational to apply this tax to banks when the expected collection (there is talk of about 3,000 million in two years) is, in our opinion, much lower than the collateral damage that it will cause to shareholders, including the State itself, society and the image of the country for investors?
*Joan Llonch is a professor in the Department of Business at the UAB and was vice president of Banco Sabadell