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Banco Santander and BBVA, aside from the rebound of domestic banking on behalf of the ECB

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The rate hike of the European Central Bank (ECB) that began in July with an increase in the cost of money of 50 basis points and is expected to continue this Thursday at the meeting held today by the Governing Council of the monetary institution is driving domestic banks, but not Banco Santander and BBVA.

Why does the rise in interest rates benefit some banks and not others? The reason is that the so-called domestic or medium-sized banks have almost all of their business in the eurozone, with a few small exceptions such as Banco Sabadell with TSB in the United Kingdom, so a rate hike improves the interest margin of this type of bank. entities.

Unlike domestic banks, the United States is the country that contributes the most to Banco Santander’s profits, almost tied with Brazil, with the United Kingdom in third place, Spain in fourth and Mexico in fifth place. In the case of BBVA, Mexico accounts for 45% of its attributable profit, Spain 28%, Turkey 13%, South America 9% and the rest 5%.

According to a Citi report, the recent ECB rate hike on July 21 will mean an improvement in earnings per share (EPS) of less than 5% for BBVA and Santander. Specifically, the analysts of the US investment bank maintain that in BBVA the impact of the rate hike on EPS would mean an improvement from the 0.19 euros registered in 2021 to 0.1995, while the entity chaired by Ana Patricia Botín would would rise to around 0.456 euros from the 0.438 euros of the last financial year.

According to the estimates of the entities themselves, a rise of 100 basic points (one percentage point) in interest rates would allow an increase of around 3,100 million euros in the interest margin to twelve months ahead, which is the time that banks estimate must elapse for their accounts to reflect this increase.

Caixabank, in fact, would be the Spanish bank that would benefit the most from a more than likely rate hike by the ECB: it has a sensitivity close to 25% to a rate hike of 100 basis points. This means that its interest margin, after a year, would increase by 1,500 million, taking into account the figures at the end of 2021.

In the case of Unicaja, the Citi study published in July pointed out that the Andalusian entity could improve its EPS by more than 25% thanks to the ECB’s rate hike last July. This leaves it among the most benefited European entities along with Caixabank or Commerzbank.

In the case of Bankinter, it would enter up to 128 million more taking into account the figures at the end of 2021, with an impact on the financial margin of more than 10%.

Banco Sabadell, for its part, pointed out in its annual financial report that the sensitivity of the interest margin one year ahead is 5%, which would mean some 171 million more. However, due to the provisions and its policy of prudence against risk, the rate hike in an entity such as Banco Sabadell takes 24 months and not 12 months to be reflected, so it could raise the interest margin up to 175 million quarterly two years ahead, according to the same entity.

The domestic banks of the Ibex 35 endure in positive
The market is rewarding Spanish domestic banks despite the significant falls seen this year in the stock markets. Caixabank is revalued so far this year by 28.9% and is positioned as the second most bullish value in the Ibex 35 only behind Repsol, which records a rise in 2022 of 30.94%. For its part, Banco Sabadell has climbed 17% so far this year and Bankinter 12.2%.

On a year-on-year basis, Unicaja shows drops of 2% and more bulky drops at Banco Santander of 17.4% and 15% at BBVA.

In the last six months, Bankinter has appreciated 19.6%, Caixabank 17.2%, Unicaja 14.9% and Banco Sabadell 14.2%. BBVA yields in the last six months 0.45% and Banco Santander 9.5%. In the price of the last month, however, they do see falls in all values, except Banco Sabadell, which is revalued by 2%. The greatest decrease in the last month is also that of Santander, which drops 6.7%.


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