Big party at the Grand Spanish Bank

Big party at the Grand Spanish Bank

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We can't say it was a surprise. The third quarter results were already more than just an indication of how the fiscal year might turn out when it comes to an end. The most striking fact, apart from the volume achieved – which is astonishing – is that each of the entities set an individual record in their profit figures, which means either that all of these entities performed extremely well, or that the primary impetus came them from the outside. It is clear in this case that the second reason prevailed.

Here, then, the large Spanish bank set a new record in 2023. The five largest groups in the country ended the financial year with just over 26 billion euros. It is the largest figure in its history and they achieved it thanks to the impact of a brutal rise in interest rates by the European Central Bank (ECB). Their profits increased by 27% and they noticed the positive impact on their accounts due to the rise in mortgage and other loan rates.

CaixaBank was the last institution to offer accounts. He did so last Friday before the stock markets opened. The entity in which the state participated received 4.800 million, an increase of 54%. This is a growth similar to what Bank Sabadell achieved with profits amounting to $1.322 million. At Bankinter the increase is also more than 50%, exceeding 840 million. Santander and BBVA, which have large exposures outside the Spanish market (outside the eurozone), increased their profits less quickly, by 15% and 26% respectively, to 11,000 and 8,000 million euros. Unicaja, the sixth entity of the Spanish state, will submit the accounts tomorrow, so the amount of 26,000 million will end up being a little more.

It has truly been an exceptional year. That's why on Friday there was a sentence from the head of Caixa Bank, the Basque countryman José Ignacio Gueregolzarri (well, there were a few of them) that surprised me. Above all, in these moments of general euphoria in all the major Spanish banks. It was kind of an understatement of the money earned. He justified the results by saying: “It is very important to emphasize that our profitability is not unusual: it is reasonable. The extraordinary thing is the very low level of profitability we have achieved with negative interest rates. And no, it's not right. If they were reasonable and sufficient, profits would not be a historical record, for example. Perhaps if the matter had been reasonable and sufficient, the interest margin would not have risen to 10,113 million euros, an increase of 54.3%. If it were plausible, we might not have to keep interest rates paid to savers at zero.

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Let's talk clearly. The bank has generally played an entire year with the advantage of the astonishing rise in ECB interest rates and the credits it has linked to Euribor, the size of commissions, everything, without rewarding deposits. There are no more secrets. The results presented by the large Spanish banks from the Íbex-35 these days to the CNMV (I have already said that Unicaja closes the round tomorrow, Tuesday) can be summarized in four main pieces of data. They have over 26,000 million net profit, which actually exceeds 46,600 if you take into account the money they set aside for allowances and endowments, having entered 85,000 interest and 24,500 commissions. By 2024, they expect to continue to increase profits. “We are looking forward to 2024, and we hope to exceed the €1,332 million we earned last year,” said Cesar González Bueno, CEO of Banco Sabadell, during the presentation of the annual results for 2023.

With this data in hand, it would be ridiculous for a manager to attribute it to good internal management of his organization. In some cases, the matter reached the point of crude and naked mockery. In the past two weeks, as the entities have been presenting their findings, both Ana Patricia Botín, president of Santander, and Carlos Torres, CEO of BBVA, have expressed their absolute and quite frankly rejection of the temporary tax at the bank. For example, Putin believes that “the best way for the Treasury to raise more is for companies to earn more,” which is why, he says, there should be more investment. “A bank tax is not a way to help the economy. I do not understand that the sector is being punished in this way,” he said without blinking, immediately after announcing profits of 11 thousand million euros, 15% more than last year and the highest in its entire history.

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Despite the results obtained, it seems that the banks are still not happy enough. They bear in mind that these results would have been higher had it not been for the extraordinary bank tax approved by the Spanish government. We remember that, although it was appealed, this exceptional tax forced the major banks to pay about $1.2 billion in 2023 for their profits. In other words, less than 4.5% of that number. Or, if you like, a fifth of the increases in profits that came to them thanks to the monetary policy of the European Central Bank.

If that's their view of the situation, I'm not surprised they didn't like the announcement by Yolanda Díaz, Spain's vice president and labor minister, last Thursday that her government would make banks “contribute as necessary” after record profits in 2023. “We want them to contribute as necessary.” It is necessary to preserve the public good; “So it's time to protect the bank tax and make it permanent,” he added. It might look good to me, especially if I do a little memory.

Because bankers' memories are very strange indeed. No one talks about the public money spent saving the sector a few years ago. No one remembers that last December the country made the tenth annual payment of €3,643 million to the European Stability Mechanism. With this disbursement, the total amount returned to 24.898 million, and reaches 60.2% of the amount received. However, there is still an outstanding bill of $16,435 million, which taxpayers will have to cover over the next four years, until 2027. It is the famous $40,000 bill that Mariano Rajoy had already described in 2017 as “so wasted” because they avoided Some large sums. Greater evils for the state.

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We remember that the 2012 bank bailout was a response to the economic crisis that pushed the Spanish state to its limits, with unsustainable deficits and interest rates overwhelmed by debt. Despite claims by Mariano Rajoy's government that “the bank will pay this money itself” and that it “will not cost the taxpayer a single euro”, the state has taken over the payment, and the Bank of Spain considers that the vast majority of the money has been lost.

All in all, it's the end of a very good year for banking and the beginning of another that, as they say, could be better. This time, it is expected that the reward that the saver will receive will be felt.

Note: I do not want to end the article without mentioning some of the phrases that Mr. Gueregolzarri said last Friday, in addition to those already mentioned, which I did not understand much. The first refers to customers. “In 2023, CaixaBank was very close to its customers, companies and individuals, financing their projects and managing their savings. All this in addition to a business model committed to financial inclusion and supporting the most vulnerable groups.” I don't know what most customers should think about this. I know a few who don't believe what he says.

The second concerns the repeated justification it gives for keeping the headquarters in Valencia. “We are in Valencia and our goal is to survive. Nothing has changed, we still think the same way. It is best for depositors and shareholders. We are very happy in Valencia, it is the best place for our business.” When they insisted on these strong statements, he added that Valencia seemed to him “a clear contrast to Catalonia, an unusually balanced place.”

You can think whatever you want about it. Everything is worth it. I will just say, quite simply, that I don't know what or how it would make it better for depositors and shareholders to be headquartered in Valencia. Maybe it would be nice if he explained it in detail someday.

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