The ECB's interest rate hikes have boosted bank profits after years of poor profitability, but the change in scenario has its counterparts. Clients are now suffering from a growing increase in the cost of their debts and this has forced entities to sharply increase provisions in anticipation of an increase in arrears.
In the first part of the year, the six large Spanish banks listed on the Ibex totaled 10,868 million euros in provisions to deal with possible inclement weather, which represents an increase of 27% compared to the 8,537 million of the previous year, according to a Accuracy consultancy report.
It is an amount much higher than the joint profits of the six banks, which are Santander, BBVA, CaixaBank, Sabadell, Bankinter and Unicaja, of 5,373 million in the semester, 49% higher than a year ago. It is also reached despite the fact that the entities continue to be comfortable with liquidity, the Achilles heel that precipitated the falls of Silicon Valley Bank and Credit Suisse.
The ECB warned last week that the short-term outlook for the economy has deteriorated due to a contraction in demand. The central bank says that the tightening of financing conditions is behind the trend, which may prove key in determining whether it will raise interest rates beyond 4.25%.
Among the Spanish banks, the only ones that have not raised provisions have been Unicaja and Sabadell, the latter due to the positive impacts on its real estate portfolio and litigation. Santander, on the other hand, has sharply raised provisions for insolvency in anticipation of worse customer behavior, especially in the United States. They have gone from 5,770 million a year ago to 7,426 in the first half of the year. That's a 28% rise.
BBVA has raised provisions by 36%, up to 2,087 million, compared to 19% for CaixaBank, up to 556 million, and 26% for Bankinter, up to 193 million. In the case of CaixaBank, these endowments actually fell in the second quarter compared to the first due to the improvement in the macroeconomic prospects in Spain, but the overall photo for the semester continues to show increases.
For now, these movements are part of the preventive maneuvers in the face of the foreseeable arrival of dark clouds that have yet to appear on the balance sheets of Spanish banks. Santander's delinquency rate has remained at 3.1%, while those of BBVA and CaixaBank have dropped, in the first case from 3.7% to 3.4% and in the second, from 3. 1% to 2.6%. On the other hand, it has risen in Sabadell, up to 3.5%, and in Unicaja, up to 3.6%.
There is another alarm light that is also still off. When a credit passes to special surveillance risk, it is computed as stage 2 and when the risk is doubtful, it goes to stage 3. These are the two steps prior to default, which have their own accounting drawers and which allow banks to anticipate danger. At the end of the first semester, stage 1 and stage 2 of the banks totaled 226,130 million, barely 367 million more than a year ago.
Spanish banks have also taken advantage of the semester to make allowances for bad debts that are much higher than those of other European entities. The German Deutsche Bank has barely parked 800 million, compared to the 100 million of the Italian Unicredit, the 300 million of the Dutch ING, the 1,300 million of the French BNP Paribas or the 900 million of the British Barclays.
