The main photo left by the results of the large listed banks suggests that the sector is managing to weather the storm of rate cuts by the European Central Bank (ECB) in a much more comfortable way than expected. Contrary to the dismal omens that the sector’s main executives anticipated at the beginning of the year, the six large Ibex-35 companies (Santander, BBVA, CaixaBank, Sabadell, Bankinter and Unicaja) have closed the first nine months of the year with a historic profit of 23.6 billion euros, 19.6% more. And, most importantly, the interest margin (which measures the difference between the profitability of what the bank earns from giving loans and what it pays for deposits) remains in check at 68,542 million euros, 8% more. But, be careful! If you go down a step and make the comparison quarter by quarter, you can already see how the figures falter between July and September in some cases, when the shift in monetary policy was already one hundred percent evident.
In that stagnant quarter, and taking into account the seasonal effect of the month of August, with lower activity, the profit of the sector as a whole fell 2.8% compared to the second quarter, with some exceptions that have improved profits compared to the second quarter. to the April-June period. And the same thing happens with margins, which fell by 3.8% in total. This has caused the profitability that banking generates for each client to have begun a downward trend, with a couple of entities already below the 3% barrier that had managed to maintain itself in recent times. “A question arises about the sector’s ability to maintain the current pace of growth in revenue and profits,” says Javier Molina, eToro analyst. “The question is whether banks will be able to offset this pressure by diversifying into new business areas or through sustained cost optimization,” he adds. For now, the sector as a whole is outlining its strategy to manage margins and maintain record profits.
And the path is twofold: on the one hand, they seek to grow in volumes, commissions and number of clients to compensate for the lower interest at which mortgages and other loans will be offered with the fall of the Euribor. On the other hand, they will try to adjust the remuneration of savings to avoid breaking that balance between what is paid for deposits and what is received for loans. For now, no one dares to touch the conditions of products such as paid accounts, focusing this more immediate cut on the profitability of long-term savings.
