The good income commitment in Spanish banking manages to offset the increase in costs. HE interest margin pullThe positive development in other commercial enterprises, supported by the interest rate increase organized by the European Central Bank, inflated the accounts of financial institutions that managed to increase their efficiency in the third quarter. Among the six banks traded on the stock exchange at the end of September; Bankinter, CaixaBank and BBVA stood out among the best positionedrate is below 40%. The bank headed by Goirigolzarri and Unicaja was the bank that increased its efficiency the most compared to the previous year.
Efficiency rate is measured The relationship between a business’s expenses and its income The result you get (so the lower the better) is a key metric for calculating a bank’s efficiency. Analysts generally estimate that 50% or lower is a healthy level of efficiency, assuming banks spend 50 euros or less to generate 100 euros of gross revenue. In fact, a ratio above this threshold means a bank is spending more than it should be compared to its revenue.
Spanish banks took longer than expected to take advantage of the higher income provided by higher interest rates to improve their books and, in some cases, make record profits. At the same time, digitalization processes as well as efficiency plans that reduced the number of branches and employees were effective in reducing this rate.
Last February, Sabadell allocated £53 million to an efficiency plan for British subsidiary TSB, part of the Catalan bank’s business that it has managed to turn a profit after a long restructuring. The goal, according to CEO César González Bueno, is to “stop doing things that are not necessary.” Sabadell ended September with 40.7% efficiency, compared to 41.9% a year ago. Excluding TSB the figures will be lower, at 35.7%, one point lower than last September.
In terms of efficiency, the podium of Spanish banks includes Bankinter, BBVA and CaixaBank. Bank led by Gloria Ortiz This rate has been below 35 percent for more than a year (34.62% as of the end of September) and thus remains the leader in terms of efficiency in Spanish banking. Bankinter from January to September increased gross margin by 7% up to €2,151 million and operating costs between 6% and €745 million. Therefore there is a slight improvement in its efficiency, which is still well below its rivals.
BBVA is recovering
But, BBVA reduced distance with Bankinter It increased its productivity by almost three percentage points (38.9%) last year. The bank, headed by Carlos Torres, increased its costs by 10 percent to 10 billion 189 million, but increased its gross profit margin by 18 percent to 26 billion 161 million. The improvement is even more remarkable if business in Spain alone is considered. The productivity rate fell 4.8 points, from 39.4% to 34.6%.
CaixaBank also rebounded. The bank, which wanted to reduce the efficiency rate from 58% to 48% within the framework of the 2022-24 strategic plan, reduced the efficiency rate by 3.5 points from 42.7% to 39.2%. But inside New road map for the next three yearsThat lowered the bar a bit as presented on Tuesday, estimating efficiency at just over 40%.
business acceleration
In an environment where rates are falling, one of the key pillars of its strategy consists of: press the gas pedal on job creation to compensate for declining margins. In fact, it plans to grow at an annual rate of 4 percent in its main areas of activity, credit and customer resources. It is no longer easy to keep costs under control, especially in the face of the need to encourage technology investments. The bank has therefore committed to hiring 3,000 people under the age of 35 to revamp its channels and simplify its applications, as well as injecting 5,000 million in digitalisation and innovation, an extra 1,000 million into its usual plans.
All major banks have increased their efficiency since last yearHowever, the organization that achieved the most success was Unicaja, which reduced its rate by 3.6 points to 44.5%. Of course, it started from a more negative position than its rivals, and although it has gradually closed the gap, it remains the highest-yielding Spanish bank listed on the stock exchange.
Santander, ahead of the bank headed by José Sevilla and in the penultimate place among the six listed banks, closed September with 41.7%, indicating an increase of 2.3 points compared to last year. It was his best number in 15 yearsThanks to the group’s transformation, which allowed it to limit cost growth below inflation.
The organization, headed by Ana Botín, fell well below the 42% target set for this year. After reorganizing its business into five global units last year, the organization is in the process of continuing to reduce its product offering as well as pursuing unsuitable or duplicate positions to achieve its strategic goals.
Three of the six listed banks currently have efficiency below 40%. But he maintaining these levels This is not a situation that the market will take lightly in the coming quarters, because the interest margin, which constitutes a significant part of banks’ income, will probably narrow. Big banks are betting on attracting loans and fees to continue to demonstrate their power. However, this strategy does not guarantee increased productivity.
Stable efficiency rates in the coming quarters will be a good outcome for Spanish banks, according to Morningstar analyst Johann Scholtz, who specializes in banking. “We believe that revenue growth has reached its peak as low interest rates will put pressure on margins. On the other hand, although increasing net interest income triggers a large part of the productivity increase, productivity increases resulting from digitalization should not be ignored,” he added. .
