The ECB’s fight against inflation, with rate hikes unprecedented in the single currency’s more than 20 years, had made the banking sector one of the biggest, if not the biggest, beneficiaries of the park. However, all optimism was dashed with the stroke of a pen after the insolvency of SVB Financial sparked fears of a new financial crisis, despite measures taken by the US authorities to contain any contagion.
“These events have led to a loss of market confidence in the financial sector, which has spread to all banks in Europe, and It has sparked fears for the liquidity of the sector,” explains Nuria Álvarez, an analyst at Renta 4, who believes the stock market’s punishment over the past few days has been “unjustified”..
Unlike the disgraced US bank, Spanish banks have “comfortable liquidity positions”. At the end of 2022, the average LCR liquidity ratio of listed companies was 222%, well above the regulatory level of 100%.
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“We believe that part of the decline is due to significantly reduced rate hike expectations as well as expected lower lending with the associated impact on the business cycle,” explains Álvarez. “Added to this is the risk that in this context of uncertainty and loss of depositor confidence, companies could be forced to accelerate or even intensify deposit compensation plans, which would mean pressures beyond interests.”
For the Renta 4 expert, “those falls an entry point for a sector that will continue to benefit from the rate hike environmentdespite the fact that the level of expected arrivals is slightly lower compared to last week and the impact of the increase in the deposit fee can be expected, which is expected to be more noticeable in the second half of the year”.
Potential of Spanish banks
In these first two months of 2023, Banco Santander still recorded a revaluation of almost 19.5%, despite falling 11.25% in just two days. And analysts expect it to keep climbing once the dust settles, with the potential for more than 35% more. The analysis houses that cover the value give a buy recommendation with an average price target of EUR 4.50, 35.8% above the current price.
The bank led by Ana Botín ended 2022 with a profit of 9,605 million euros, up 18% on a year earlier and the highest in history, as reported in early February. The announcement was also accompanied by a 16% dividend increase.
The truth is that all Spanish banks have a “buy” recommendation from the experts, with significantly different potentials. Behind Santander is Unicaja Banco with a valuation of €1.44, which is 35.2% higher than the current price.
The good performance of the Andalusian bank in 2022 earned it the leap into the IBEX 35 on December 27, replacing Siemens Gamesa. Earlier in the year, it was up 4.4% after also dropping more than 10% for the last two days. Unicaja closed the 2022 financial year with a net profit of 260 million euros, an increase of 88.9% over the previous year.
For its part, Bankinter has a valuation of €7.59, which is 27.6% higher than the current rate. The harsh penalty of 12.7% suffered over the past two days has already pushed the year to date negative by 3.9%.
Bankinter was the first bank to present its 2022 results, which generated a profit of 560 million euros, up 28% on the previous year. The group also reached its profit targets for 2023 a year earlier.
Banco Sabadell posted a profit of €859 million in fiscal 2022, up 61.9% year-on-year. These accounts, along with the announcement of a payout increase of up to 50%, were met with acclaim by the market ahead of the current market shock, allowing it to seize the opportunity to resume increases once the waters have calmed down.
Sabadell has a valuation of 1.38 euros, which represents a 27.4% potential to add to the good performance at the beginning of the year. In fact, the company today boasts the Ibex 35’s best-ever value in 2023 a 25% increase despite the 16% penalty between Friday and Monday.
The experts give Caixabank an approximate potential of 22.5%, with a price target of EUR 4.60. Right now their titles are up just 3% this year 2023 after punishing the past two days. The group achieved an attributable net profit of 3,145 million euros in 2022, up 29.7% on the previous year, based on homogeneous perimeters. Taking into account the special effects from the Bankia integration, the result fell by 39.8%. The increase in earnings was also accompanied by an increase in the dividend.
The bank with the lowest potential is BBVA with a price target of EUR 7.61, which is 18.7% above the current price. The value has appreciated 14.8% so far in 2023 despite the recent penalty. The bank, led by Carlos Torres, generated an attributable result of 6,420 million euros in 2022, representing a growth of 38% compared to the previous year. As with Santander, it is the best result in the company’s history and is also accompanied by an increase in the dividend.
| Bank | Recommended price (€) | potential (%) | Change 2023 (%) | |
| Santander bank | 4.50 | +35.8 | +19.5 | |
| BBVA | 7.61 | +18.7 | +14.8 | |
| caixabank | 4.60 | +22.5 | +3.0 | |
| Sabadell Bank | 1.38 | +27.4 | +25.0 | |
| bank inter | 7.59 | +27.6 | -3.9 | |
| Unicaja bench | 1.44 | +35.2 | +4.4 |