The future of the Ibex 35, which is roughly in the hands of five values, is less and less defined by what it can do. Its weighting within the index is on the verge of falling below 9%, which marks minimum levels not seen since 2020 in the wake of the crash caused by Covid, although if this recent episode were ignored, it would be the lowest mark in the entire XXI century.
Investors seem to have rebalanced their positions between the two most international banks in the country, and Banco Santander, which has fallen 5% since it presented results on July 28, has opened a gap of almost 9 percentage points with respect to BBVA, which add 6% in five sessions. Enough to turn around the previous situation and that Santander has become the red lantern of the sector in the year, with losses of 19% compared to 15% left by BBVA.
The financial sector, until July the one with the highest weighting of the Ibex with 26%, has gone into the background as investors have wanted to return to the search for refuge and this necessarily implies buying utilities. The national electricity and gas companies, with Iberdrola in the lead, regained their leadership position this summer and once again accounted for a quarter of the weighting of the index. Iberdrola alone accounts for 15.4% of the total. The maximum level was reached in 2020, when it touched 20%.
A priori, the sales that affect Banco Santander could be justified by a rotation of the portfolios of large international investors. Five of the ten largest institutional shareholders of the entity chaired by Ana Botín have reduced their exposure to the bank in the last month. BlackRock decided to do it last Friday, although it maintains the first position of the institutional ones, with 4.15% of the capital; yesterday Bloomberg picked up the sale of Credit Agricole (with 1.28%); and on July 19 Capital Group kept 0.76% of the capital after selling.
Analysts see, despite the drop, a surplus of capital and revenue growth for 2023
The rise in interest rates that has already begun in the euro zone -with the last hike announced by the European Central Bank two weeks ago- is a very clear tailwind for the sector. The point is that, in recent months, investors have decided to favor entities with the greatest exposure to Spain -such as CaixaBank and Sabadell- to the detriment of those most exposed to emerging markets -Santander and BBVA-.
This has led the Santander bank to increase its upward potential to close to 70% twelve months ahead, taking into account that its fall in the stock market has not been accompanied by a deterioration in analysts’ estimates, who place their target price at above 4 euros. The average of national banks has an upward path of 50%. In the case of BBVA it is 46%.
Last week, the bank presented a profit of 4,894 million euros during the first half of the year, 33% higher than the same period in 2021. In the second quarter alone, income from “interest margin reached 9,550 million euros, a 16% more,” says JP Morgan, which believes that “it will continue to increase in the coming quarters, benefiting from the rise in rates and the increase in activity levels.”
“The momentum is about to arrive and we believe that it is only a matter of time. The patience in Brazil (first market for the bank) that offers geographic diversification has proven to be very useful and we are already looking at 2023,” they say from Credit Suisse.
In addition, the step aside that Botín has made for (Citi’s Mexican subsidiary for which it made an offer) opens the door, they say from Bloomberg Intellingence, for “that excess capital” to affect shareholders at some point.
bank tax
Santander will have to pay about 730 million euros in terms of interest and commissions over the next two years to comply with the, which will tax 4.8% of the banks’ income. In the case of the entity chaired by Ana Botín, this rate will represent 2% of profit before taxes, and 359 and 373 million euros per year, according to calculations by Bloomberg.
It is the lowest percentage of the sector on the benefit of the group, despite the fact that it represents a quarter of the collection to which the State aspires. It is only surpassed by CaixaBank, in total amount, with close to 1,000 million in the two years as a whole, although in its case it represents approximately 12% of profit.
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