Ups and downs

29 October 2014 By Fiona Maharg-Bravo

EU stress tests stacked up investors’ sense that Spanish banks are in good shape. Profits are growing, driven by lower bad debts and funding costs, as shown in BBVA’s results. But with the good news already priced in, negatives like shrinking credit mean lower share prices.

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Shares in BBVA fell 3.6 percent on the morning of Oct. 29 after reporting net profit of 601 million euros in the third quarter of the year, up from 195 million euros a year ago but below consensus. CaixaBank stock fell 2.6 percent.

In the first nine months of the year BBVA’s net profit dropped 37 percent to 1.9 billion euros, mainly due to the absence of one-off gains from sales last year. Net interest income grew 7.8 percent in the third quarter. Impairments on loans fell nearly 40 percent compared to the third quarter last year.

All 15 Spanish banks passed the European Banking Authority’s stress tests published on Oct. 26. Only one small Spanish lender, Liberbank, registered a capital shortfall at the end of 2013, and it has already covered the gap.

On Oct. 24, CaixaBank and Bankia reported a rise in nine month profits. CaixaBank’s net interest income was up 4.7 percent in the nine months, at 3.07 billion euros, while Bankia’s grew 15.2 percent at 2.16 billion euros. However, loans are still falling at both banks. Loan impairments fell nearly 50 percent in the first nine months for CaixaBank.

Profits from buying Spanish government securities made up a quarter of net interest income in 2013, according to analyst MainFirst. They could fall to 15 percent next year, MainFirst reckons.

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