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Spanish banks perform better in EU stress test than in 2021, El Confidencial says

Published Jul 12, 2023 14:18
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© Reuters. FILE PHOTO: A Spanish flag hangs above a Santander financial agency branch in Madrid, Spain July 2, 2020. Picture taken July 2, 2020. REUTERS/Juan Medina/File Photo
 
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MADRID (Reuters) - Spanish banks, such as Santander (BME:SAN) and BBVA (BME:BBVA), performed better in European stress tests with a lower capital depletion than two years ago, except for Bankinter, news website El Confidencial said on Wednesday, citing provisional data.

The news outlet, which said it had provisional data from the test that will be published at the end of July, said six Spanish listed banks and three non-listed banks that are included in the test will suffer a capital depletion on average of around 260 basis points in the adverse scenario.

The adverse scenario measures a bank's resilience to a decline of 6% in economic output in the three-year period to 2025.

European Union banking regulators launched the stress test to check how banks could cope with a long period of high inflation and interest rates at a time when the European Central Bank has raised euro zone borrowing costs to their highest level in 22 years.

Bank-by-bank results, with no pass or fail mark, inform on annual regulatory assessments of capital buffers.

Results are closely watched for signs of resilience in the banking sector, especially in the aftermath of the recent market turmoil triggered by the demise of Silicon Valley Bank (SVB) and two other lenders in the United States and the state-backed rescue by Swiss lender UBS of Credit Suisse (SIX:CSGN).

Spanish banks are benefiting from higher interest rates as the bulk of their loan books are made of mortgages, mostly tied to variable rates.

The European Banking Authority said that the exercise had not been finalised and any data was "speculative at this stage".

The official data will be released by the EBA on its website at the end of the month, a spokesperson said.

Two sources with knowledge of the exercise said, however, that the final results should not differ that much from provisional data.

Among European banks, Intesa Sanpaolo (BIT:ISP) would see a depletion of 320 basis points in capital, while Unicredit (BIT:CRDI) and BNP Paribas (EPA:BNPP) would lose around 400 bps.

Deutsche Bank (ETR:DBKGn) and Commerzbank (ETR:CBKG) would suffer a 530 bps and 460 bps drop, respectively, under the worst scenario.

Almost all banks declined to comment while BNP was not immediately available.

Under the adverse scenario, Santander would suffer a capital depletion of between 170 to 175 basis points, while BBVA would see a solvency erosion of 270 basis points, according to El Confidencial. In the 2021 test, Santander's loss was 258 basis points and BBVA 303 bps.

Neither Santander nor BBVA commented.

In 2021, just four Spanish lenders took part in the stress test while the biggest Spanish domestic bank Caixabank and Unicaja, which had still not finished the integration of Bankia and Liberbank respectively under the previous test, will be included this time.

In this year's test, Bankinter would suffer a capital erosion of between 160 and 170 basis points, compared to around 104 basis points in 2021, according to the Spanish media report.

Bankinter also declined to comment.

Spanish banks perform better in EU stress test than in 2021, El Confidencial says
 

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