Banking begins 2021 with lower provisions and stable margins after a year to forget

The year is complicated and full of uncertainty for entities, especially in relation to the evolution of bad debts.

Logo of the Swiss entity UBS.

After a 2020 to forget, banks are now ready to release their first results for 2021 to the market, which, according to analysts, will be marked by a slowdown in the effort to allocate provisions and a stabilization of margins.

While waiting for the support measures launched by the Government to be withdrawn and delinquencies begin to surface, the banks continue to make provisions to protect themselves against the wave of defaults that the pandemic will leave behind, although from UBS and Barclays believe that Spanish entities have slowed down in the creation of that shield in the first quarter.

CaixaBank, which since last March, when it legally integrated Bankia, is the first entity in the country, has closed the first quarter of the year with provisions 12% lower than the end of 2020 and 42% below those registered a year earlier, according to UBS analysts.

In the case of Sabadell, the total provisions projected by these experts for the first quarter would be over 331 million euros, that is, 27% and 63% below those of the first three months of 2020 and at the end of the year, respectively, of agreement with the Swiss house.

Santander, for its part, the rate decreased by 1% compared to the end of 2020 and by 34% on the same dates last year at a global level, as estimated by UBS. However, in the case of its Spanish subsidiary, Barclays analysts believe that it accelerates in the first quarter.

Santander Financial City, in Boadilla del Monte (Madrid).

Santander Financial City, in Boadilla del Monte (Madrid).
Europa Press

These same experts also point out that the provisions of BBVA They fell 46% in the quarter compared to the same period in 2020, although compared to the end of the year they rose 30%, especially due to the business that the bank maintains in Turkey (Garanti BBVA).

These lower provisions are framed in the context of a strong provision made in the first half of last year after the outbreak of the pandemic, although in the third quarter, banks slowed down this effort despite the uncertainty and insistence supervisors to be “prudent.” With everything from Alvarez & Marsal They believe that, with the provisions made up to now, Spanish banks could assume a default of 7%.

Stable margins

What will remain more stable in the banks’ accounts for the first quarter are the interest margins. Despite the situation of low interest rates that constrains them, banks will register figures similar to those of last year.

UBS analysts believe that the net interest income of CaixaBank stood at 1,185 million euros (excluding Bankia’s business) at the end of the first quarter, which implies a slight fall, of 1%, compared to the previous year, while in the case of Santander this variable was lowered by 7%, to 7,871 million, in line with Barclays estimates.

To the same extent, the net interest income of Sabadell, up to 825 million euros, while that of Bankinter it stands at 314 million, 2% above, according to UBS.

In the case of BBVA, from Barclays they estimate that it will stand at 3,598 million euros at the end of March, that is, 11% below that obtained in the first quarter of 2020.