The Outlook for the Spanish Banking Sector

Transcription

1 The Outlook for the Spanish Banking Sector Madrid, 24 th May 2012 IACPM Spring General Meeting 2012 Alfonso García Mora Managing Director Analistas Financieros Internacionales (Afi)

2 Index 1. Banking sector restructuring process: Is it enough? 2. Banking recapitalization 3. The outlook: Main economic drivers Credit and deposits Liquidity NPLs and Provisions Profitability 4. What s next? 2

3 LA CAIXA MADRID POPULAR BANCAJA SABADELL CAM CATALUNYA GALICIA IBERCAJA UNICAJA PASTOR CAIXANOVA BBK CAJASOL CCM CAJA ESPAÑA PENEDÉS MURCIA CAJA DUERO GIPUZKOA Y S.S. NAVARRA CAJASUR ASTURIAS BALEARES GRAL CANARIAS GRANADA SABADELL TERRASSA BURGOS MPAL. INMACULADA TARRAGONA GUIPUZCOANO CANTABRIA INSUL. CANARIAS VITAL LAIETANA GIRONA EXTREMADURA ÁVILA MANRESA SEGOVIA BURGOS C.C.O. BADAJOZ RIOJA MANLLEU GUADALAJARA JAÉN ONTINYENT POLLENSA CAIXABANK + CÍVICA BBVA + UNNIM SANTANDER B.F.A. SABADELL + CAM POPU + PASTOR UNICAJA + CEISS CATALUNYA BANC KUTXABANK NCG BANCO MARE NOSTRUM IBERCAJA + CAJA 3 BANKINTER LIBERBANK B. VALENCIA BANCA MARCH ONTINYENT POLLENSA Millions 1. Banking sector restructuring: Is it enough? Saving banks and banks immerse in integration process* (total assets mill.) 350, ,000 December , ,000 December , ,000 x2 200, , , ,000 50, , ,000 50,000 0 x2 0 # entities: 45 Average size: 29 bn. Post integration # entities: 18 Average size: 106 bn. Pre integration Sources: Afi, CECA and AEB (consolidated basis, Dec09 and Dec11) (*) Banco Popular, Sabadell, Pastor and Banco Guipuzcoano 3

4 Banking sector restructuring: Is it enough? Number of employees in the banking sector* Number of branches in the banking sector* 280,000 50, , ,855-5% 45,000 45,662-13% 260, , ,578 40,000 35,000 39, ,000 30, ,000 25, ,000 20, Employees/ branches Sources: Afi, Bank of Spain *Banks, saving banks and credit cooperatives 4

5 2. Banking recapitalization Since 2008, Spanish financial institutions have increased Core Tier 1 ratio by 330 pb 1 RWA decrease: -8,4% (178 bn ) Core Tier 1 Spanish banking sector 2 60 pb increase in Core Tier 1 Capital increase: 54 bn 14% 12% 10% 8% 8.7% 10.8% 12.0% 6% 4% 270 pb increase in Core Tier 1 2% 0% 2008 Sep 2011 Mar 2012 * (*) Capital at Sept. 11 is estimated as balance sheet equity + FROB I. For March 12, issues of convertible instruments that can be counted as capital is included as a ratio to this figure, as well as planned exchanges not executed at September. Source: AFI, Bank of Spain, CECA and AEB 5

6 jun % 64.3% 64.4% 63.3% 73.5% 71.8% 74.4% 72.0% 2. Banking recapitalization 1 RWAs descrease Banks have decreased RWAs by 178 bn 30% 25% 20% 15% 10% 5% 0% -5% -10% Credit, total assets and RWA (annual growth rate) RWA/Total assets (%, Risk profile) Var. interanual APRs Var. interanual Activo Total Var. interanual Inversión Crediticia Jun-11 Source: AFI, Bank of Spain 6

7 Billions 2. Banking recapitalization 2 Capital increase Banks have increased capital by 77 bn Variation of capital in Spanish banks (2008 March 2012) Capital increase by instrument Capital 2008 Expected Loss Capital increase Capital March 2012 (E) (*) Capital at Sept. 11 is estimated as balance sheet equity + FROB I. For March 12, issues of convertible instruments that can be counted as capital is included as a ratio to this figure, as well as planned exchanges not executed at September. Source: Afi, Bank of Spain, CNMV. 7

8 m-08 j-08 s-08 d-08 m-09 j-09 s-09 d-09 m-10 j-10 s-10 d-10 m-11 j-11 s-11 d-11 m The Outlook: Main economic drivers 34% 32% 30% 28% 26% 24% 22% 20% 18% Investment and savings rate (% of GDP) Investment rate Net external funding needs Savings rate 31.0% 10% 21.3% 16% % -5% -10% Spanish housing prices (cumulative adjustment in current cycle ) 22.05% 3.4% 18.16% Private gross debt (% of GDP) Non financial corporations Households (RHS) Housing prices evolution from adquisition year to Q112 (index base 100 = quarter 0 or quarter of adquisition) Hace 7 años Hace 6 años Hace 5 años Hace 4 años Hace 3 años Hace 2 año Hace 1 año % -20% -21,5% % -30% -35% TINSA MFOM -28,6% abr-12; -29,8% trimestre Negative equity Source: Afi, Bank of Spain, Ministerio de Fomento 8

9 3. The Outlook: Main economic drivers 2% 0% -2% -4% -6% -8% -10% -12% -14% -16% -18% -20% Spanish labour market cycles (cumulative adjustment) quarters Labour market forecasts for Employees Unemployed Unemployment rate annual annual variation variation annual average (%) 2008 (thousand) -620 (thousand) 1, , Afi GDP forecasts Annual average GDP -3,8-0,1 0,7-2,3-1,2 Final consumption -2,3 0,7-0,7-5,2-3,0 Households -4,4 0,8-0,1-2,0-0,9 Public Administration 3,8 0,2-2,2-14,2-9,4 Gross fixed capital investm-16,5-6,3-5,1-8,4-2,5 Equipment -22,6 5,5 1,6-6,5-1,1 Construction -15,4-10,1-8,1-9,6-3,3 Housing -22,0-9,8-4,9-4,0-1,0 Other construction -7,7-10,4-11,2-15,0-5,8 Domestic demand (1) -6,6-1,0-1,7-6,0-2,8 Exports -10,2 13,5 9,1 3,2 5,8 Imports -16,9 9,0-0,1-8,8 0,8 External demand (1) 2,8 0,9 2,4 3,7 1,6 (1) Contribution to GDP grow th Source: Afi, INE (EPA) 9

10 Billions 3. The Outlook: Credit and Deposits Banking deleveraging private sector Spanish banking retail gap 200% 160% 120% 80% 40% 0% -40% 175% Credit evolution from 2008 to 2013 ~14% total loans ~23% net loans 148% 50% 40% 30% 20% 10% 0% -4.5% -5.6% -10% E Loans to private sector/ Nominal GDP Loans to private sector (RHS) % % % % Retail gap Variation in credit Reduction deposits & commercial paper Structural liquidity 561 Source: Afi, Bank of Spain. 10

11 3. The Outlook: Liquidity Spanish banking debt redemptions (millions EUR) Total quarterly redemptions Yearly redemptions by instrument 50,000 45,000 40,000 35,000 30, ,000 90,000 88, , , , , ,000 Other debt Multi covered bonds Covered bonds Subordinated debt Government Guaranteed Bonds Bonds 25, ,000 20,000 80,000 15,000 60,000 10,000 40,000 5,000 20, T12 2T12 3T12 4T12 1T13 2T13 3T13 4T13 1T14 2T14 3T14 4T More than 2031 Source:: Afi, Bloomberg, Bank of Spain, CNMV. 11

12 3. The Outlook: Liquidity Does Spanish banking sector have enough liquid assets to cover future redemptions? 1 Data as of Mar-12 bn % s/total Average haircut TOTAL LIQUID ASSETS 634,505 Treasury debt 198,245 31% 3.00% Bank guaranteed debt 54,077 9% 3.50% Other (covered, MBS, regional debt, ICO,etc) 372,183 59% 10.00% Interbank net position 10,000 5% - (*) Assuming term to maturity: 3-5y 2 Data as of TOTAL LIQUID ASSETS Mar ,505 ECB 339,495 Other Repo funding 60,000 NET AVAILABLE LIQUID ASSETS 217,798 Source: Afi, Bloomberg, Bank of Spain, AIAF, CNMV HAIRCUTS 16,649 12

13 3. The Outlook: Liquidity Potential ECB margin calls: 3 NET AVAILABLE LIQUID ASSETS 217,798 Factor #1: YTM increase towards Nov11 levels. Factor #2: Sovereign downgrade below A3/A- : + BUFFERS 132,580 Loans (list II) 30,000 Pending bank guaranteed debt 20,555 Capacity to issue covered bonds 82,025 = POTENTIAL NET AVAILABLE LIQUID ASSETS 350,377 Source: Afi, Bloomberg, Bank of Spain, AIAF, CNMV, ECB 13

14 3. The Outlook: Profitability Million % TAA YoY rate NET INTEREST INCOME 43,035 34,292 29,545 31,854 26, % 0.95% 0.98% 0.82% -20.3% -13.8% 7.8% -17.4% Commissions 12,163 11,870 11,750 11,580 11, % 0.38% 0.36% 0.35% -2.4% -1.0% -1.4% -2.6% Other income (net) 12,354 17,151 15,811 11,384 11, % 0.51% 0.35% 0.36% 38.8% -7.8% -28.0% 2.1% GROSS OPERATING INCOME 67,552 63,313 57,106 54,819 49, % 1.84% 1.69% 1.54% -6.3% -9.8% -4.0% -10.2% Personnel expenses 17,742 17,643 16,889 15,506 15, % 0.54% 0.48% 0.48% -0.6% -4.3% -8.2% -0.9% General expenses 11,657 11,789 11,576 10,974 10, % 0.37% 0.34% 0.34% 1.1% -1.8% -5.2% -1.3% Other provisions 1,351 3,963 1,576 1, % 0.05% 0.04% 0.01% -60.2% -26.8% -60.8% RESULT BEFORE IMPAIRMENT LOSSES 36,801 29,919 27,064 27,186 22, % 0.87% 0.84% 0.70% -18.7% -9.5% 0.5% -17.0% Cost / income ratio 46.5% 54.3% 57.7% 51.5% 57.5% Source: Afi, Bank of Spain 14

15 3. The Outlook: NPLs and Provisions Starting point: Exposure to Real Estate of the spansihs banking sector: Total Credit 1.7 Tn Damaged assets 175 bn. Normal credit to Real Estate and Constr. 125 bn. Total exposure to Real Estate 300 bn. Repossessions NPLs Substandard 80 mm. 53 mm. 42 mm. Construction and Real Estate Source: Afi, Bank of Spain and presentation of results of entities to December

16 3. The Outlook: NPLs and Provisions 250,000 Breakdown of doubtful credit * (million ) 200, ,000 40,712 42, ,000 50,000 17,456 20,698 42,745 57,133 26,100 78, , ,283 17,939 15,255 16,985 28,905 30, E 2013 E Housing Consumption RE & Construction Companies (not RE & Construction) Others** Source: Afi, Bank of Spain. *Doubtful credit, of private sector. ** Credit to ISFSH 16

17 Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec The Outlook: NPLs and Provisions NPL forecast Damaged assets forecast* 15% 11.8% 13.4% 10% 5% 5.1% 5.8% 7.6% 9.4% 10.7% 13.2% 11.8% 18.4% 13.4% 20.8% 5.1% 5.8% 7.6% 0% F 2013 F NPL ratio Damaged assets Source: Afi, Bank of Sapin, AEB, CECA and UNACC. * Including repossessions. 17

18 3. The Outlook: NPLs and Provisions Determination of pending provisions: Afi s numbers under a base case scenario Type of loan and provisions (in million) Exposure Provisions pre-rdl 2012 RDL 2/2012 RDL 18/2012 Total provisions post-rdl Coverage (% of damaged) Damaged assets today (% of total) New damaged assets (% performing) Total damaged assets Provisions required (% damaged assets) Pending provisions Total provisions % of total, per type Assets Doubtful + Re developers and Substandard % 59% 0 88% 46% construction written off ,4% Performing % 70% Corporations (inc. non-re Doubtful % 7% % 63% construction) Performing % ,2% Mortgage Consumer Doubtful % 3% % 30% Performing % Doubtful % 7% % 80% Performing % ,6% 10,7% PROVISIONS Specific Generic TOTAL ,4% 14,2% 9,5% 22,4% 49,5% % 18

19 3. The Outlook: NPLs and Provisions Baseline scenario Provisions Other provisions RDL 2/2012 & RDL 18/ Additional needs * Provisions before RDL (Dec11) RDL 2/2012 RDL 18/2012 RDLs use of generic provisions Specific outstanding Use of generic provisions Total provisions 19

20 3. The Outlook: NPLs and Provisions Stress scenario Other provisions RDL 2/2012 & RDL 18/ Additional needs Provisions * Provisions before RDL (Dec11) RDL 2/2012 RDL 18/2012 RDLs use of generic provisions Specific outstanding Use of generic provisions Total provisions 20

21 4. What s next? The current vicious circle Riesgo Banking bancario risk Sovereign risk Recesion risk Source: Afi 21