Kutxabank, Santander UK and TSB avoid credit risk costs

The focus on mortgage lending by these entities limits the need to build up provisions, despite increasing economic uncertainty. The cost of risk is zero.

Interest rates rise and margins for the entire banking sector improve Apparent. but, Shadows of the growing need for allocations and the recovery of arrears appear on the horizon in the face of the greater financial burden of CLents. In this context, There are some companies within Spanish entities that breathe complete peace of mind.

Cotexabank In Spain and British businessSantander and Sabadell Reliance on Lowest cost ratio for credit risk Among all sectors of the Spanish financial sector. This means that they maintain Low volume of provisions compared to the total included credit.

he Cost of risk It is an indicator of expected losses and measures the effort made by the entity in a specific period of time to protect itself from estimated future losses in its credit portfolio. Since the accounting rule requiring provisions to be made when losses are expected rather than realized has been changed, the cost of credit risk also partly acts as a factor. An early indicator of potential deterioration.

Cotexabank It is, in this sense, the king of the various banking businesses run by Spanish entities. Basque Bank The bank maintains a credit risk cost ratio of only 0.08% of the total volume of credit granted.

Behind this number is The volume of real estate loans on which a bank’s business focuses, and the type of credit that has the greatest amount of collateral and the lowest probability of default. This is acknowledged by the institution itself, which highlights that it has a “larger relative weight on the balance sheet for mortgages, which require lower provisions with collateral.”

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For this reason, and with a very remarkably conservative risk profile, Kutxabank does not consider it necessary to accumulate such a large number of provisions that would ultimately increase the cost of protecting its credit portfolio.

“We are the entity with the best risk profile. This is recognized by the European Central Bank, which puts us in second place The entity with the lowest P2R ratio in Spain and third in Europe“, they point out from Kutxabank, which waves its solidity high like a flag.

In comparison with, Subsidiaries of other entities in Spain maintain an average cost of credit risk of around 0.3%.generally differ from each other by a few basis points depending on the weight of loans to companies in their credit portfolio.

United kingdom

After the exceptional Kutxabank, British subsidiaries of Spanish banks occupy the next positions on the podium of sectors with the lowest cost of credit risk in the Spanish financial sector. Much santander uk, In the case of the entity to which it is directed Anna Putinhow Telecommunication Standardization Bureauin SabadellHardly The credit risk cost ratio is 0.12% and 0.17%, respectively.

More so than in the special circumstances of banking activity in the United Kingdom, where interest rates are at levels even higher than those set by the European Central Bank for the continent, once again. The special characteristics of companies explain the low percentage of endowments.

Both Santander UK and TSB have it The credit portfolio is heavily focused on mortgage loans, and this low level of risk reduces the need for provisions.

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British companies in Santander and Sabadell They also reduce the credit risk of their groups. In the case of Santander Bank, the cost of risk is higher than the Spanish average due to its strong presence in emerging economies.The size of the allocations is much higher, at 3.3%, in companies in South America.

Sabadell is offsetting the weight of SME business in its credit portfolio in Spain, whose cost of risk without TSB would rise to 0.52%.

Possibility of increased allocations to this sector

Regardless of the banking business observed, all Spanish entities have witnessed throughout this year how the credit risk cost ratio rose slightly above the minimum. Inflation, economic slowdown and rising interest rates have created a less rosy macroeconomic scenario and entities are beginning to notice the first symptoms of deterioration in their credits, prompting them to increase their provisions.

The cost of credit risk bottomed out at the end of last year, and since then, there has been a moderate rise that is expected to rise in 2024. An example is CaixaBank, which rose from a ratio of 19 basis points to one of 30 basis points. The ECB itself, as supervisor, has asked the financial sector to be more cautious and not be carried away by the increase in its margins that will be absorbed over time with the increase in financing costs and the rise in interest rates. delay. However, Spanish banks have not detected major problems in their credit portfolios, and expect a milder recovery in defaults.

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Sources from a Spanish entity say: “It is not the first time that the supervisor has gone to the point of pessimism. We have seen that in the epidemic. We have to be careful without going crazy.”

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