The stock market desert crossing which led the banking sector to lose more than 30% of its market value in just a few days since February 20 -when the markets realized that there would be a global pandemic that would affect all countries, since there had already been things have begun to get very complicated in Italy- it seems to turn around, and some Spanish banks recover part of what was lost in the value massacre that took place in the weeks between February 19 and March 16.
Four of the six big banks listed on the Ibex 35 –Banco Santander, BBVA, Caixabank and Bankinter– they have in fact already recovered the price they had for the week before the declaration of the alarm state, which was produced by Royal Decree on Sunday, March 15.
However, Banco Sabadell and Bankia are still below this milestone. Both one group and the other are well below the price for the week of February 20. At OKDIARIO we have spoken with analysts to shed more light on the banking situation.
“The behavior of the sector is justified in part because they had reached excessively low contribution levels that in some cases discounted bankruptcies, as has happened with IAG, which is also recovering. The market had discounted a more negative scenario than we found and to the extent that the market is now picking up only the positive things – slight recovery of macro data although from very depressed levels, support from central banks, government programs- that makes the sector recovering positions », he says Nuria Álvarez, analyst of Income 4 Bank.
“The review of the objective prices of the analysis houses that were made just after the results have helped them a lot,” says Nuria Álvarez de Renta 4 Banco
The analyst at Renta 4 Banco assures that “although Sabadell is greatly impacted by the economic downturn, trading at 0.1 times its book value may not make much sense. So they are recovering positions and have recovered a lot. Then it has also helped them to review the objective prices of the analysis houses just after the results, “adds the specialist, who recalls that” the banks are very cyclical and it is difficult to see how they will react in the coming months. Right now the market picks up only the good part but it should not be forgotten that valuations, with a stock market going up, are demanding ».
Miguel Ángel Martínez, Analyst at ‘Tiempo de Bolsa,’ believes that a bullish streak has now been established in the stock market for Spanish banks, terribly punished by the pandemic. “Just as in February I did not recommend people to invest in banking, because I saw a lot of problems, I think that now there are opportunities and above all I see a lot of value potential in some like BBVA,” he assures this newspaper.
“Banks take it for granted that the ECB will not touch interest rates, which investors take as a sign of some strength in the banking sector,” says Darío García.
In addition, according to Martínez, there is the possibility that some of the entities enter into a consolidation process (merger or absorption) sooner rather than later, which could produce a similar effect on the Stock Market to the one that occurred last year with Liberbank, whose repeated announcements of the first interest of Unicaja and after Abanca they shot up the value “50%”, even if it was on time. According to the analyst, Banco Sabadell is the great favorite to participate in any of the operations, as well as BBVA, to gain size, but he does not see it feasible for Santander or Caixabank.
Darío García XTB, XTB analyst explains the following: “The injection of liquidity by the ECB to Spain and Italy is a good boost for banks. They know that this money, whether it enters or leaves, will pass through their hands, so they will take advantage of that liquidity to improve efficiency costs for possible ERTE or any structural situation. Furthermore, they also take for granted that the ECB will not touch interest rates, which investors will take as a sign of some strength in the banking sector. ”
“Although the prices of the banks are improving in recent days, the truth is that they do not correspond to the global macroeconomic situation. Right now there is an overbought in all sectors, except in the automobile. The earnings per share of almost all listed Ibex were already cut in the first quarter and are expected to be worse in the second quarter. Many retail investors have entered the financial markets en masse without investment criteria. In general, the climbs are supported by a pyramid of playing cards ”, remarks this expert.
By last, Jose Lizán, manager of Magnum Sicav at Solventis, Add: “Clearly there is a closure of cyclical shorts. All the analysis houses have discounted a generalized economic debacle, but now the market is seeing that the relapse of the disease is more improbable and thinks that the economic forecasts could be less drastic than expected ”.