The banks will not save the income statement this year with financial operations, as they did during the hardest years of the crisis (2013 and 2014) and have continued to a lesser extent, yes, during the last few years.
In the first nine months of this year, the six banks listed on the IBEX have obtained 2,535 million euros of financial results, 21.84% less than in the same period of the previous year.
It seems that financial institutions are about to deplete their stakes in “non-core” businesses and have detached themselves from doubtful portfolios, which have done so much damage to profits, and fixed income with better interest rates than the current ones.
If in the three weeks remaining to conclude the year there is no extraordinary operation, the ROF of these six banks will close 2019 in the surroundings of 3,500 million euros, half that in 2014.
ROF is the abbreviation admitted in the accounting jargon of banks that collects the results obtained on the trading portfolio formed by fixed income securities (bonds and obligations), variable income (shares), options and futures. The next line of the account is occupied by dividends contributed by investee companies.
In recent years, thanks to the monetary policy of the European Central Bank (ECB), European banks have enjoyed endless liquidity at zero price, especially since Mario Draghi lowered the official price of money to that historical low in March 2016 the bank has plenty of money and that is why it does not need to capture term deposits in the domestic market.
With the money he receives from the ECB he buys debt and chooses the best moments to do trading operations to swell the gross margin, the income of a financial entity.
This is how Banco Santander, BBVA, Caixabank and Bankia have behaved
Banco Santander and BBVA , due to their size, have been the ones with the highest income for this concept. The bank that chairs Ana Botín has obtained 935 million euros, far from the 1,359 million of the first nine months of last year.
It is a fall of 31.2%, which however is not the highest. The bank insists that the ROF and other income from dividends and results of entities valued by the equity method represent less than 5% of revenues, although it recognizes a decrease derived from the magnificent performance of the first quarter of 2018.
Different is the case of Caixabank , a bank that, traditionally, has had a large portfolio of stakes in industrial companies, from which it has been gradually emerging, a policy that is currently affecting its results.
Sabadell Bank has seen its revenues reduced by this chapter by 44%, from 233 million between January and September 2018 to only 130 million in the same months of this year. The CEO of the latter bank, Jaime Guardiola, has said on numerous occasions that these “results occur when there are market opportunities.”
BBVA has recorded 893 million ROF in its income statement, only 1.5% less than in the first nine months of last year. Carlos Torres said of ROF, when he was CEO of the entity, that “the results of financial operations are also part of the banking business.”
Banking executives do not like having to rely on ROF to increase the income statement. It is not in vain that these are non-recurring results, which occur on certain occasions, basically when the benefits must be increased in order to be able to reward the shareholders through the distribution of dividends.
Bankia has entered 935 million euros, 37.9% less than in 2018 and Bankinter barely 55.7 million euros, although this figure is 38.1% higher than in 2018. Bankia points to the lower result obtained from the portfolios fixed income as responsible for the fall in benefits.
The ROF has represented 24.2% of the profits in the first nine months of the year, three tenths less than in 2018. The difference is that while between January and September 2019 the six listed banks have earned 10,467 million euros, in the same period of 2018 earned 13,229 million.
According to the data provided by the banks themselves, the results of financial operations reached their maximum level in 2014, with 7.7 billion euros. A year later they dropped to 6,825 million and in 2016, to 5,625 million.