Banks make the ECB rate hike profitable on the stock market

Good day for Spanish listed banks. Although the news was already expected, the rate hike announced by the European Central Bankthis Thursday, the price of bank securities has skyrocketed.

Thus, Caixabank (indicated as the entity that would hypothetically benefit the most from this rate hike) is the value that rises the most within the IBEX 35, climbing 4.89 percent this Friday.

A short distance away, Bankinter rises 4.79 percent; Banco de Sabadell climbs 4.61 percent; BBVA rises 4.44 percent and Santander increases 4.14 percent.

The good behavior of the banks also boosted the selective Spanish, which was revalued around 1.5 percent this Friday.

Higher rates have a positive impact on the banking business

These values ​​have skyrocketed due to the prospect that increases in interest rates (of 75 basis points, in the case of the latest) will have a positive impact on the banking business, since they allow them to obtain more profitability from the loans they grant to their clients. .

In fact, the rise in interest rates adopted this Thursday has caused analysts to raise their profit forecasts for the sector as a whole.

In reality, the news was expected and, in fact, the anticipation of it has allowed some of these values ​​to be the ones that rise the most in the Spanish selective also in the year as a whole.

Spanish banks, the most profitable stocks on the IBEX 35

Specific, Caixabank climbs 39 percent since last January 1; while Sabadell shoots up 26 percent and Bankinter rises 25 percent.

These are the banking securities most focused on domestic business, considered as the ones that can obtain the most income from rate hikes.

The most internationalized banks lag behind

The most internationalized banks, on the other hand, have lagged behind in the stock market this year because, having part of their business in countries outside the euro zone, they do not benefit as much from the measure.

Thus, BBVA leaves 8 percent of its capitalization so far this year; while Santander is bled 13 percent.

The ECB’s policy will continue to benefit domestic banks

In this context, the question some investors are asking is whether the rally in domestic banks is likely to continue.

In this regard, it must be taken into account that the ECB will continue to tighten monetary policy and raise interest rates until inflation shows signs of moderation, so it is to be expected that this factor will continue to support Spanish banks.

Although, not everything looks rosy for the national banks, then, Although the rise in interest rates favors them after years of being at rock bottom, the truth is that the threat of recession is a serious danger for them.

The danger of recession could impact the banking rally

“In the short term, especially in the last quarter of 2022 and the first quarter of 2023, the key to success will be that the monetary measures have a real effect of containing inflation. If so – and this should be the economic objective of the financial world and, as such, the base case of the market – perhaps we can see a stronger economic recovery in the medium term and more optimistic markets (in fixed income and equities) ” , writes Pedro del Pozo, director of financial investments at Mutualidad de la Abogacía.

“If this does not happen, the general framework could lead to more or less prolonged stagflation (low growth or decrease with inflation), something very harmful for the markets and, naturally, for the real economy,” adds this expert.

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