The European Banking Authority (EBA) warns that the energy situation has increased the exposure of entities to the sector
The energy and price crisis derived from the war in Ukraine has begun to make a dent in the solvency of the large Spanish banks which, together with the rest of the European banks, have seen how their CET 1 capital ratio (the one that measures that solvency ) has been reduced by half a point until last June with respect to what they had a year earlier. This is indicated by the latest report from the European Banking Authority (EBA), which has prepared its annual transparency exercise: the current capital ratio stands at 15% compared to 15.5% a year ago.
By Spanish financial entities, Kutxabank remains the entity that heads this solvency ranking measured by the EBA, with a capital ratio of 16.6%; behind are Banco de Crédito Cooperativo (12.9%), Unicaja ( 12.7%), BBVA(12.4%), Sabadell (12.3%), Ibercaja (12.3%), CaixaBank (12.2%), Santander (12%), Abanca (11.9% ) and Bankinter (11.7%).
In general, most of the entities have seen how their solvent capital ratio has been reduced in the last 12 months, a circumstance that the European Banking Authority links to the energy crisis. In fact, the institution chaired by the Spanish José Manuel Campa has warned that the energy crisis has caused banks to increase their level of exposure to the energy sector, while also paying attention to the uncertainty of the future of the profitability of entities, as can be seen from their annual transparency exercise.
This situation has been caused by the volatility in the prices registered by the gas and oil markets in the European Union, which has led energy companies to have “unprecedented” liquidity needs in the first half of the year.
The EBA has explained that the increase in risk-weighted assets (RWA) has been greater than the generation of capital, which has affected the ratio.
On the other hand, although the return on capital (RoE) has reached an average of 7.8% among the banks in the sample, the EBA has indicated that there is uncertainty about how profitability will evolve.
In the same way, the lower growth of the gross domestic product (GDP) in line with higher interest rates will mean lower income from payment services and asset management.
In any case, the EBA has also focused on non-performing or doubtful loans (NPLs). As of June 2022, the rate stood at 1.8%, five points less than a year earlier, equivalent to 370,000 million euros. However, the regulator has warned that the percentage of loans located in what is known as ‘phase 2’, when they are under special surveillance or risk of non-payment, was 9.5% at the end of the second quarter. This rate is seven tenths higher than a year earlier and the highest recorded since the historical series began in 2018.
Specifically, the absolute volume of loans in said ‘phase 2’ reached 1.45 trillion euros, 14% more. 80% of this increase came from French and German banks, according to the EBA.
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