Banco Santander SA, Banco Bilbao Vizcaya Argentaria SA and CaixaBank hold their own, whilst other Spanish institutions struggle
As banks around the world continue to struggle with the impact of the recent recession as well as the inflation that is found in the economies of many nations today, Spanish banks are facing their own share of problems. Once considered somewhat of a favourite of analysts, given their ability to withstand some of the buffeting other banks were going through over the last several years, the tide seems to have changed in recent months. In fact a number of Spanish private and investment banks, along with the central bank, are finding the going tough. Here are some examples of what is happening with a few of the key Spanish banks, both in terms of domestic and international performance.
Several leading Spanish banks, which also operate internationally, have recently seen their ratings downgraded significantly. Banco Santander SA, Banco Bilbao Vizcaya Argentaria SA and CaixaBank have long been viewed as some of the best performers in the banking industry, but concerns about defaults on various categories of loans and shrinking returns on other types of investments led rating service Moody’s to evaluate their rankings around the beginning of the fourth quarter of 2011. The action followed shortly after Standard & Poor’s downgraded the ranking of several Spanish banks.
In spite of these less than desirable downgrades, all three banks continue to strengthen their holdings within the country, while also seeking opportunities abroad. Banco Santander is focusing its efforts on South America and in particular, on growth potential in Brazil, something that is already helping offset some of the domestic losses sustained in recent years. As with many banking institutions, all three have carried out at least some degree of evaluation on their holdings and made changes in terms of investments in stocks and money markets, as well as real estate holdings.
The central bank of Spain has also come into some criticism as the country’s economy moves closer toward another round of recession. In addition to coming under fire for some of the arrangements made in years past with other banks in the country, much of the angst has to do with steps taken to control interest rates in a manner that prevented the issuance of loans to individuals and companies with less than acceptable credit. Like many other countries, the number of defaults on home loans in Spain has led to some talk of reorganising the central bank and also making changes in banking laws and regulations, possibly to the point of changing the banking landscape in ways that are still being determined.
The basic issue with banking in Spain today is that both the central and commercial banks headquartered in the country share a great deal with central banks and other financial institutions around the world. Lending decisions that were once considered safe have proven to be unsound, banks are scrambling to remain profitable and the central bank is adapting in order to at least minimise, if not completely avoid, another recession. The next year or so will be crucial to determining if the leading Spanish banks can hope to stabilise and return to expansion, or if mergers and acquisitions by other entities, as well as changes in the central bank, will change Spain’s banking landscape permanently.