Last weekend, European banking, and very specifically the large Spanish groups, have been the object of the test stress by the European Banking Authority (EBA), and whose main result has been its general approval. And where the worst results have been for the Italian Monte dei Paschi and Unicredit, which have shown certain deficiencies in their respective lines of business.
However, the analyzes by financial intermediaries have not been long in coming, and have been a disappointment for investors in this important sector in European and Spanish equities. Specifically, the influential rating agency Standard & Poor's (S&P) has issued a report a few days after the release of these results, in which it shows that Banco Popular, CaixaBank and Banco Sabadell show "possible weaknesses" in the event of an economic crisis.
A whole jug of cold water on the waterline of savers who have their contributions in some of these banking groups. And what has meant, that the initial joys after the publication have been imposed by reality as a result of a much more detailed reading on the real state of Spanish banking. Other rating agencies have also expressed their doubts about the banks in our environment
Sales are imposed in the markets
The reaction of the financial markets has not been long, and the sales They are clearly imposing on purchases, and even with a special virulence. Within this scenario, banking is dragging the main indices of the old continent, with sharp falls that are leading many investors to rethink their investment strategies in Spanish banks, and by extension in Europeans.
The national selective index, Ibex 35, with a great specific weight of banking a little more than 3% has been left in the first days of the week. Mainly weighed down by all banks listed on this index. While other sectors maintained the good evolution of their prices during the last weeks, the banks have not been able to follow them and it has generated important depreciations in their prices.
The first consequences on the stress test have not been long in coming, and sales have reappeared with unusual strength, after a few months of relative calm in the stock market. The worst unemployed of all banks is the Popular, which has been left these days more than 7% of its value. Nor have the other financial groups fared better. BBVA has lost close to 5%, Banco Santander has followed this trend, and Sabadell and CaixaBank have moderated their falls, between 1,50% and 3%.
The least affected by these notes linked to the solvency of European banks has been Bankia, which is precisely the one that I note has obtained from this examination. And that has led to its declines being within the margins assumed by small and medium investors, no more than 1,50%.
Weakening of the Ibex 35
The first consequence that these results have generated for European banks in general has been the weakening of the Spanish index. Not in vain, has abandoned the 8.500 point levels with great force. And with the increasingly real possibility of visiting the 8.000 points in the next trading sessions. In this sense, the month of August can be really dangerous for the interests of retail investors. Many of them are on vacation these days, and they may find themselves with a more than negative surprise when they return from their trips. And who knows if with much less money in your investment portfolio.
The securities representing the bank are now being a burden that is difficult to solve for the main national index. Not surprisingly, the remaining securities are not doing badly in the financial markets, there are even moderate rises in the quotation of their prices. Hence, more and more analysts are appearing who recommend their clients refrain from opening positions in bank securities. At least for as long as these uncertainties in equities last.
One of the biggest risks is that the evolution of the banking sector will have a full impact on the Ibex 35, and could lead it again to visit the lows of recent years. Even with deeper fixes that can delve into a deeper downtrend. At least in the short term. Therefore, be very careful with operations on the stock market during this quintessential holiday month, where the number of operations in equity markets declines significantly.
Bank position in the stock market
One of the problems that arises for investment is the excessive dependence that banks exert on the Spanish stock market in general. Not in vain, there are six banking groups that are listed in the national benchmark index. BBVA, Santander, Caixabank, Popular, Bankinter and Bankia are the representatives of this important and influential sector of the stock market. And that this year he is doing worse than others.
To this must be added other small banks that are listed on the continuous market, and that are also being affected by this Community examination. With very extreme price volatility, and that takes us back to the worst moments of the financial markets. And even with the real possibility that prices may fall further in the markets. In this sense, the next few weeks will be decisive in verifying the evolution of Spanish banks.
Banks, which on the other hand, have been making a dividend payment to their shareholders that is really generous for their interests. With an annual median yield close to 4,50%, through credits that are formalized every month in the current account of investors. And that it will suppose a certain relief to them to maintain the liquidity of their savings.
All this within a general context, in which the analysis agency Standard & Poor's does not include any Spanish bank among those that considers that can present problems and that deserve special attention. In return, if banks from other countries are present: Monte dei Paschi, Unicredit, Deutsche or RBS, among the most important.
What can investors do?
One of the dilemmas is the one presented to small investors from now on, and where they do not know what to do with the savings invested in Spanish banks: buy, hold or sell. Everything will depend on your current position, and that it will require a different strategy, and maybe even diametrically opposite. Precisely one of the most complicated months of the year, to be on vacation in a tourist destination.
If they do not have open positions in the banking sector, it is recommended that they continue like this until they return from their vacations. And in this way, they can analyze with greater objectivity everything that is happening to this important sector of equities. Waiting at least a few weeks will be the best decision you can make right now.
If, on the contrary, they are already positioned in the stock markets through these securities, prudence will be the common denominator of their actions. It may already be a bit late to close positions in Spanish banks. And as an investment strategy, you can expect price spikes to sell your shares. And divert them to safer securities, and even with greater potential for appreciation in the next six months.
Selective shopping opportunities
In any case, if the banking sector continues to fall during the next trading sessions, even more so with percentages above 5%, it would be a real business opportunity. Especially if the investment is aimed at the medium and long term. And all this for the low prices with which the main banks in Spain would be quoted. That in a more or less reasonable period of permanence they would present a return above that presented by other financial assets.
And where it would be logical for money to enter the markets. Imposing purchases over sales again in a clear way. Not surprisingly, the banking sector is one of the hardest hit in recent months. And where the shares of Banco Santander or BBVA, for example, they have lost almost half of their value compared to a year ago. From this perspective in the analysis, it can be a good time to make the first purchases, although very selective in any case.
To avoid making mistakes at this time, it would be very useful if you follow a series of tips to optimize equity operations. And that would go through the following keys that you must take into account.
- This is not the time to make hot decisions, and it is preferable that you meditate on your strategy during these days that you have off.
- Most banks are trading under a clear downtrend. Be aware of where you can stop and change sign in the evolution of your prices.
- Not all banks show very similar business results, but rather some more than others are in a better financial position. They will be the most receptive to your purchases.
- This sector is the one offers greater risks at the moment, but in return the one that presents greater opportunities to revalue. It may be a candidate to be part of your investment portfolio.
- Although their prices are very low, and in some cases unreal, keep in mind that they can still go lower.