We are in a market situation frankly and one of the doubts that arises at the moment is whether it would be appropriate to buy shares in the banking sector or not. Because it is one of the business segments most affected as a result of the emergence of coronavirus. With falls of around 40% and that have caused their valuations to have been drastically reduced. In some cases, it is 50% compared to a month ago and that can make small and medium investors think that it may be a unique opportunity to open positions in some of these stocks.
In this general context, the one that does not raise doubts of any kind is that the banking sector is the worst of the Ibex 35 sectors and that Banco Santander and BBVA are at the forefront of these setbacks. With a price of around 2,10 and 3 euros for each share, respectively. For this reason, it is not surprising that large of the doubts presented by small and medium-sized investors are centered around the two large banks, Banco Santander and BBVA, and to a lesser extent the rest of the most important Spanish banks, those that They are listed on the Ibex 35, as are Caixabank, Bankia, Bankinter and Banco Sabadell. But is it a good time to enter these securities of one of the preferred segments of the selective index of equities in our country?
First of all, it should be noted that these operations can be very profitable if they are aimed at the medium and especially long term. Because it offers very important oversold levels at the moment. Because it is no less true that their book value is frankly higher than what their prices reflect on these important days. Where it is very relevant that its real value is above, although the moment in which the prices show this state of the companies that are listed on the equity markets of our country is not known.
Technical aspect of banks
In any of the cases, the cuts have been exceptional and above those shown by other business segments. Passing from one side trend to another clearly bearish after all the credit institutions have broken all the supports that they had in front of them. To the point that to recover the previous state it would be necessary to revalue their values at levels very close to 70%. A scenario that is not very likely at the moment since for the selective index of Spanish equities it would have to go to approximately 9.000 points. It is a scenario that at least is not very feasible to occur in the shortest term.
While on the other hand, it is also necessary to emphasize that another very important aspect is that the banks are in a very unfavorable scenario for their sectoral interests. As interest rates are in negative territory, and at historical lows. Namely, the price of money is 0% and therefore the benefits of credit institutions have been lowered in recent years. Without a change in trend in the coming months or even in the next few years. With which their situation can be reflected in their prices in the equity markets, just as it was happening before the pandemic of this respiratory virus appeared.
Suspension of dividends
Another effect of this health crisis is that derived from the payment of this remuneration to the shareholder. In this sense, the European Central Bank (ECB) has raised the tone and urges banks not to distribute profits among their shareholders while the economic crisis unleashed by the coronavirus pandemic lasts. The institution yesterday updated the generic recommendation on dividend policies that it issued at the beginning of the year and urged banks to suspend payments to shareholders until at least October 1. So that in this way, the effects generated by the emergence of this very important pandemic and which has affected practically the entire planet can be minimized.
This trend has been inaugurated by Banco Santander and has been followed by the other credit institutions with the sole exception of Bankinter, which has delivered this remuneration to its shareholders in March. This change in strategy may cause a significant number of small and medium investors to undo positions in this sector towards others that do maintain this payment on a timely and recurring basis. As for example, in the case of electricity companies, which are the ones that can benefit from this variation in their behavior in the equity markets of our country.
I may not have reached the ground
Of course, the values of the banking sector, and with the exception of tourism, is the one that is reflecting the worst performance of all. Not only in the groups that operate in Spain, but also in those established in the European Union. To the point that its inflection point has yet to be detected on the daily charts. If not, on the contrary, everything seems to indicate that it is going to head towards new all-time lows in the coming days. In this way, those stock market users who want to position themselves in the sector will still have opportunities to make their purchases at a much more competitive price than that shown in these last sessions on the stock market.
On the other hand, they can be affected by the little liquidity that is seen in the money market and that are doubtful should be reflected in business accounts, of at least the first and second quarters of this very complex year for credit institutions. Where your recovery is going to be very difficult to achieve. And therefore, they must be absent from their positions in the face of what may happen from now on. Because in fact, despite their very low prices at which they are listed at the moment, it cannot be said by any means that the price of their shares is precisely very cheap. Not much less, as many of the analysts in the equity markets emphasize these days. With the recommendation not to position yourself in the sector until another order.
Fateful quarter for banking
In any case, there is no doubt that the first quarter of this year has been truly fatal for the banking sector on the stock market. The six entities listed on the Ibex 35 (Banco Santander, BBVA, CaixaBank, Bankia, Bankinter and Sabadell), have lost half of their capitalization. All this in a period that is marked by the unexpected arrival of the economic recession as a consequence of the serious health crisis caused by the coronavirus. And that it has had all these values as one of the great victims in the stock markets, with thousands and thousands of investors trapped in their positions and without seeing a real way out of this long tunnel.
While on the other hand, it cannot be forgotten that the problems of the banking sector are not new, but on the contrary, they already came from behind. And this is why your investors may continue to suffer until the end of the year. Because at no time have they behaved as safe havens to try to weather the gale of short positions against buyers. And with the mitigating circumstance that the bearish positions in the equity markets of our country have been suspended for the moment. Well, not even with this performance have they been able to come back in their positions in recent weeks. Its action has only been limited to very specific rebounds like the one produced in the last days of last March.
Volatility very close to 10%
Another of its most negative elements is that the volatility of these stocks is approaching at 10% levels. And in this way, it is very complex to carry out any investment strategy that is reliable and much less profitable for our personal interests. Beyond the movements developed in the same trading session and which are known as intraday operations. In this sense, they have in their favor that their market capitalization is very high, especially when compared to other sectors that make up the Ibex 35. That is, the entry and exit prices can be better adjusted in the values of these characteristics .
Finally, it should be mentioned that there are serious doubts about the term in which credit institutions can go back. Taking positions at this precise moment is a very risky decision. Because there is a serious risk that there is a greater chance of losing money than of winning. At least while the doubts that grip the values of this complex sector of the Spanish stock market remain. Not surprisingly, it may take many months for this new scenario.