If there is a sector that is very weakened at the moment, that is none other than the banking sector. It is at minimum levels in recent years and with interest rates against their interests. To the point that the pressure from short positions it is imposing itself on the buyers. With a massive capital outflow of these securities in the equity markets. With a significant reduction in the profits of these companies that are so important in the stock markets around the world.
It is enough to remember that with respect to the values of the banking sector in the selective stock market index, the Ibex 35, a good part of its representatives are at half price in relation to the price of just a few years ago. In this sense, it may seem at first glance that they are undervalued options and that can be the object of our purchases from now on. By predictably trading at very competitive prices as a result of these price reductions.
While on the other hand, they have seen how they have reduced their dividend yield in the last three years. In order to thus go from 5,50% to 4,90% on average among all listed companies. A fact that has undoubtedly scared off the most conservative or defensive investment profiles. Where security prevails over other more aggressive considerations in investment strategies. Although Banco Sabadell still maintains its profitability for dividend by just over 9%. In other words, the second highest of all the securities listed in the selective index of Spanish equities, the Ibex 35.
BBVA with a bad technical aspect
One of the banks that maintains the worst constants in its prices is precisely BBVA. Where, in addition, its high exposure to Mexico, where it could invest 6.000 million euros more, is making the stock suffer, as announced by Credit Suisse. By also showing that it is running out of revaluation potential by establishing itself at this time with a target price below year-end 2018. Swiss investment banks also point out that their dividend is below the average for the rest of the sector.
All these news play without a doubt against the interests of this bank for individuals. Where its price per share has fallen sharply in recent trading sessions as a result of its situation in some of the destinations where this bank value is located. As for example, in Mexico and Turkey and that is affecting your bottom line. With a decrease in its benefits that can also compromise the technical aspect that this financial group presents. Where at any time the corrections to the members of this important sector in the stock market can come again. And what is worse, with a great intensity in the falls.
Sabadell in a compromised situation
Of all of them, the value that presents the worst technical aspect is undoubtedly Sabadell. For starters, it is trading below the euro unit. Specifically, shares at a level of 0,92 euros and may even trade lower from now on. The fact that it is trading below the euro unit it is already in itself a clear danger since the values that are in this situation find it difficult to get out of these levels. As has happened with other securities on the Spanish continuous market. Not surprisingly, you have much more to lose than gain at these price levels.
While on the other hand, its business situation is not particularly comfortable since it has many cash problems and all this is reflected in the conformation of its prices. To the point that it can be directed up to levels very close to 0,79 euros the action. In any case, it has lost practically half of its market value in a very short space of time. Where the selling pressure has been imposed with great clarity on the buyer. And worst of all, it seems to indicate that it will continue like this for much longer. Therefore, it is better to walk away from your positions at least in the short term. By becoming one of the most dangerous values of the Ibex 35 due to the risk generated by its positions.
Santander below 4 euros
Who was going to say that the best national bank was going to be in this situation right now. With a valuation far below your expectations real as it is a security that has been highly recommended by many of the equity market analysts. In this sense, it should be noted that Banco Santander has obtained an attributable profit of 1.840 million euros in the first quarter of 2019, 10% less than in the same period of the previous year (-8% in constant euros), due to to a net charge of 108 million euros due to the sale of assets and restructurings.
This charge includes 150 million euros of capital gains for the sale of the 51% stake in Prisma in Argentina and 180 million euros of losses derived from the sale of a portfolio of residential properties in Spain. In any case, these are business results that have not generated a very clear response in the equity markets. Neither in one sense nor in the other and that they have not influenced the valuation of their shares in the financial markets as they are considered neutral.
The small bank in the spotlight
It is the small and medium banks that are awakening the interest of small and medium investors. But not because they are doing well in the equity markets. If not on the contrary, by the rumors of concentration that can occur in the sector and in all the pools is present Liberbank. That on the other hand, and according to its latest business results, it seems that the improvement in the commercial impulse of the typical activity is consolidated, with a growth of the net interest margin of 8,6 percent, and the containment of costs, with a reduction of administration expenses of 2,7 percent.
While on the other hand, the net profit can incentivize the price of their shares from now on. However, this data is a bit misleading and has not been very well collected by the equity markets. By understanding that the current international context does not benefit your business interests. It should also be noted that it is one of the most volatile banking sector securities of all. And that is part of the pools on the new framework in which Spanish banking is going to develop from now on.
What to do in the sector?
Before developing any kind of strategy in the sector, it should be noted that they all carry a great risk at this precise moment. Therefore, they must be avoided, at least during these last months of the current year. In this sense, there is another series of securities that are much more desirable at the moment, such as those from the electric sector. Where some of its listed companies are in a free rise situation. It is the best of all because they no longer have resistance ahead and this fact can lead to their prices reaching much higher levels.
On the other hand, one of the advantages of waiting in the securities of the banking sector is that you can buy the shares at prices much lower than those that are quoted at the moment. Due to this reason, there is no doubt that its potential for revaluation may be much higher from the next few years. To the point that in the medium and long term it can become a real business opportunity. Among other reasons, because its shares can be bought at minimum prices that were unthinkable just a few months ago. Therefore, there is no choice but to wait, wait and wait.
Finally, it must be borne in mind that as long as interest rates in the euro zone are at current levels, there is nothing to do with these values. The key lies in the moment in which these change and especially in what conditions. Because it may be the definitive moment to take positions in the sector. Where they will predictably do better than the rest of the equity financial market. Of course, it is a very dynamic sector that can also be used to make sales on credit. That is, to gain from operations through their loss of value. In movements that must be carried out in the short term to avoid greater evils due to the risk of its high volatility. Therefore, there is no choice but to wait, wait and wait.