The bank is opening up again to mergers and the end of the sector’s “perfect storm” is already in sight




The crisis of Covid-19 It has been a before and after for banks. It has accelerated processes, and changed others, although it has undoubtedly been the great catalyst to launch the most hackneyed issue in the sector: mergers. Caixabank and Unicaja are good examples that finding a dance partner is possible. And although it seemed that the ‘party’ had already ended, in the guild they do not close the door at all; in fact, they open it.

Gonzalo Gortázar, CEO of Caixabank, heads the largest bank by volume of assets in Spain after absorbing Bankia; technological integration is on the verge and his experience in this union gives him the authority to sell the benefits of bank consolidation. He has not missed XXVIII Meeting of the Financial Sector, organized by ABC and Deloitte with the sponsorship of the Appraisal Society, and has not disappointed in its defense of the union processes.

The executive stressed that mergers are not a thing of the past but are still very much present. The process has not finished (largely due to the “structural problem” of the loss of profitability), so he considers it “logical” that there are new operations. These words were pronounced before the main CEOs of the bank, with special curiosity for the presence also of Sabadell Bank in the date. Precisely, this last entity experienced a failed merger with BBVA last year … and it always rang to join Caixabank once Bankia was absorbed.

Likewise, the Caixabank executive pointed out that it will be much more difficult to see cross-border unions “because they do not generate so many synergies.” He added that the union with Bankia has created cost savings synergies of 940 million, which represents almost 51% of the costs that Bankia had in 2019. “The internationalization of banking has not advanced in recent years,” he said Jose Manuel CampaPresident of the European Banking Authority (EBA), who, when asked about cross-border mergers, commented that they are “a challenge” for the entire financial sector. Regarding the suitability of these operations, Campa recalled that the messages of the European Central Bank (ECB) are directed to the fact that if the resulting entity has a more solvent model, work must be done so that it is executed.

However, although Gortázar once again opened the door for more operations in the union, the one that always rings to enter into mergers, that is, Sabadell, is no longer entirely due to the work. Its CEO, César González-Bueno, did not speak of bank consolidation and he dedicated himself to extolling the virtues of his bank. The CEO of the Catalan-born entity has been in office for less than a year, but he has already revolutionized the bank with a new structure, new divisions and another strategic plan. He noted that upon arrival he found an organization “that was too distributed and needed more focus and verticality by business lines.” It also detected that greater efficiency was needed in the use of capital, so as not to focus so much on the commercial branch. “They have been nine very exciting months, seeing that the bank has traction, that the bank executes, that it knows how to do things,” he said. From their words it is clear that they want to fly alone, even more so now that they have repaired the wings of TSB, its British subsidiary.

TSB was his big unknown. In the past, because the situation has changed greatly in a year, going from losing more than 200 million to contributing more than 30 million. “Now it is in a magnificent trend”He commented, to add: «It was one of the great doubts of our business portfolio. He was badly valued, we have suffered a lot, but we are on a very positive path and his contribution to the group is going to be high. It will be a key element of profitability, “he stressed.

In a sectorial key, and taking into account the economic situation, the executive commented that there is light at the end of the tunnel for financial entities. «A season of a certain perfect storm reversal is coming that the financial sector has experienced, “he explained, referring to the fact that the banking system was suffering from problems such as negative interest rates, excessively high structural costs, digital transformation … A series of tests that” are beginning to be overcome.

Positive trend

The CEO of the entity commented that negative rates in Europe will continue to be a reality but internationally the climate is already changing. The uncertainties and the impact of risks, such as inflation or debt derived from the crisis, also pose challenges to the sector, as highlighted, but “in the short term the trend is positive; activity and consumption are returning, investment … ».

A similar thesis was maintained by José Antonio Álvarez, CEO of Santander Bank, who emphasized that the recovery is underway, and that what was feared at first has not been so virulent, in his opinion: employment have been lower than those of the consensus, and secondly, the price of assets has suffered less than anticipated, “he said, then adding that «If people and companies prosper, we will prosper. The opposite is not possible.

However, this does not mean that the situation is risk-free. In this sense, he mentioned that we have “guests such as inflation and the price of raw materials” that could last longer than expected. Precisely today the advanced CPI for September was known, which stands at 4%, the highest level in 13 years.

Imperfect competition

In times like the current ones of the explosion of digitization and the use of technology, the banking complaints about the competition posed by ‘fintech’ and the so-called ‘shadow banking’ are common. “The regulators underestimate the risks of these actors and overvalue the risks of the banks,” said Álvarez.

The manager pointed out that Santander is always open and likes competition in the financial sector, but rejects a “Asymmetric competition” which, in his opinion, is what they currently have. Thus, he indicated that they learn from the ‘fintech’, but that they need and want to play by the same rules.

Manuel Menéndez, CEO of Unicaja, a newly inaugurated position as someone who says in the new bank – he assures that everything is going well and they are meeting objectives – also spoke in terms of competition, but more among the traditional banking actors themselves. The competition is very efficient, which means that, according to Unicaja, “Let’s see prices that are not optimal”. “Either because they play to exclude other competitors or to maintain the client portfolio, in the short term, you are faced with prices that do not always cover the profitability-risk requirements. To face them we think that tackling the merger has implicit synergies that will allow us to face risks better together than separately, “he added.

Beyond pure traditional banking, the president of the National Securities Market Commission (CNMV), Rodrigo Buenaventura, left the classic discourse of economic recovery and the sector to launch a very clear alert. He made the opening speech of the forum, in which he warned that in recent months an “increase in fraudulent processes has been detected, ranging from the sale of products without adequate controls to an increase in pyramid scams linked to cryptocurrencies”; a small ‘boom’ that the stock market supervisor will try to put a stop to. Buenaventura, who also announced that the CNMV is working together with the Administration and different banking entities in a plan to alleviate these practices, recalled that this type of fraud “puts the prestige of the financial sector on alert”, which was precisely damaged after the last crisis.

The CNMV considers that phenomena such as low interest rates or high savings rates can constitute an “ideal breeding ground for unscrupulous offers to flourish”; in short, on some occasions scams carried out through the so-called ‘financial chiringuitos’, which do not stop proliferating.

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