Montesinos, Alejandro

Bank margins: Price, volume and composition effects - Spain in a European context

Two years since the start of the rate hiking cycle, various factors have shaped the trend in margins, with some clearly positive while others less favourable, raising doubts over the sustainability of current margins. A disaggregation of the rate, volume and funding reconfiguration effects helps to explain the incremental growth in the Spanish banks’ net interest margin relative to their European counterparts.

Read More

Bank valuations: Good news and bad news

Positive earnings performance and lower cost of equity have led the European banks to outperform the general stock indices for the last two years; nevertheless, they have yet to close the gap between their market value and book value, despite the fact that their return on equity (ROE) is back above 10%, the threshold traditionally deemed necessary to close the valuation gap. While the inability to close this gap appears to lie with the fact that the cost of equity (CoE) required of the banks has increased above the conventionally assumed threshold of 10%, the discount at which the European and Spanish banks are currently trading seems excessive.

Read More

Think tank dedicado a la investigación económica y social

C/ Caballero de Gracia, 28 | 28013 Madrid, España
+34 91 596 57 18 |
Send this to a friend