Articles
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Bank valuations: Good news and bad news
10 April 2024
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.
Autores: Alberni, Marta, Berges, Ángel, Montesinos, Alejandro
Tags: Bank valuations
Looking beyond Spanish banks’ profitability
The Spanish banks reported sharp earnings growth in 2023, with the six largest banks recording over €26 billion in profits on aggregate, up 27% from 2022. This situation has prompted a deep dive into the issue in an attempt to understand the role these earnings play not only in the stability and growth of the financial institutions themselves but also in creating general economic wellbeing.
Autores: Carbó Valverde, Santiago, Rodríguez Fernández, Francisco
Tags: Bank profitability
Rental affordability in Spain: Trends and variations across regions
Residential rents have increased sharply over the past decade, with average household expenditure on rent increasing by 27.7% between 2015 and 2022- well above the growth in average household income – yet with notable differences across the Spanish regions. The rent control policies introduced in 2022 have kept growth in average spending on rent at 2.1% (compared to 11.2% in 2019), however, although there are no rigorous studies, some real estate portal reports suggest these policies have also led to an estimated reduction of 30% in the supply of rental housing.
Autores: Romero-Jordán, Desiderio
Tags: Rental market
Spain’s youth: Precarious employment and unaffordable housing
The fragility of the Spanish job market, characterised by a high incidence of temporary contracts and high structural unemployment, particularly impacting the Spanish youth, has led to an increased concentration of young people in major urban areas due to migration in search of work opportunities. However, less affordable housing in the cities is not only reducing the wealth of this age cohort but is accompanied by negative repercussions for society as a whole, which need to be addressed by public policies aimed to foster quality job creation, as well as affordable housing.
Autores: Asensio, Marina, Serrano, Javier
Tags: Youth employment
Growth in Spanish labour demand: Evidence from online job postings
Labour demand in Spain appears to have weathered the effects of the pandemic, as evidenced by sustained growth in job postings, despite a more significant initial drop in hiring compared to other countries in 2020. This, together with other trends, appears to support part of the recent acceleration in Spanish wage growth, underpinning a solid forecast for employment and GDP growth in 2024 relative to other advanced economies.
Autores: Adrjan, Pawel, Lydon, Reamonn
Tags: Labour demand
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