The ruling of the Supreme Court known today on the payment of mortgage taxes is causing sharp stock market declines in banking. CaixaBank and Sabadell suffered falls of over 7% and Bankinter of 6%, while Bankia lost another 4%. All the securities listed flat or with slight increases before the news, shortly after 11 am.
Today's declines are the case of Caixabank, Bankia and Bankinter, the most intense since Brexit and much higher than the losses with which the sector reacted in December 2016 to the unfavorable ruling of the European Court on land clauses. The losses of the Spanish banking are in the day today the biggest ones with difference between European banks.
The judgment establishes that the banks must assume the payment of the tax of legal acts documented in the constitution of the mortgages. The tax can be between 0.5% and 2% on the amount of the loan, depending on what is approved by each Autonomous Community. That is, for a house of 100,000 euros can be between 500 and 2,000 euros.
The ruling annuls an article of the tax regulation that established that the borrower is the taxpayer because it is contrary to the law, and opens a new judicial front for the sector. The mortgage portfolio has a decisive weight in the balance sheet of Spanish banks and this unfavorable ruling implies an additional expense at a time when interest rates will still take to rise.
Spaniards have paid close to 26,000 million euros in mortgage expenses for two decades, according to data compiled by the analysis house Kepler Cheuvreux, which points out that the return in game can range between 6,500 and 9,000 million euros, which adding interest and costs could add between 12,000 and 18,000 million. The most affected entities, according to Kepler, would be CaixaBank, which could have to pay about 4,100 million, followed by BBVA, with 2,900 million at stake, or the nationalized Bankia, which risks a payment of 2,600 million.
"As a general rule, the impacts that litigation could have on Spanish banks have been underestimated in recent years, and the risk of an event similar to what happened in the case of the floor clauses is not ruled out and we must analyze it" , Mirabaud warned almost a year ago in a report about the rulings that were being heard in the courts on claims in the payment of the tax of documented legal acts.
The sector is especially sensitive to the ruling since the mortgage activity is key in its business. In fact, the price of the banks is awaiting a signal from the ECB that will start a rise in the yields of the debt and the mortgage euribor, to which 90% of the mortgage stock is referenced.
Only then, with the revision of mortgages at higher interest rates, Spanish banks will begin to recover business margin and profitability. The rise in reference rates is not expected, however, until at least the summer of 2019. Today's sentence of the Supreme Court is therefore a new setback for the sector, which lives low hours on the Stock Exchange and has already accused in December 2016 the unfavorable judgment of the European Court on ground clauses.