June 16, 2021

Goldman Sachs raises the cost for banking up to 44,000 million if the EU justice annuls the IRPH | Economy

Goldman Sachs raises the cost for banking up to 44,000 million if the EU justice annuls the IRPH | Economy

Goldman Sachs raises to a fork between 7,000 and 44,000 million euros the potential impact for Spanish banks before taxes if the Court of Luxembourg decides against the mortgage IRPH.

The Court of Justice of the European Union (CJEU) is currently reviewing the indicator used as an alternative to the Euribor in some operations after the European Commission amended the Supreme Court's 2017 verdict in favor of the bank, arguing that it could violate Community legislation considering that it offers no guarantee of transparency and can be abusive.

The investment bank warned in a report published on Tuesday, that this situation is latent when the Bank of Spain has warned in recent weeks that it perceives as "low" the capital position of Spanish entities and he has been summoned to "strengthen it", after also considering as "relevant" the legal risks to mortgages.

Among them, it goes beyond the IRPH and recalls the controversial tax of documented legal acts that the Government has decided to impute to the banks from now on even though the Supreme Court concluded that the client should continue paying it.

The executive himself estimated the cost at 5,000 million if the courts determined that the financial entity should assume it with a retroactivity of four years, he recalls. In addition, judicial hot spots would remain in relation to other litigation such as land clauses, early amortization, the costs of formalizing the loans or in multi-currency mortgages.

The figures indicated are extrapolations for the financial sector as a whole, and from that amount it estimates between 5,000 and 29,000 million the potential impact for the banks it covers (Santander, Caixabank, BBVA, Sabadell, Bankia, Bankinter and Unicaja).

An impact that could dilute the capital of these seven financial entities listed in a range of between 24 and 152 basis points. In view of this contingency, the investment bank has reduced its neutral recommendation to sell in Caixabank, with a target price of 3.5 euros per share, 4% lower than the one it had previously estimated, given its greater mortgage exposure in the portfolio .

A Santander and Unicaja, in contrast, has a revaluation path of 41 and 50%, respectively. Goldman Sachs sees the IRPH as a "tail risk that could have important implications" for the hedging of securities if it is ultimately unfavorable for banks.

In his report he recalls that the European Commission has already considered that all the problems of "bad sales" related to mortgages involving Spanish banks (land clauses, multi-currency mortgages, IRPH, etc.) create "a serious problem with legal security and systemic risk "


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