José Ramón Iturriaga: Fears of slowdown

We have been talking about a possible economic slowdown for a few days. On the one hand, worse data has been gathered in some countries on the evolution of the epidemic – mainly contagions – and the rises in prices of raw materials as a result of bottlenecks after the economic reopening.

We have enough information to consider the debate on the future economic impact of the epidemic over. The countries in which vaccination is more advanced – and Spain is a very good example – the data on the evolution of hospital incidence and deaths shows that it is already a problem for the economy. No new restrictions will be necessary because the efficacy of the vaccine in controlling

of the incidence is more than demonstrated. Even in countries where vaccination lags behind – and perhaps the United States in this case is the best example – and infections are still high, the fact that the vulnerable population is vaccinated has substantially reduced the incidence of hospital and disease. deaths. Today in the United States the mortality rate among the vaccinated population is lower than that of, for example, the flu, much lower than that of cancer and comparable to that of car accidents. In addition, last week we learned that the third dose of Pfizer administered six months later is very effective in increasing the protection of the vulnerable population. Therefore and although the headlines do not accompany, the covid is exceeded for the markets.

And on the other hand, the current situation of raw materials is not comparable to the 1970s. One thing is what has risen in percentage and quite another where is the price of, for example, oil in absolute terms. Without going any further, oil in the last ten years has been practically zero and above 100 dollars without seriously impacting the economy. It should be remembered that a little over a year ago oil – one of the maturities of West Texas – for different reasons came to trade negative. That is one of the main reasons why in the year it accumulates the increase that it has taken.

The logical thing is that the market ends up adapting and that the supply problems that have occurred after the economic blackout will be solved. There is no problem of shortage of raw materials. Not even the producing countries have an interest in taking this situation anywhere.

As has happened with other raw materials, prices will not take long to adjust. What is really worrying would be that after what we have experienced in recent months, the “animal spirits” have been affected and companies and consumers have had their arms shrunk. It is not the case. In fact, part of the problem has been the speed and strength of the recovery in demand. The offer will be adjusted.

The future of banks

Banks in recent years have been through the perfect storm. Since the financial crisis of 2008, they have basically been managing misery. First, the Lehman bankruptcy that swept away the world financial system; later, and that was more ours, the bursting of the real estate bubble with the consequent hole in the balance of the Spanish banking system that ended up carrying half of the system, which were basically the savings banks; The euro crisis that logically affected everything, but even more so to the banks because they are, among others, the large holders of public debt; and we could continue with Brexit, populisms with the end of the pandemic fireworks that, as we are already seeing, the consequences have been much less than expected.

Once we can consider the pandemic over as far as the economic impact is concerned, everything indicates that the worst is clearly behind and that in particular the banks are the entities that benefit the most from what it looks like to be the central scenario for the next few years: growth with some inflation. Economic growth, like all companies exposed to the cycle, is very good for the bank’s income statement. Specifically, more activity logically translates into more income – more mortgages and more commissions – and less arrears. And the rebound in prices too, because the balance is reprized. Most of the bank’s assets are linked to the evolution of interest rates and although central banks are deliberately – and in my right opinion – going behind the curve – it is going to move upwards, dragging also at twelve months. In addition, the slope in the yield curve makes it much easier for the bank to earn money in managing its treasury. And last but not least, banks also benefit at first from the rise in interest rates on liabilities – customer deposits – because they are not passed on to customers in an integrated manner with what that implies. .

This being the case, and taking into account the very attractive valuations at which banks are still trading even though they have recovered part of the fall from lows, banks should continue to do well on the stock market. A first flying goal could be the level at which US retail banks or retailers are, which are highly assimilable. Today they are trading at twice the multiple of Europeans – this, as Josep Prats has explained to you, is not something exclusive to Spanish banks. The drivers are already working and now it’s time to get carried away.

Looking further ahead, it would be necessary to assess the risks of technological disruption that are undoubtedly there. However, unlike other industries, the strong regulation of the sector works in its favor and makes it less attractive to outside players. So far we have seen how banks have been adapting to technological changes and incorporating those fintech companies that have contributed something to their value chains.


The update that Minister Escrivá makes on the evolution of employment in the middle of the month always goes unnoticed. The evolution of social security affiliation with the detail with which it is known -type of activity, province,… .- added to the evolution of the number of people under the umbrella of the temporary employment protection scheme provides very valuable information that then each one can interpret as they want. But however we want to read it, there is little doubt that it is probably the best thermometer on economic evolution.

With the data that we learned a week ago, the number of social security affiliates is clearly above pre-pandemic levels, even taking into account the people who are still under the ERTE. In fact, as the minister commented, there has been some daily reading in recent weeks that has set a historical record above 19,700,000 people contributing to social security. The photo is completed by the evolution of the number of workers at ERTE, which continues to decline

Everything indicates that the growth data for the third quarter will be very good. This does not mean that the Spanish economy does not have problems. Nor that it is not going to be one of the economies that later to return to the starting box although this return is at a speed never seen before. This is a photo of the current situation in which several things add up. Economic reopening, high propensity to consume due to the desire to make up for lost time, monetary and fiscal policies to everything they give,…. Beyond what we cannot control – the evolution of the epidemic or the price of oil, to mention two – future growth also depends on what the government can do (or not do). It is very important that the perception of regulatory risk is reduced. The skidding of recent weeks – electricity and housing – does not constitute a good precedent. Let’s see what happens with the detail of the labor reform that we will not take long to know. You have to remember what it costs to win but how quickly you lose, the reputation I mean. And trust is a very valuable intangible that makes the difference in how the trust of consumers and companies can evolve in the future.


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