José Ramón Iturriaga: Santander
In recent days, Banco Santander has given a twist to its forecasts for next year. And perhaps more important than what he has said has been precisely what he has not mentioned.
From this one is leaving or is leaving with less delinquency than expected with what that means for the income statement. Greater cost savings, which lays the groundwork for what they explained to us in college when income recovers and costs not only do not rise but fall: operating leverage. They also gave the first indications that ICO credits do not look bad either, which in the case of Santander is
especially important because it has been one of the banks that has used them the most. In short, it points to returns of 12% when it is trading below 0.7 times the book value, which is the polite way of saying it is trading at 0.6.
With the indications given by the Cantabrian bank, next year it will earn about nine billion euros. This may seem like a lot, little or regular, but what you have to do is put it in context with what it is worth on the stock market: less (a lot) than fifty billion.
At this stage of the game, paying a little more than five times the benefits of next year is a very good example of the market's slowdown. More if we take into account that the wind blows tail and that except for a great catastrophe it will continue to blow in the coming times.
Different responses from central banks
Last week was a big week for central banks. They had a different but probably correct answer. The Anglo-Saxons giving signs of the end of the cycle with regard to the ultra-expansive monetary policies of recent years with surprise included by the Bank of England that against all expectations and with the covers taken by the last wave, the reference rate rose testimonially . The Federal Reserve, for its part, also toughened up the discourse and, in addition to setting a date for the end of bond purchases in the market, raised expectations of increases for next year to three.
The European Central Bank (ECB) maintained the most cautious tone and made it clear from its president that we do not expect increases next year.
There are reasons that justify this divergence of monetary policies. Core inflation is practically double in the United States than in Europe. And that's how the market understood it. When interest rate hikes are for the right reasons, well anticipated, and the starting point so extraordinarily low, the consequences are none.
Perhaps a message was missed to those who have now raised the flag of inflation and dare to blame them that they are not doing their duty.
The reasons behind the price increases –in addition to short-term events– cannot be tackled with conventional monetary policy measures. Bottlenecks or base effects will not be solved because interest rates rise faster.
Central banks have been, and continue to be, at the height of difficult economic circumstances and, as we said last week, we need to let them work.
Days go by and the news is encouraging
One more week of South African variant and although it may seem that things are very bad because of how the information is treated, the news of the last few days if not directly good if they are encouraging.
Despite being more contagious, the worst predictions of a few days ago regarding the speed of spread have not come true. Omicron's doubling range has not been placed in two days but has remained above three and also in South Africa there are indications that in some provinces it could have peaked.
Also, and this is the most important thing, it is confirmed that this mutation is less severe. The risk of hospitalization and death is significantly lower. It is still difficult to quantify it but the increase in hospital incidence is significantly lower than previous waves. The lower severity added to the greater immunity substantially reduces the risk to the health system.
In addition, in recent days it has been known that Pfizer's antiviral treatment, which is about to be approved, maintains all its effectiveness with the new variant. And that the third dose of Pfizer or Moderna works without the need for an ad hoc booster.
Thus, and taking into account how the third puncture has accelerated in recent days in developed countries, we can anticipate that this latest wave should be seen and unseen. The speed at which it has burst into our life is going to be the same at which it comes out.
Without a doubt, the precautionary principle is very important. Vaccinations, Covid passport, tests, and common sense. Now it is worth not forgetting proportionality, especially if we take into account the information we already have. In the coming days, infections will continue to increase in Spain and many will participate or directly encourage collective psychosis. Today with more and better knowledge of the facts than a week ago, there are no reasons to get carried away. Some will pretend they do and then try to score a goal.
Others who do not know if they go up or down, in that permanent stake in which it is installed, will again put the cry in the sky with the same result that until now, which is basically disconcerting its parish. And most of us will breathe a sigh of relief when what the data points out is confirmed. And I don't think I have any win to play with the emotions of the staff with the trallla that we carry.
