The European Central Bank (ECB) is already seeing a sharp economic slowdown in the Eurozone and, in an attempt to compensate for it, has decided to make a break on its way towards the normalization of monetary policy. The unanimous decision of the government council of the agency of further delay the rise in interest rates, at 0% for three years, and inject more cheap liquidity to the financial system It gives an idea of the pessimism about economic evolution and, as a secondary effect, complicates even more the recovery of profitability of financial institutions. That is why the value of shares on the stock market of European banks have been dropped after hearing the announcement of Mario Draghi.
The two big banks in Germany, a country whose economy has suddenly slowed down and explains part of the economic slowdown in the euro zone, Deutsche Bank Y Commerzbank, fall in the afternoon by 5.5% and 4.8% respectively. In Italy, whose economy has entered directly into recession, its main financial entities –Unicredit, Intesa Sanpaolo– fall around 3%. The tonic is the same among French banks: the actions of the giant BNP Paribas fall 3.8% and those of Crédit Agricole 3.3%. In Spain, the collapse is also widespread. The Sabadell is the busiest at this time with a fall of 7.65%, ahead of Bankia (6.15%), the Santander (4.11%), Caixabank (3.86%), BBVA (3.50%), Unicaja (3.32%), Bankinter (2.79%) and Liberbank (1.79%).
The maintenance of interest rates at 0% and the ease of deposits at -0.4%, so that entities have a hard time keeping their liquidity at the central bank, is a monetary policy that is disastrous for the income statement of the banks, especially for those dedicated to the retail business. With the rates at that level, the financial entities obtain a reduced margin for the granting of the credit, and especially of the mortgages at interest rates linked to the Euribor.
This has been reflected in a very crystalline way in the Spanish banks' results account of recent years, where the interest margin -difference among those who charge to give credit and what they pay for deposits- of the entities has been going or has hardly credited exercise after exercise. In fact, the entities trusted that this year the ECB would raise the rates and that would allow to improve its business margins. Now, they will have to wait at least half a year longer than expected.