The Bank of Spain urges banks to bolster capital after the distribution of mass dividends | Financial markets | EUROtoday

The Bank of Spain has requested banks to bolster their capital ranges. The supervisor has warned in his Financial stability report That in recent times the Spanish entities have taken benefit of the robust enhance in the advantages to remunerate their shareholders via the cost of rising dividends and repurchases of mass actions, however haven’t devoted a lot capital to bolster solvency ranges.

“We do not see that the payment of dividends is generating a problem for financial stability, but somehow it detracts the capacity to accumulate resources to face risk situations. With the right levels of profitability and with a situation of uncertainty it is an adequate time to make an effort and reinforce that solvency,” stated Daniel Pérez Cid, normal director of economic stability, regulation and backbone of the Bank of Spain, throughout the presentation of the report.

The report highlights that Spanish banks are in a power place to withstand a disaster, however keep in mind that they’re nonetheless removed from European comparable banks relating to the mattress of cash they’ve collected to cope with potential turbulence. “The capital ratio of Spanish banks is lower than that of the rest of the main European banking systems, while the leverage ratio is at a comparable level,” says the report.

According to the info of the Bank of Spain, the CET1 ratio, which measures the best high quality capital on threat weighted property, elevated by 2024 from 13.2% to 13.5%. In comparability, the banks of Germany, France, Italy or Netherlands exceed 16%.

Of course, the supervisor additionally emphasizes that the rise in funds to shareholders has contributed to growing the enticing inventory market of banks for buyers. The report signifies that Spanish and Italian banks are those who quote extra capitalization with respect to their guide worth, whereas the French and Germans proceed beneath. In addition, the Spanish financial institution leads when it comes to profitability: in 2024, the ROE (return on capital) stood at 14.1%, after rising 170 fundamental factors, the best stage of the final decade.

Housing overvaluation

On the opposite hand, the Bank of Spain confirms in its report a “moderate overvaluation” within the value of housing in Spain. According to supervisor information, 367,000 housing sale operations have been signed within the second semester, 2.3% greater than within the first semester and 16.6% greater than in the identical 2023 interval although the value has risen 11%.

“The price of housing has continued to press up, in a context of vigorous demand and a relatively rigid supply. By segments, the price of new housing continued showing a more intense revaluation, with an advance of 11% year -on -year in the second semester of 2024, its greatest rise since 2007,” the report factors out. “What we are observing is that prices are somewhat above their equilibrium value. The signs of overvaluation are moderate,” added Pérez Cid.

The report attributes market dynamism to the web creation of 180,000 properties and the autumn in financing prices, after the sort cuts of the European Central Bank. The provide, then again, has reacted slowly. “In real terms, the price of housing was at the end of 2024 11.5% above its level prior to the pandemic, in values ​​similar to those of 2004, but still 22% below the historical maximum reached before the global financial crisis,” displays the doc.

Of course, the Bank of Spain factors out that the factors for granting banks have remained strict to forestall properties from assuming extra debt than they will. The ratio loan-to worthwhich signifies the share of the housing that banks finance, it displays that Mortgages are granted on common for 70% of the worth of the home and solely in 12% of the operations greater than 80% of its worth has been granted. These are extra contained ranges than in different European nations.