Large banks and major Spanish electricity companies posted a combined profit of 25,586 million through September, up 29.9% from the same period in 2021. The figure includes the six largest banks in Spain: CaixaBank, Banco Santander, BBVA, Banco Sabadell, and Bankinter. In addition, Unicaja and key energy firms such as Endesa, Cepsa, and Iberdrola contributed to a total profit of 16,014 million, with these energy players reaching 9,572 million in the first nine months of the year, a 52% rise over the prior year. These numbers reflect a robust performance across both sectors during the period. This combined result underscores the dominant role of financial services and energy in the Spanish market for the year’s first three quarters, as reported by market analysts and industry observers.
With a looming recession and high inflation, energy companies have benefited from elevated energy prices, a trend driven in part by the war in Ukraine. Analysts note that rising raw material costs are being passed on to consumers, sustaining revenue growth for these firms. A XTB analyst remarked that revenues have expanded sharply due to supply-side dynamics and price pass-through, while the banking sector has seen higher profits as central banks raise interest rates, boosting traditional lending margins. These conditions help explain the strong results observed in both sectors.
As conditions tighten for households due to higher living costs, the government has signaled support measures targeting these two sectors through new special taxes aimed at broader revenue needs. In addition to temporary levies, authorities have increased taxes on large fortunes as a response to the crisis. The treasury’s target is to raise 7,000 million over the next two years, with the banking tax anticipated to raise up to 3,000 million from 2022 to 2023. The tax would apply at a rate of 4.8% on the interest margins and commissions earned by financial institutions. This proposal has sparked debate among policymakers and economists about its potential impact on competition and consumer costs.
However, the European Central Bank has opposed the tax, arguing that it could distort competition and raise costs for customers, though it clarified that the ECB’s opinion is non-binding and that only technical issues would be reconsidered by the ministry. The Ministry of Finance in Spain has noted this distinction, signaling that the ECB’s position will not derail planning for the measure. This exchange highlights the complexity of aligning tax policy with European oversight while pursuing fiscal aims.
Fedea, the Foundation for the Study of Applied Economics, expressed skepticism about the new taxes in a recent report. Its analysts called the measures highly questionable and suggested they carry a strong ideological charge with electoral motivations. They urged that the priority should be an income-focused agreement rather than patchwork taxes on specific sectors or regions. In the medium and long term, Fedea advocated for a careful, well-designed tax reform rather than targeted levies that could complicate the business environment. Ángel de la Fuente, the foundation’s director, emphasized the need for a balanced approach to tax policy.
The think tank also cautioned that the proposed tax bill on banks and energy companies could have broader consequences if applied in an arbitrary fashion and risked running afoul of the rule of law. It urged policymakers to pursue measures that enhance long-term stability and fairness rather than short-term fixes for political reasons.
Dividends and Shareholder Returns
The banking sector and energy companies continue to be the year’s leading performers, with ongoing emphasis on shareholder remunerations. After the results were announced, Repsol announced an 11% dividend increase, totaling 0.70 euros per share for 2023, following a nine-month profit of 3,222 million euros. Analysts noted that energy firms recognize the importance of attracting investors through attractive dividend policies, a point emphasized by market observers. The focus on shareholder returns explains why many energy firms and banks are signaling higher distributions in the near term.
Banco Santander has maintained a policy of distributing around 40% of profits as cash dividends, with a portion allocated to potential share buybacks. BBVA has targeted a payout range of 40% to 50%. Given the nine-month performance that surpassed 2021 results, top executives have indicated a strong likelihood of substantial dividends for 2022 and beyond. CaixaBank plans to allocate 50% to 60% of profits to shareholders, aligning with its strategic plan that envisions 9,000 million in shareholder rewards over the next three years. Banco Sabadell has raised its payout from 31.8% to 40%, and Bankinter again commits to distributing 50% of profits as cash dividends. These dividend announcements reflect a broader market trend of prioritizing returns to investors as profits grow.
Overall, the year’s leadership by banks and energy companies is translating into higher dividends and notable investor appeal, even as policymakers debate the best approach to taxation and economic resilience.
Related news