After a tough 2020 marked by provisions to face the crisis, Santander Bank faces the year of profit recovery with a firm commitment to risk control. Especially at a time when, according to its latest annual report, the group has accumulated some 125,600 million euros exposed to the most vulnerable sectors, 13% of its loan portfolio.
The objective for the coming months, common throughout the sector, is to prevent the expected wave of defaults or business bankruptcies from triggering delinquencies, overturning the tight control that the bank has had over this ratio thanks to measures such as deferrals or ERTE. In fact, and according to provisional data from the Bank of Spain, delinquency would have ended 2020 at 4.51%, its lowest level since April 2009.
Santander Bank lower the average with a 3.21% delinquency at the end of December, although in the case of its business in Spain the figure stood at 6.23%. But from the bank they have always defended the prudence with which they are managing this risk. And so it is also transmitted in that exposure of 125,600 million, as a group, to the sectors hardest hit by the pandemic.
Within the box of vulnerable sectors, Santander identifies industries such as the automotive industry, tourism (hotels, leisure, cruises and restaurants), transportation, oil and gas, food and construction (excludes real estate development). If only they are taken into account the sectors most affected in the short term (which the entity focuses on tourism, oil and gas, food and passenger transport) the bank’s exposure amounts to € 66.2 billion.
“This identification has proven to be consistent with similar analyzes carried out by the ECB, the Bank of Spain and rating agencies. We carry out detailed monitoring of these sectors and it is periodically reported to the senior management bodies of the group ”, indicates the bank in its latest annual report. In fact, all the Group’s subsidiaries must report periodically in executive committees and meetings on the evolution of the impact of the crisis on the portfolio.
The control is maximum. Especially at a time when banks must be especially careful when it comes to reclassify credits against possible risks of non-payment. In this sense, and analyzing sector by sector, Santander keeps this risk under control.
For example, total exposure to the automotive amounts to 34.6 billion euros. From that figure, 92.7% of the credit is classified as ‘stage 1’. That is, normal credit, without risk of default. 5.9% are in ‘stage 2’ (under special surveillance, but it does not have to become delinquent) and only 1.4% is classified as ‘stage 3’, where the unpaid are located.
The figures are better in oil and gas, with 20.9 billion euros, of which 97.7% are risk-free, 1.6% are in special surveillance and only 0.7% in ‘stage 3’. In passenger transportOf the 18,300 million euros of exposure, 88.5% do not present any risk, compared to 7.3% in special surveillance and 4.2% in ‘stage 3’.
Similar figures are used for the food sector, while the situation is somewhat more complex in the sectors most related to food. tourism (hotels, leisure, cruises and restaurants). In total, the group estimates its exposure to these companies at 17.7 billion euros. Of that figure, 74.4% is still classified as normal credit, without risk. But 18.3% are already classified as ‘stage 2’ and 7.3% are delinquent.
Confidence in management
Banco Santander, like the rest of the financial sector, trusts that European vaccines and funds will end up “unblocking” the economic recovery so necessary to return to pre-crisis benefits. For this reason, they have been requesting direct aid to these sectors for months.
But on the part of the entities, the work is also being arduous. In addition to last year’s credit rain and the application of moratoriums, the sector has strengthened its own internal control mechanisms in recent months.
Specifically, for Banco Santander the identification and quantification of expected losses, as well as the recovery management (a complete process that starts even before the default occurs and that covers all phases of the recovery cycle until its resolution), have been key for the entity to be able to manage the expected impact when the support measures are withdrawn.