Milan, 07/23/2024 – From 2021 to 2023 the top three Italian banks (Intesa Sanpaolo, Unicredit and Banco BPM) excel in an increase in market capitalization equal to +25.0%, compared to their British counterparts (-0.2 %, HSBC, Barclays, Lloyds Bank), German (-0.5%, Deutsche Bank, Commerzbank, DZ Bank), French (-7.6%, BNP Paribas, Crédit Agricole, Societe Generale) and US (-11, 3%, J.P. Morgan, Bank of America, Citigroup). The Spanish companies also stand out positively (+30.1%, Santander, BBVA, CaixaBank). The increase in profits (by 15.6 pps) but also the recovery of expectations (by 9.4 pps) contributed to driving the performance of the Italian companies. This is supported by research by Excellence Consulting.

The work of the italian consultancy firm, entitled “Determinants of market capitalization in the international banking sector”, analyzes the capitalization of the main European and Anglo-Saxon banks in light of the dynamics of rates, which remained at very low levels until 2022 (with the refinancing rate main since March 2016 equal to zero), then rose sharply from July 2022 to curb inflation and remain at high levels (4.25% in June 2024, source: ECB). American rates also followed a similar trend: after remaining at very low levels for a long period (0.25% federal funds rate from December 2008 to December 2015), they normalized slightly between 2016 and 2020, and then rise rapidly from 0.25% in March 2022 up to 5.50% in June 2024 (source: Fed).

This expansion of rates has generated greater profitability for banks, especially where they have increased their interest margin. Only the top three Italian banks (Intesa Sanpaolo, Unicredit and Banco BPM) will see their profits inflate from 2021 to 2023 (from 6.3 to 18.5 billion euros, +194%). As regards foreign companies, again from 2021 to 2023, the profits of the British (HSBC, Barclays, Lloyds Bank) and the Germans (Deutsche Bank, Commerzbank, DZ Bank) respectively rise from 32.2 to 40.4 billion pounds (+ 25%) and from 5.5 to 9.5 billion euros (+72%). The profits of the French (BNP Paribas, Crédit Agricole, Societe Generale) and the Americans (J.P. Morgan, Bank of America, Citigroup) are reduced, respectively from 21.0 to 19.8 billion euros (-6%) and from 102, 3 to 84.1 billion dollars (-18%). The profit of the Spanish companies (Santander, BBVA, CaixaBank) shows a plus sign: from 18.0 to 23.9 billion euros (+33%).

The object of the analysis was to break down the determinants of the increase in capitalization to verify how much of it is actually due to the rise in profits and how much is instead due to an improvement in the banks’ growth expectations estimated by the market. For Italian banks, the increase in capitalisation, equal to +25.0%, derives 15.6% from the rise in profits, but also 9.4% from growth expectations. Instead, the reduction in capitalization depends, respectively, on the increase in profits and reduction in expectations, for the British banks (equal to -0.2%), 3.6% and -3.8%, for the German ones ( -0.5%) for 7.2% and -7.7%, for the French (equal to -7.6%) for -0.8% and -6.8%, for the Americans (equal to -11.3%) for -1.9% and -9.4%. The increase in the capitalization of the Spanish companies was positive, equal to +30.1%, due 5.6% to the increase in profits and 24.5% to that of growth expectations.

“Our analysis – explains Maurizio Primanni, CEO of Excellence Consulting – demonstrates that the increase in the market capitalization of the main Italian banks – as is the case of the Spanish ones and not the British, German, French and US ones – is due not only, at least to 50%, to the profit produced, to the ability, i.e. to generate profitability, activity, linked to the trend of interest rates, in which our banks stand out, but also largely to the effects of expectations. It is as if the market said to the banks: “I increase your capitalization because you have earned with rates, but I expect you to invest in different options, in innovation of business models and evolution of employee behavior.”