Banking profitability and social impact

CECA's banks and savings banks have farewelled 2022 with good results. Contrary to public opinion, these are not so much due to the interest rate hike by the European Central Bank, the impact of which was only reflected in the banking business during the last months of the year, but rather to the strong performance of demand for credit (up 33%) and to the greater efficiency of our banks, which is above the European average. These are not windfall profits.

These sound figures conceal, however, a profitability which, although recovering, needs to improve further in order to position itself, in general terms, above the cost of capital and also on a par with the profitability of publicly traded non-financial companies.

Despite this dual reality, the headlines have focused on the magnitude of these profits, leading to a public controversy that has often ignored the close and differential link between the profits of financial institutions and their social contribution.

With regard to CECA's banks, this link is articulated, firstly, through the Obra Social, the true founding hallmark of our members, which today is implemented by the banking foundations thanks to the dividends they receive from their shareholdings in the capital of our banks. This has meant that since 2014, with an investment of €6,170 million and 253 million beneficiaries in aggregate terms, Obra Social has repeatedly become the largest private social investor in our country, acting as an essential complement to the welfare state.

Secondly, bank profits flow back to society through taxation and redistribution in the form of public transfers. Here, too, the contribution of the banking sector is differential, with a higher corporate tax rate of 30%, in addition to sector-specific levies. This tax peculiarity explains why the tax contribution of CECA's entities stood at 48.8% in 2021. In other words, for every €100 of profit, €48.8 was spent on tax payments. In view of the improved results announced, forecasts point to an even higher contribution in 2022. Moreover, when compared to other European banks, Spanish banks pay the most taxes, together with French banks, at a distance from German and Italian banks. This figure does not include the recent bank levy and, therefore, this differential is likely to widen further, as there is no similar tax in other neighbouring jurisdictions.

Finally, bank profits not earmarked for tax and dividend payments also generate a social return, by strengthening capital, an essential condition for increasing the lending capacity of banks. This is essential for a sector that differentiates itself because it generates a dual impact on our society: as any economic agent, through its corporate activity, and, specifically, as a catalyst of the economy, through the financing granted. This explains why, in the last financial year, the social impact of CECA's entities totalled €178,000 million, equivalent to 16% of GDP, and 3 million jobs, 15% of the active population.

In view of the foregoing, it seems clear that the profits generated by financial institutions are both desirable and necessary. Perhaps, taking on board this observation will contribute to counteracting the habit firmly rooted in our collective imagination of groundlessly stigmatising corporate profits, in general, and those of banks, in particular.