But, especially, profitability. In fact, are not the doubts regarding the future profitability of the financial sector precisely the main argument behind its stock market penalization? This creates a vicious circle between uncertainty over future profitability and short-term punishment in the markets, thus bringing a future risk into present value. It also conditions it, limiting the sector’s room for maneuver should it require more capital. All of this may partly explain why markets are one of the threats to the sector considered by the Bank of Spain in its latest Financial Stability Report. Or was it perhaps referring to the risks derived from the possible overvaluation of other financial assets, such as fixed income? The same fixed income that forms part of banks’ balance sheets.
But above these two threats, markets and profitability, lies economic growth. Growth is key to the activity of banks as providers of financing and financial services. Although, is it not truly key for all of us? Its weakness is a risk for banks, when the banks themselves and their activity are the necessary condition for the economic recovery to strengthen. Unfortunately, the sufficient condition does not depend on them.
