The de-escalation of the Euribor is taking a long time to come, but it is beginning to be subtly noticeable in the pockets of the mortgaged. The reference index for the vast majority of variable rate mortgages in Spain has fallen slightly in April to 3.703%. Although the decrease is just over one hundredth compared to the previous month, this first drop after two consecutive increases has been enough to surpass the levels at which the indicator was a year ago, which represents the first reduction in the monthly quotas for mortgages with annual review from the end of 2021.

Although it remains above 3.7%, the Euribor has fallen slightly in April compared to the average of 3.718% at which it closed in March. Despite the decrease, the indicator is still above the level at which 2024 started, recording an average of 3.609% in January, its lowest level in almost a year. This behavior at the beginning of the year invited confirmation of the long-awaited de-escalation of the Euribor, which exceeded 4% for much of the second half of 2023. However, the increases recorded in February and March frustrated this trend, which could now recover.

Although the ups and downs in recent months have been very subtle and the indicator is stuck at around 3.7%, the decrease in April has caused the Euribor to fall below the rate in the Eurozone for the first time in more than two years. which was located a year earlier. In April 2023, the index closed at an average of 3.757%, half a tenth above the data known this Tuesday. This year-on-year drop will allow mortgages with annual review that are updated with the April data to register the first reduction in their installments since 2021, although the respite will be very small.. “The first drops in mortgages with annual review have arrived in April not so much because of a sharp drop in the Euribor, but because the indicator is already beginning to be compared with the figures from the spring of 2023, when a very pronounced upward path began,” explains Estefanía González, spokesperson for the comparator Kelisto.es.

For example, a person who took out an average variable mortgage of 150,000 euros for 30 years in April 2021, with a differential of 0.99% over the Euribor, will barely notice a reduction in their monthly payment of about 4.38 euros.. This slight decrease contrasts with the increases of the two previous years in which this average fee went from 448.98 euros in April 2021 with a Euribor at -0.487% to 481.55 euros per month after the 2022 review – when the indicator entered positive territory for the first time since February 2016 – and rose again the following year to 759.36 euros per month, almost 300 euros more than at the beginning. These amounts are doubled in the case of a mortgage of 300,000 euros under the same conditions.. The decrease with the April 2024 data would be just 8.76 euros per month, going from paying 1,518.73 euros in 2023 to 1,509.97 euros per month, still 612 euros more than in 2021.

“The reduction in price that we see this month in the installments of variable mortgages due to the stabilization of the Euribor is very slight and does not compensate for the increases in prices that mortgage holders have suffered in the last two years,” confirms Simone Colombelli, director of Mortgages at iAhorro, if He clarifies that this first relief is “good news for citizens and for the mortgage market in general, which is beginning to recover.”

The reduction is more pronounced in the case of mortgages with semi-annual review, since the drop in the indicator is steeper compared to the 4.160% registered six months earlier, in October 2023, when it reached its highest threshold in thirteen years.. In the case of a loan of 150,000 euros, the update with the data from April 2024 will reduce the average payment by 39.18 euros to 747.62 euros per month. If the total amount of the loan were 300,000 euros, the reduction would double and the amount would be 1,573.59 euros per month, compared to the 1,495.24 euros paid in the previous semester.

In any case, the forecasts indicate that these first declines will continue in the coming months, in which the European Central Bank (ECB) is expected to change the course of monetary policy in the eurozone. “If the ECB lowers official interest rates after its June meeting, we could begin to see more drops in the average monthly Euribor data and also some rate cuts in banks' commercial offers on mortgages,” Colombelli predicts.. “As the rate drop will not be very pronounced, we do not believe that the situation will immediately take a radical turn; the outlook will be more positive but not very different from the current one,” he clarifies.

BBVA confirmed on Tuesday its interest in initiating new negotiations with the Bank of Sabadell to explore the possibility of a merger between the two entities, according to the National Market Commission. BBVA has appointed advisors for this purpose, while Sabadell’s board of directors will analyze the proposals. BBVA is said to have hired JP Morgan and UBS to evaluate a possible total stock offer. The news of the potential merger caused a rise in Sabadell shares and a drop in BBVA shares.

This would be the second official attempt at a merger between the two banks. In November 2020, they announced negotiations but later broke ties. The current situation has changed, with improved margins, reduced costs, and a profitable British subsidiary for Sabadell. The merger could create one of the largest banking mergers in Europe, forming a true banking giant with combined assets of 1,037 billion and a market value close to Santander.

However, mergers often result in layoffs and office closures due to duplicated services. It is estimated that about 4,000 employees could be affected in this potential merger. The announcement also comes after the six main Spanish banks reported a joint profit of 6,566 million euros in the first quarter of the year, a 15.3% increase compared to the same period last year. Santander, BBVA, and CaixaBank were the top performers.

The public coffers have made money with the inflation of recent years, especially with personal income tax. The Bank of Spain estimates that not deflating this tax – that is, not adapting the amount of its rates or its tax benefits to inflation – has allowed the Treasury to collect 11,000 million euros more since the pandemic than it would have achieved if it had adapted the tribute to the rise in prices.

This follows from an analysis published by the Bank of Spain this Tuesday within the framework of its annual report.. A document in which the banking supervisor reviews the main events that have surrounded the Spanish economy in 2023 and the structural challenges facing the country.

The deflation (or not) of personal income tax has become a cause of dispute between the Government and the opposition. The PP has championed this measure and the communities it governs have applied tax deflations (something that some regional governments in the hands of the PSOE have also done). On the other hand, the central Executive has rejected this measure on different occasions, considering that it mainly benefits high incomes.. The Government also defends that it has already reduced the tax on low incomes through the reduction for income from work.

According to the supervisor's work, between 2019 and 2023, personal income tax collection increased by 38,000 million euros. Of them, 26,000 million are explained by the widening of the tax base. This is, because there are more people working or obtaining other types of income and because the income they obtain has increased.. However, a non-negligible amount of this gain (11 billion, 29% of the increase) is explained by the so-called “cold progressiveness”. That is, the non-deflation of the tax elements.

If we measure personal income tax revenue over GDP – a metric that allows us to know how much is obtained from this tax compared to what the economy produces – the Bank of Spain estimates that half of the increase in collection is due to non-deflation. Revenue from this tax has gone from 6.9% of GDP in 2019 to 8.5% in 2023. In fact, if the trend continues, they could reach 9% in 2024 if rates are not adapted.

The non-deflation of the rate has meant that the average rate paid by taxpayers (that is, the percentage of their income that will be paid personal income tax) has increased. Specifically, this percentage has gone from 12.8% in 2019 to 14.7% last year. Of this increase, the supervisor maintains, 70% is the fault of the non-deflation of the tax.

The middle classes, the most affected

The Bank of Spain explains that, in general, for every 1% that a taxpayer's income increases (whether due to a salary increase, earnings from savings, rent, home sale…), the fee they have to pay increases. 1.85%. For example, for a taxpayer with an income of 33,700 euros, these percentages translate into an increase in income of 337 euros resulting in an increase in the amount payable of 101 euros.

However, cold progression does not affect everyone equally.. The effects are especially focused on taxpayers with “average” incomes. Taxpayers with income between 16. 385 and 19,873 euros are the ones that notice it the most. For every 1% that their income increases, the fee to pay increases by 10%. In the case of filers with income between 19,873 and 23,988 euros, the relationship is four to one. The effect of cold progressivity is often diluted as income increases. However, the 30% of taxpayers who earn the least income (that is, income of up to 16,385 euros) are not affected by no deflation.

Cold progressivity affects in two different ways. Firstly, if the amounts that delimit tax benefits such as reductions in the tax base or tax deductions are not updated when prices or wages rise, they lose their effects.. The second way occurs when the amounts that delimit the tax brackets are not touched.. These amounts reflect a certain standard of living, but were set more than ten years ago. The rise in prices and salaries since then means that a salary of 22,000 euros gross (to give an example) now has less purchasing power than before the pandemic.. However, you pay the same personal income tax as you did then.

The supervisor has confirmed that non-deflation has also produced a reduction in inequality in the distribution of income. Income differences between the richest 10% and the poorest 10% after taxes have narrowed. Of course, although redistribution has increased, progressivity has been reduced: the difference between the average rate paid by the wealthiest taxpayers and those with the lowest incomes has been reduced.

However, deflating personal income tax means giving up an important source of income at a time when Spain will have to face fiscal adjustments to balance its deficit and public debt levels.. From Brussels and from more and more international organizations, messages continue to be sent to the Government to present a consensual adjustment plan as soon as possible.

The Ministry of Labor is making significant efforts to reach an agreement with unions and employers to shorten the working day before the arrival of summer. Yolanda Díaz, the second vice president and minister of the branch, has set a deadline of summer vacations to achieve an agreement that would reduce the maximum working day from 40 hours to 37.5 hours by 2025, with a preliminary reduction to 38.5 hours this year.

Negotiations for the reduction of working hours are currently underway between the Ministry of Labor, unions, and employers through social dialogue. However, these three-way talks have been at a standstill for the past two months as employers and worker representatives negotiate technical details at a separate table.

Díaz considers this negotiation table to be “undoubtedly the most important of this legislature.” She emphasized the need to make rapid progress in the coming months to secure an agreement before summer. While Díaz prefers a three-way pact, she is also open to an agreement solely with the unions, similar to those that have resulted in increases in the minimum wage or the second part of the pension reform.

According to Díaz, this measure is highly valued by citizens, regardless of their political affiliation. She sees it as a way to distribute productivity between workers and employers. Ultimately, the goal is to amend article 34 of the Workers’ Statute, which currently establishes a maximum working day of 40 hours on average throughout the year.

A crucial aspect under discussion is the introduction of flexible elements to reduce the working day. The current regulations stipulate that the 40-hour requirement is an average calculated annually. This means that not all weeks need to amount to 40 hours; the important factor is that the average for the year is less than this figure. One possibility is for companies to implement a reduction in working hours by offering additional days off, though this approach is not favored by unions.

The unions believe that reducing the working day to 38.5 hours in 2024 will have minimal impact on most agreements, as many already have shorter working hours established. However, setting the legal limit at 37.5 hours by 2025 could benefit approximately 13 million workers, according to CCOO estimates.

The Bank of Spain has issued a warning about the potential negative consequences of solely relying on increased contributions to finance the expected rise in public spending on pensions in the coming years. According to the banking supervisor’s annual report, this approach could harm employment and Spain’s overall competitiveness. The report focuses on the country’s structural challenges and highlights the significant challenge of the imminent retirement of the baby boom generation, which will lead to a substantial increase in retirement benefit expenditures. The pension reform implemented last year has further accentuated this situation.

To address this increase in pension spending, the government has proposed a progressive increase in social contributions, particularly for salaries exceeding 50,000 euros. However, in case spending exceeds 13.3% of GDP, the government will be compelled to implement additional measures to reduce spending or bolster income, a decision that will be based on the forthcoming Airef report next year. If no agreement is reached, an automatic clause will come into effect, resulting in even higher contributions to offset the expenditure increase.

However, the Bank of Spain highlights the potential drawbacks of relying solely on increased social contributions for pension system financing. According to their estimates, for every percentage point increase in the average social contribution rate, employment could decline by 0.25% after four years. In practical terms, a 1% increase in contributions would lead to the loss of approximately 50,000 jobs within the same timeframe.

Under the full implementation of the pension reform, the Airef predicts a 2.7-point rise in the average contribution rate. In numerical terms, this would result in a loss of 135,000 jobs within four years. Nevertheless, the fiscal supervisor notes that the impact would be uneven and primarily affect higher salaries.

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The Indra Board has made the decision to grant executive functions to Marc Murtra, who was previously the non-executive president of the company and a key figure for the government within the organization. This comes two years after Murtra joined the Board of Directors and after initially being denied these functions. The granted powers will be limited to opening new markets and managing institutional relationships, while the day-to-day business operations will continue to be overseen by José Vicente of the Mozos.

The director’s increased responsibilities were agreed upon through a joint proposal by Murtra and De los Mozos, which was unanimously approved by the Appointments Committee. The committee consists of three independent directors.

Initially, the government intended for Murtra to become the executive president of the group following the dismissal of Fernando Abril-Martorell in 2021. However, due to Murtra’s lack of experience in managing companies, the independent directors on the Board rejected the government’s proposal.

The government’s intervention caused instability within Indra. The independent directors who rejected Murtra were subsequently dismissed with the cooperation of Indra’s government partners: Amber Capital, Joseph Oughourlian’s fund (Prisa), and Sapa Placencia, a Basque company owned by the Aperribay family who also own the Royal Society. This maneuver prompted an investigation by the National Securities Market Commission (CNMV), which confirmed the cooperation and coordination of these shareholders, with Murtra’s active involvement.

Eventually, new independent directors were nominated, leading to a solution that allowed Murtra to continue as non-executive president alongside Ignacio Mataix as CEO. However, Mataix was dismissed in March 2023, raising doubts once again about Indra’s independence and the influence of the government.

The appointment of De los Mozos, a figure with no political ties to the government and a strong business background, was seen as a resolution to the governance crisis. It also helped build relationships with the People’s Party (PP) and contributed to a significant increase in the company’s stock market performance since May 2023, with a rise of over 50%.

However, the latest move to reinforce Murtra’s position raises concerns about the company’s governance. Good governance practices dictate that the president should be non-executive and independent from the CEO.

According to Indra, Murtra’s new functions will be carried out “in coordination with the operational and business leadership of the CEO, whose delegated powers remain unchanged.” The company states that this delegation of executive functions will allow Murtra to focus more on corporate aspects, expanding into new markets where Indra currently lacks presence, and engaging with public administrations, governments, and international organizations, in line with the company’s position in the Defense market and the current geopolitical context.

Prior to this appointment, Murtra had already been gaining influence within the Board of Directors, first as the president of the Strategy Commission and later as the president of the Executive Delegate Commission.

On Monday, Indra will present its first results under its new strategic plan, which involves growth in the space and defense sector. The attention will once again shift to the leadership decisions within the company after almost a year of institutional stability.

In a statement, De los Mozos later said, “After a year at Indra, and after a thorough analysis of the company, President Murtra and I have proposed reinforcing his functions at the corporate level. This is in line with our efforts to implement the Leading the Future Strategic Plan.”

Puig’s initial public offering (IPO) has garnered significant interest from investors, positioning it as the largest IPO in Europe this year and the most important in nine years for the market. Bloomberg reports that the company has successfully closed the placement at a price of 24.5 euros, valuing it at 13.9 billion euros. The results of the placement will be made public tomorrow after the market closes.

The Catalan luxury cosmetics firm has seen overwhelming demand, with the demand exceeding the available shares valued at around 3 billion euros. This IPO is the largest in Spain since Aena’s debut in 2015. Despite going public, the Puig family will still maintain a majority control of the company through a capital increase and the sale of existing shares.

The IPO is exclusively aimed at institutional investors and consists of a public subscription offer (OPS) of new class B shares worth 1.25 billion euros and a public sale offer (IPO) for additional income of 1.36 billion euros. This IPO surpasses that of Galderma Group and CVC Capital Partners, making it the largest in the European market for the year.

Regarding dividends, Puig has not yet approved a shareholder remuneration policy but plans to distribute dividends prudently starting in 2025. The estimated payout ratio will be 40% based on the company’s historical remuneration policy.

Who is Puig? Puig is a Catalan group with a rich history of 110 years specializing in perfumery, fashion, foot care treatments, and high-end makeup. It operates in 32 countries, employs over 11,000 people, and holds an 11% market share in selective perfumery. Puig is one of the top five sellers worldwide and owns 17 brands, including Rabanne, Charlotte Tilbury, and Carolina Herrera. Spain represents 7% of its revenues, with the US and England being its main markets.

Puig has undergone a transition in its business, diversifying its income streams. In just four years, the company has reduced the weight of perfumery sales from 100% to 72% while increasing the contribution of skincare, which now accounts for 10% of sales.

The company aims to achieve revenue of 4.3 billion euros by the end of 2023, with a net profit of 465 million euros. Its operating margin exceeded 16.1% in the previous year. Puig has 2,000 niche perfumery sales points worldwide, with 26% of sales generated through online channels.

Puig holds the fourth position in the selective perfumery segment and the third in dermocosmetics within the European parapharmacy field. Rabanne has already exceeded 1 billion euros in revenue, and Carolina Herrera and Charlotte Tilbury are expected to reach this milestone in the future. Advertising is Puig’s main expense, with approximately 1.34 billion euros dedicated to marketing campaigns for perfume sales in 2023.

Spain stands out as one of the countries with the highest tax burden on salaries in the OECD, with workers allocating 40.2% of their gross salary to taxes and social contributions in 2023. This represents an increase compared to the average of 34.8% within the organization. The increase is attributed to measures implemented as part of the pension reform, which have led to higher payments by both workers and companies for social contributions. Additionally, the lack of adjustments to personal income tax coupled with rising inflation has contributed to increased tax collection.

Among OECD countries, only Australia, Luxembourg, and New Zealand experienced larger increases in the tax burden in 2023. Spain ranks fourteenth in terms of tax burden, with Belgium occupying the top position. When considering a working couple with two children, Spain ranks tenth with a tax burden of 37.1%.

In terms of the distribution of the tax burden, about half of the increase is borne by companies in Spain, with contributions representing 23.3% of the salary. Social Security contributions paid by employees increased by 0.06% in 2023. The average labor cost in Spain amounted to $63,683, putting the country in 20th place among the OECD countries. The average gross salary in Spain is 13% lower than the OECD average.

In a bid to ensure compliance with the temporary VAT reduction on food, supermarkets have requested more time from the government to prove that they’re not exploiting the situation to increase their profits. This request comes after an investigation was launched by the Ministry of Consumer Affairs to examine whether supermarket chains were passing on the VAT discount to customers as intended. While some chains have sought an extension of the deadline, the ministry has confirmed that all necessary information has been provided and is currently being reviewed.

Meanwhile, the National Markets and Competition Commission (CNMC) is also monitoring the situation. A report published by the CNMC in July 2023 concluded that the distribution chains were correctly passing on the VAT reduction to final prices. The CNMC is now working on an updated evaluation report. In the absence of this report, the Bank of Spain’s observatory of business margins provides some insight into the industry. According to the latest update, margins in the agri-food chain increased slightly in the second half of 2023, while the food trade experienced declining margins since 2021.

As the government keeps a close eye on supermarkets to ensure compliance with the VAT reduction, the food industry is preparing to ask for an extension of the measure. They will request an extension until the end of the year and expand the list of products affected to include essential items like meat and fish. The Spanish Federation of Food and Beverage Industries (FIAB) will be leading these requests. Additionally, they hope that the processing of the bill, which includes a VAT reduction on olive oil, won’t be delayed due to political uncertainty.

Over the weekend, Ibercaja unveiled its 2024-2026 strategic plan, centered around prioritizing customer satisfaction and resilience. The plan aims to achieve a profit of 300 million euros without resorting to going public, a path the bank has previously attempted but without success.

This strategic plan no longer includes the requirement to go public, as the Ibercaja Foundation has established a reserve fund worth 320 million euros, thus eliminating the legal obligation to go public according to the Savings Bank Law. The bank’s president, Francisco Serrano, emphasized this during the plan’s presentation in Zaragoza.

Dubbed the ‘Now Ibercaja’ plan, it outlines the objective of strengthening the bank’s solvency over the next three years, aiming for a fully loaded CET1 coefficient between 13.5% and 14%, up from the current 12.7%. Additionally, Ibercaja aims to maintain an LCR liquidity ratio above 190% and limit non-performing assets (NPAs) to below 3.5%. The plan also sets a target for a profitability (ROTE) above 10%, ensuring that the bank can cover its capital costs for a medium-low risk profile.

The bank’s CEO, Víctor Iglesias, explained that achieving a ROTE of 10% between 2024 and 2026 is more significant than the previous year’s 11.6% due to expected interest rate cuts, narrower margins, increased costs from salary increments, and higher risks of defaults.

Another key goal outlined in the plan is to increase the customer base by 10%, specifically targeting 50,000 new private clients, 6,000 business clients, and 2,000 clients from SMEs and large companies by 2026. To achieve these objectives, the plan allocates a budget of 45 million euros for this year, combined with regular budget resources, totaling an investment of 110 million euros in Ibercaja. Over half of this investment will be dedicated to technological, operational, and commercial transformation.

Moving forward, Ibercaja will continue its growth strategy, focusing on the geographic areas of Madrid and Arco Mediterráneo, while further strengthening its commercial presence in Aragón, La Rioja, Guadalajara, Burgos, and Badajoz. Additionally, the bank aims to renew and attract a younger customer base.

However, Ibercaja’s growth prospects are influenced by the political instability in Spain. Serrano highlighted that Spain has experienced a succession of 16 electoral processes since the restoration of democracy, with 8 of them occurring in the past eight years. This instability has resulted in parliamentary fragmentation and is not conducive to investment. Serrano emphasized the need for a stable political environment that promotes dialogue and negotiation, stating that stronger and more stable institutions would ensure more consistent and secure growth.