Spanish, Italian Banks Take Up Maximum in Cheap ECB Loans

(Bloomberg) -- Some of Spain’s and Italy’s largest banks borrowed as much as they were allowed to in ultra-cheap loans from the European Central Bank as part of a fresh round of stimulus to ward off a virus-generated economic crisis.

Four out of the five biggest banks in Spain, led by CaixaBank SA, said they took up their maximum allowance for a total of 97.9 billion euros ($109.9 billion). UniCredit SpA, Italy’s largest lender, and its subsidiaries borrowed 94.3 billion euros, also the most they could get.

Across Europe, more than 700 banks made use of the three-year loans, borrowing a total of 1.3 trillion euros under a program known as targeted longer-term refinancing operations, or TLTRO. They carry an interest rate below zero, meaning the ECB is paying lenders so they keep providing credit to companies and households hit by the pandemic.

Some banks aren’t using the loans simply as a funding source but as an opportunity to boost profitability by investing in sovereign bonds, said Tom Kinmonth, a fixed income strategist at ABN AMRO.

“Even if you place some of the funds at the ECB at -0.5% you have the potential to make a profit,” Kinmonth said by email. “This is the first time we are in this unique position.”

Sabadell, Santander

UniCredit said it participated so it could better support its clients through the crisis. Some 50.7 billion euros it had borrowed in a previous round of such loans will be repaid by the end of the month, it said in a statement late Thursday.

The CaixaBank group that includes Banco BPI SA in Portugal took up 40.7 billion euros to add to 9 billion euros it had already used from the previous round, reaching its full allotment. Bankia SA borrowed 9.2 billion euros to reach a total of 23 billion euros it has taken up overall.

Banco de Sabadell SA borrowed 27 billion euros, part of which was to refinance 13.5 billion euros from previous rounds at a cheaper interest. Banco Bilbao Vizcaya Argentaria SA asked for 21 billion euros, reaching its maximum of 35 billion euros and refinancing 7 billion euros in the process.

Banco Santander SA declined to say how much it borrowed.

Elsewhere in Europe, Intesa Sanpaolo SpA said it borrowed 35.8 billion for a total of 70.9 billion euros. The Milan-based lender said its maximum allowance was increased to 90.2 billion euros in March.

Rabobank Group, the second-biggest Dutch lender, borrowed 20 billion euros, a spokeswoman said. ABN Amro Bank NV and ING Groep NV said they participated but declined to disclose how much they borrowed.

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