November 7, 2018 / 9:02 AM / in 13 days

Shares in Spanish banks rally after Spanish court reverses loan tax ruling

MADRID, Nov 7 (Reuters) - Shares in Spanish banks, such as Banco Sabadell and Bankia, rallied on Wednesday, the day after Spain’s Supreme Court ruled banks are not required to pay stamp duty on mortgages.

The unexpected ruling spares them from potentially having to reimburse billions of euros to borrowers who for years have paid the tax themselves.

This could have cost them more than 15 billion euros, analysts and ratings agencies, such as Moody’s and DBRS, estimated.

The full ruling by Spain’s Supreme Court is expected to be published in the coming days.

Banco Sabadell was up 5 percent at 0820 GMT while Bankia was up around 4.5 percent. Caixabank rose 4 percent while Banco Santander, BBVA and Bankinter were all up around 3 percent.

“The Supreme Court decision to maintain the status quo on the mortgage tax has removed a tail risk and restored the much-needed legal security for the banks to continue operating in the long-duration business of mortgage loans,” the broker Alantra said in a note.

Smaller lenders like Liberbank and Unicaja with a high exposure to Spain and with balance sheets mostly relying on mortgage lending, rose 5.6 percent and 3.8 percent, respectively.

Tuesday’s decision reverses a ruling in mid-October in which the Supreme Court declared that banks, not their customers, were legally responsible for the tax - signalling a potential windfall for borrowers but a big headache for banks which had lobbied hard against the change.

Reporting By Jesús Aguado; Editing by Sonya Dowsett and Elaine Hardcastle

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