Spain’s banking sector: Facts & Figures
The Spanish economy is on the verge of returning to the same income level as during the economic crisis and, in 2017, the GDP level will exceed its highest pre-crisis level. Labour reform, banking restructuring and a robust deleveraging process in the private sector since 2013 are the drivers behind this recovery phase.
In 2017 the Spanish economy will keep a strong recovery and balanced path. GDP growth is expected to be close to 3% in 2017 and around 2.5% in 2018. Private consumption will remain the main contributor to growth. In the medium term, however, its contribution will slow as the pace of job creation decreases and other factors which supported the improvements in households’ disposable income, like the fall in oil prices, lose momentum. The continued dynamism of exports, a comfortable external surplus, as well as a sustained investment pattern in capital goods will, nevertheless, keep supporting the growth trend.
However, the Spanish economy will be exposed to risks with potentially negative consequences. The main challenges are, on the one hand, to return to pre-crisis levels of unemployment and public debt and, on the other hand, to cope with geopolitical events. In this sense, the path of economic and structural reforms in Spain should continue in the coming years. From the perspective of the Spanish banking sector, 2016 was a year of transition, due in part to the restructuring process undertaken in recent years and the need to adapt to the recent changes in the regulatory and supervisory framework of the European Union.
The Spanish banking sector is composed of 14 groups, which represent more than 90% of the industry, formed by 59 private banks, two savings banks and 63 cooperative banks. In March 2017, the Spanish Fund for Orderly Bank Restructuring (FROB) announced the upcoming merger of the two remaining public-owned banks as the best strategy to optimise the resilience of public support.
In 2016, the scenario faced by the banking sector continues to be unfavourable to financial intermediation: low interest rates, deleveraging of households and SMEs and reduced margins. Despite these factors, Spanish banks have been able to keep improving their liquidity position, to focus on cleaning their balance sheets and to build and strengthen their capital and solvency positions.
The Spanish banks’ equity/assets ratio reached 10.4%, a new high, in 2016 on a solo basis and the consolidated regulatory capital ratio reached 12.36% CET1 phase-in. In terms of profitability, as of December 2016, ROE continues, on average, below the cost of a capital-consolidated basis, with an efficiency ratio of 50.8%, remaining one of the best positions in the EU. The reduction trend of the non-performing loan (NPL) continued in 2016 and, in consolidated terms, Spanish banking groups maintain a ratio below the euro area average.
Although the total volume of credit in 2016 remained in figures similar to those recorded in 2015 (€1,276 billion), fresh credit to SMEs and households, reached almost €170 billion in 2016, as a sign of the positive development of the economy. In terms of deposits, total volume reached €1,368 billion, changing the trend of a small decline, observed in 2015, as foreseen.
Spanish banks aim to be early adopters of new technologies both for the front and back office procedures. A recent example is the P2P immediate payment solution, known as BIZUM, launched by the banking sector in October 2016. BIZUM enables customers to make instant payments between payment accounts using the payee’s telephone number. Fund transfers are completed in two seconds. By May 2017 there are 27 banks or banking groups offering this service, representing 95% of market share. Some 0.5 million “bizumers” were using it and close to a million transactions had been processed for a total of €48 million.