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Spain’s banking sector: Facts & Figures

Updated December 2020 – For earlier editions of Facts & Figures click here

The Spanish economy continued the path of mild slowdown in 2019 that began four years earlier. The growth rate stood at an acceptable 2% per annum, four percentual points fewer than the performance in 2018. The economic slowdown was entirely due to domestic demand. In addition, export growth also lost strength, in line with the deterioration of the international context. Imports, on the other hand, experienced a more intense slowdown than exports in line with the observed adjustment in domestic demand. In turn, the current account balance remained positive, with a value equivalent to 1.6% of GDP.

The growth of GDP was mainly driven by a strong job creation path and the leverage of the economy on credit due to favourable financial conditions. Productivity, the Achilles heel of recovery, fell by 0.3% adding to two years of continuous reduction.

The budget deficit amounted to 2.5% of GDP, the same result as in the previous year, which means that in 2019 no progress was made on the path of budgetary consolidation. As regards public borrowing, the balance of public debt outstanding stood at 96.9% of GDP.

However, the Spanish economy confronted some other challenges such as maintaining and improving macroeconomic stability, and fully being incorporated into the digital economy.

The Spanish banking sector was composed, as of December 2019, of twelve banking groups, the same as the year before, representing more than 90% of the industry. These groups include 52 private banks, two saving banks and 61 cooperative banks.

During this year, Spanish banks have continued going deeper in the cleaning up of balance sheets and in the construction of a strong CET1 on a fully loaded basis.

In terms of capital, the equity-to-assets ratio was, in December 2019 and on a solo basis, 10.0%, exactly the same as in December 2018. The consolidated regulatory capital ratio reached 11.9% (11.5% in December 2018) – fully loaded CET1. Regarding profitability, and according to EBA data, Spanish ROE was, in December 2019, 7.0% and once again above the European average (5.7%), with an efficiency ratio that remained constantly slightly below 50%. As mentioned before, the NPL ratio continues its downward trend to 3.2% (3.8% in 2018).

As far as the Spanish banks’ balance sheet is concerned, the total volume of both loans and deposits has increased more than 4.7% since December of last year, including an increase in fresh credit operations up to €446 billion for SMEs and households.

Thanks to the fast digitalisation process banks’ payment developments are reaching cruising speed and the SCTInst is gaining ground (the triple of the previous year’s volume). More than 97% of the accounts are reachable through the SCTInst SEPA-wide and around 12% of the credit transfer were executed instantly (within two seconds). The instant mobile payment system known as BIZUM, based on a proxy database that obtains clients’ IBANs, has enlarged the use cases and it is now available for e-commerce transactions. In a still cash-based economy as the Spanish one, the usage of cards for daily payments is experiencing two digits grow for its fourth consecutive year, with a rate of 16.20% in number of transactions in 2019 compared to 2018, when the GDP increased 2%. Furthermore, Spanish banks introduced optimal and safe solutions to open accounts to third-party providers for payments’ initiation and account information services, according to PSD2 requirements.

The market for sustainable financing in Spain has experienced a remarkable advance in 2019. Adding the figures for Bonds and Sustainable Lending, the segment of sustainable financing mobilized €22.78 billion. Therefore, sustainable financing has grown in our country by around 34% with respect to 2018. Overall, public and private companies, banks, autonomous communities and public agencies in our country issued green, social and sustainable bonds for a total of €9,756 million in 2019, a figure that places Spain in the top 10 of the sustainable bond ranking, a position that is higher than it should be, considering its GDP. At the same time, the loan sustainable market in Spain reached more than €13,025 million in 2019, ranging from infrastructure and renewable energy projects to real state initiatives.

On the other hand, two Financial Centres for Sustainability were created in Spain in 2019, one in Madrid called Finresp and one in Barcelona, working both together and already members of the International Network of Financial Centres for Sustainability (FC4S).

Finresp, presented at the COP25, was created to address the difficulties and needs that Spanish SMEs have in order to adapt to the requirements of the upcoming regulatory proposals on sustainable finance, recently presented by the European Commission. In this sense, Finresp’s next steps will be to move forward with determination in the dissemination of sustainable finance through three layers: best practices exchange, development of sustainable webinars focused on different sectors and training courses on sustainable finance for SMEs.

Contributor: Carmen Rizo