Spain’s banking sector: Facts & Figures
Updated September 2019 – For earlier editions of Facts & Figures click here
The economic growth of the Spanish economy in recent years has continued in 2018, allowing GDP to grow by 2.5% over the year, consolidating an environment of moderate growth. Even though Spain was not immune to the external shock, the dynamism of domestic demand offsets the downturn of the external situation. Private consumption has continued to exhibit notable strength, against a backdrop of continuing swift job creation, increased purchasing power as a result of lower inflation, a budgetary stimulus to household income and a decrease of the rate of saving.
The current expansionary phase of the Spanish economy is expected to continue in the medium term. Nevertheless, exports are not expected to increase strongly due to the international context and geopolitical tensions and the lack of economic reforms and political uncertainty in Spain, which might dampen the dynamism shown by domestic demand. After growing by 2.2% in 2019, GDP is forecast to grow by 1.9% and 1.7% in the following two years.
The Spanish banking sector, in 2018, is composed of twelve banking groups, representing more than 90% of the industry, with 52 private banks, two saving banks and 62 cooperative banks. Trends observed in previous years, namely low interest rates and stagnation of household and SME lending, continued in 2018. However, Spanish banks are making a significant effort to clean up their balance sheets and to strengthen their capital ratios at a faster rate than that required by the Basel III reform.
In terms of capital, the equity-to-assets ratio was, in December 2018, and on a solo basis, above 10% for the third consecutive year. Concerning consolidated regulatory capital ratios, Spanish banks fully loaded Core Equity Tier 1 (CET1) ratio, reached 11.5% at the end of 2018, increasing nine basis points since 2017. The results of the EBA stress test showed that, in the baseline scenario, Spanish entities would present an increase of 230 basis points of CET1 in 2020, the highest of all Member States and almost double the average of the EU (104 basis points).
Regarding profitability, and according to EBA data, Spanish return on equity continued to increase, from 7.05% in December 2017 to 8.37% in December 2018, with an efficiency ratio of 49.6%. Meanwhile, the non-performing loan ratio continues its downward trend, decreasing from 4.53% in 2017 to 3.74% in 2018.
On the bank’s balance sheets, the total value of credit increased slightly, core credit to SMEs and households increased from €272 billion a year in 2017 to €293 billion in 2018. Similarly, deposits held by Spanish banks increased from €1,018 billion to €1,061 billion during 2018.
In order to complete the macroprudential framework in the country, Spanish financial regulatory authorities were authorised to use new instruments such as limits to sectoral concentration, or, limits and conditions on lending. In addition, the Spanish government approved, at the beginning of 2019, the creation of the Spanish Macroprudential Authority. Its main objective is to monitor and analyse possible systemic risks, as well as to issue opinions and publish warnings about any identified systemic risk that could affect the country’s financial stability.
Spanish banks keep adapting their systems to incorporate new digital and payment technologies. A clear example in the payments framework is the person-to-person (P2P) instant mobile payment system, known as BIZUM, developed as a consumer-friendly technology based on a proxy database that obtains clients’ IBANs directly from their mobile numbers. Added to that, banks have introduced the SCTInst processes and instant payments have become a common payment method available to all Spanish customers, representing as much as 10% of the regular SEPA Credit Transfer transactions. Furthermore, Spanish banks are swiftly introducing optimal and safe solutions to open accounts to third-party providers for payment initiation and account information services, according to PSD2 requirements.
The Spanish Banking Association in collaboration with other Spanish financial associations, launched a Responsible and Sustainable Finance Centre (FinResp), with the purpose of promoting and accelerating the accomplishment of the financial commitments linked to the Sustainable Development Objectives promoted by the United Nations. FinResp aims to help Spanish SMEs address their difficulties and needs to comply with the requirements of upcoming laws for energy transition and climate change. It also encourages the creation of networks for the exchange of best practices among companies and countries, promoting the design of innovative products and services in this field.
In 2018, there was a significant consolidation of green, social and sustainable bonds issuances in the Spanish capital market. Spain stands as the fourth market for this type of bonds by volume (€5.8 billion in 2018) after the U.S., France and China.
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