• The profitability (ROE) of the banking sector at the end of 2023 stood at 12.57%, 4.52% higher than the previous year
  • Industry solvency has slightly increased in about 2 basis points in comparison with 2022 data, with a CET1 fully loaded ratio of 12.8%
  • Industry efficiency has improved from 50.6% in 2022, with the figure reaching 42% by December 2023
  • Non-performing loans (NPLs) showed a slight increase of 3 basis, due to the sale of doubtful loans portfolios, while the cost of risk remains stable, rising by 1 basis point and settling at 0.39%
  • Alvarez & Marsal's ranking for large-sized entities is led by Caixabank, while that for medium-sized banks is led by Kutxabank.

Madrid - March 13, 2024 - Global professional services firm Alvarez & Marsal ("A&M") today announced the results of the nineteenth edition of its flagship report "The Pulse of the Spanish Banking Sector." This study analyzes the performance of the top ten Spanish banks in terms of growth, liquidity, efficiency, risk, profitability, and solvency during 2023, highlighting key industry performance indicators and scoring them based on KPIs related to each area of analysis. Additionally, this edition of the report examines the results of the latest stress test of capital for Spanish banks and includes a detailed analysis of the financial margin from the perspective of its components.

The report reveals that, during the year, banking profitability by return on equity (ROE) reached 12.57%, a 4.52% increase from the previous period. Profits for the top half of the major 10 Spanish banks in their domestic business reached 13,430 billion euros, the highest figure in recent years. Spanish banks already achieved double-digit profitability in 2022, and is currently above the European average, which stands at 10.9%. The cost of risk remains constant at 0.40%, while the NPL ratio increased to 3.15%, still surpassing the European average of 1.8%.

That said, industry solvency remains at similar levels to the end of 2022, reaching 12.8%, incorporating dividends and share buyback programs. In comparative terms, European banks still maintain higher solvency levels, around 15.7%.

In the income statement, A&M's analysis reflects that net interest margin drives profit growth, reaching 1.55%, driven by the revaluation of the EURIBOR that occurred in mid-2022, although surpassing the 4% threshold and ending the year at 3.68%, this also resulted in 47 basis points increase in deposit costs. The operating profits of the sector have risen to 2.1%.

December 2023 marked an improvement in industry efficiency to 42%, up from 50.6% in 2022. A&M also observes higher branch-level productivity for all entities, with Santander leading in terms of business volume per branch, followed by Bankinter.

Across 2023, the non-performing loan (NPL) ratio increased on the previous year, reaching 3.15%, with expectations of further growth in 2024. The coverage ratio remains stable above 65%. When compared to the European average, the level of delinquency remains high (1.80% for the EU). Notably, Sabadell and BBVA are the entities with the highest NPL levels.

A&M's ranking for large-sized entities is led by Caixabank, while that for medium-sized banks is led by Kutxabank.

Additional topics included in this edition of the Pulse of the Spanish Banking Sector:

  • This iteration includes an analysis of the savings business in the Spanish banking sector:
  • Caixabank leads by market share percentage in Spain
  • A&M finds the percentage of Time Deposits reaches 17%
  • Off-balance sheet assets represent 32%
  • The contribution to the profitability of the savings business (on and off the balance sheet) accounts for 2%, with medium-sized entities standing out for their greater contribution to profitability in both on and off-balance savings compared to large banks

About A&M's Pulse of the Spanish Banking Sector:

The Pulse of the Spanish Banking Sector ("The Pulse") is a quarterly report that examines the top 10 largest Spanish banks in their business within Spain, highlighting the main performance indicators of the Spanish banking sector. The aim of The Pulse is to help the banking sector and board members stay updated on industry trends.

All data used in this report have been obtained from public sources.

What we analyze: The top 10 largest banks in Spain in their business in our country

CaixaBank, BBVA, Santander, Sabadell, Bankinter, Abanca, Unicaja, Kutxabank, Ibercaja, and Cajamar

If you would like a copy of the report, you can request it here.

Originally Published 13 March 2024

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.