According to AFI’s forecasts, the key areas of improvement in the results will be:
• The reduction in the cost of retail liabilities will be maintained, with the subsequent drop in financial costs.
• A decline in provisions thanks to the fall in bad loans. This drop is not only due to the decrease in net inflows, but also to the increase in outflows, especially via adjudications.
• The gradual recovery of the banking business in its most profitable areas, particularly SMEs and consumer loans. These segments are the focus for the banks’ new lending drive.
As far as the main elements continuing to squeeze earnings are concerned, AFI highlights:
• The drop in financial income, both from the banks’ lending activity as a result of increased competition and the drop in interest rates, as well as from their fixed income operations.
• The expected retroactive cancellation of “floor clauses” from May 2013 (the date of the first ruling) could shave € 5 billion off the Spanish banking sector’s results in 2015, although it only affects banks which still have these clauses. At the beginning of the crisis, 30% of the sector’s mortgage portfolio had “floor clauses” with a minimum rate of 3% and now a third of them have been eliminated. So this measure would have a negative impact of € 2.250 billion on net interest income in 2015 and generate about € 2.780 billion in extraordinary losses.