Spanish banks: Income quality remains a challenge in 2015

Spanish banks

While 2014 was more positive than 2013, the fact is that securing quality income remains a challenge. In general, the results of the sector in 2014 were characterised by a recovery in net interest income, due to an expansion in the range of customers and improved efficiency. Also, a trend which showed a steady decline in delinquencies and a reinforcement in capital ratios aided performance.

Looking ahead to 2015, we expect the recovery of income to continue owing to the following factors: improving credit quality (reduction of the risk premium), the control of recurring costs and increased net income on interest (although at rates more moderate than in 20104/2013) by adjusting the cost of liability in both wholesale and retail sectors.

We are also likely to see a change of strategy in the sector, as solvency issues cease to be the main concern thanks to a high level of excess capital. Instead, attention will focus on corporate movements that allow greater diversification either from a geographical or business strategy perspectives. Some operations will involve, depending on their size, capital consumption in the short-term and the also the risk of capital increases.

In terms of dividend policy, listed banks will perform a gradual shift towards reducing scrip dividend in favor of cash dividend to shareholders, except for Santander, which has already altered is compensation system.



About the Author

The Corner
The Corner has a team of on-the-ground reporters in capital cities ranging from New York to Beijing. Their stories are edited by the teams at the Spanish magazine Consejeros (for members of companies’ boards of directors) and at the stock market news site Consenso Del Mercado (market consensus). They have worked in economics and communication for over 25 years.

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