The Bank of Spain published a speech by Deputy Governor Soledad Núñez reviewing the condition of the Spanish banking sector, highlighting strong 2024 profitability and historically low non-performing loans alongside a modest recovery in lending, and setting out key challenges tied to digital transformation, the sustainability transition and heightened geopolitical uncertainty. The address noted that Spanish banks hold total assets of EUR 4.2 trillion across 184 deposit institutions, with sector concentration rising as the five largest banks’ market share increased to around 70% in 2023. Credit to households and firms grew 0.6% in 2024 (around EUR 7 billion), with household credit up 1.2% driven by consumer lending (+6.7%) and mortgage lending up 0.7%, while corporate credit was flat as large corporate lending (+2.4%) offset a decline in lending to SMEs (-2%). Asset quality indicators remained favourable, with an NPL ratio of 3.24% and the stage 2 ratio for core portfolios falling from 8.37% to 7.07% in 2024, while the cost of risk declined to 70 basis points. Profitability rose to 14.7% ROE in 2024, supported by net interest income and fee growth, although cost pressures included staff costs (+8.7%) and conduct-related provisions, and profitability was expected to stabilise as ECB rate cuts reduce interest income tailwinds. On solvency, significant institutions’ capital ratios increased to 12.9% in 2024 and the leverage ratio improved to 5.5%. Looking ahead to 2025, the speech pointed to uncertainty as a constraint on credit growth and identified supervisory focus areas including operational risks from digitalisation and outsourcing, implementation of the DORA regulation, banks’ transition plans aligned with European Banking Authority guidelines, and integrating geopolitical risk into credit risk monitoring, provisioning, capital and liquidity planning, cyber resilience and internal stress testing.

Original source View in tracker