After an exceptionally profitable year, Spanish banking now centres around consolidation and the potential creation of a larger contender for the country’s top spot.
While Banco Santander remains the dominant name in the local market by a good measure — both in terms of Tier 1 capital and assets — a potential tie-up between Spain’s second- and fourth-biggest lenders has been reigniting discussions about both national and cross-border acquisitions in Europe.
BBVA’s bid to take over Banco Sabadell would not only widen the gap between Spain’s largest banks and the rest, but would also mean the combined group would enter Europe’s top 10 lenders.
A combined BBVA/Sabadell would have a domestic market share of more than 20 per cent in loans and deposits, according to The Banker Database. Spain’s smaller lenders typically have market shares of between 2 per cent and 5 per cent.
As negotiations continue — and questions hang over whether this and other potential national deals elsewhere Europe should be seen as precursors for international M&As in the region — the Spanish banking industry is displaying a bright picture of strength and growth.
Tier 1 capital has increased, in some cases by a substantial measure, for all 14 Spanish banks listed in the global Top 1000 ranking. That expansion was in many cases faster than that of assets.
Most notably, pre-tax profits have increased by double- and triple-digit percentages. For Abanca Corporacion Bancaria, Spain’s eighth-largest bank, pre-tax profit growth was 206.19 per cent (only surpassed by the smaller Spanish arm of Deutsche Bank).
This growth supported Abanca’s top-scoring position in the best-performing table, where both size and annual change in several financial indicators are considered. The bank, based in the north-western region of Galicia, also outperformed its peers in terms of individual scores for operational efficiency and return on risk.
Conversely, BBVA and Sabadell are in fifth and seventh place in the overall performance ranking, respectively. Santander is in 10th place.
Other smaller banks have had a good year. Bilbao-based Kutxabank, the country’s sixth-largest, is the second-best-performing lender in the list, thanks to its asset quality, soundness and leverage metrics. Meanwhile Bankinter, fifth by size, is the third-best-performing after scoring better than its competitors in terms of growth, and doing well in profitability and return on risk.
