MADRID (Reuters) – The destructive impact of decrease rates of interest on Spanish banks’ profitability needs to be restricted and no less than partly offset by rising mortgage volumes, the Financial institution of Spain stated on Tuesday.
Any downward strain on banks’ margins can be countered, no less than partly, by a “extra beneficial evolution of the quantity of exercise,” the financial institution stated in its semiannual monetary stability report.
Spanish banks benefited when rates of interest rose following an inflation hike in 2022 and 2023 by rising the charges they charged on loans, whereas limiting the charges they paid on deposits.
That tailwind is now reversing and European lenders are having to adapt to a altering market setting as benchmark rates of interest fall.
Within the first half of this 12 months, the consolidated internet revenue at Spanish banks rose 22% year-on-year, boosting their return-on-equity ratio (ROE) by 2.2 proportion factors to 13.9%.
Web curiosity earnings, earnings on loans minus deposit prices, rose 14.5% year-on-year to June, down from a 27% rise within the first half of 2023.
count on decrease borrowing prices will bolster lending exercise. In opposition to that backdrop, the inventory of loans to the non-public sector in Spain has returned to an upward development and grew a seasonally adjusted 0.5% between Might and August.
The central financial institution stated the principle threat to the banks’ stability was a doable escalation of tensions within the Ukraine and the Center East in addition to the result of the U.S. elections due to potential repercussions on commerce relations.
