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MADRID (Reuters) – The detrimental create of lower interest rates on Spanish banks’ profitability ought to be limited and never lower than partly offset by rising loan volumes, the Financial institution of Spain acknowledged on Tuesday.
Any downward stress on banks’ margins would possibly possibly well maybe be countered, not lower than in fragment, by a “more favourable evolution of the volume of activity,” the financial institution acknowledged in its semiannual financial balance file.
Spanish banks benefited when interest rates rose following an inflation hike in 2022 and 2023 by growing the rates they charged on loans, while limiting the rates they paid on deposits.
That tailwind is now reversing and European lenders are having to adapt to a changing market environment as benchmark interest rates descend.
Within the foremost half of of this year, the consolidated secure profit at Spanish banks rose 22% year-on-year, boosting their return-on-fairness ratio (ROE) by 2.2 proportion facets to 13.9%.
Fetch interest earnings, earnings on loans minus deposit costs, rose 14.5% year-on-year to June, down from a 27% upward push in the foremost half of of 2023.
question lower borrowing costs will bolster lending activity. In opposition to that backdrop, the stock of loans to the non-public sector in Spain has returned to an upward fashion and grew a seasonally adjusted 0.5% between Could well well additionally merely and August.
The central financial institution acknowledged the foremost likelihood to the banks’ balance was once a that you simply would possibly possibly well maybe also pronounce of escalation of tensions in the Ukraine and the Center East as effectively as the consequence of the U.S. elections because of possible repercussions on swap relations.
