Spain: Financial Sector Assessment Program-Technical Note-Determinants of Bank Profitability
IMF Staff Country Reports, November 13, 2017
Source details
- Canonical URL
- Spain: Financial Sector Assessment Program-Technical Note-Determinants of Bank Profitability
Other formats
Bibliographic details
- Published: November 13, 2017
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9781484327159.002
Executive summary and key findings
- Profitability remains higher for Spanish banks than for European peers, especially supported by relatively high net interest margins.
- Some Spanish banks still exhibit higher nonperforming loans (NPLs) and higher provision-to-asset ratios.
- Panel regression analysis suggests that Spanish banks’ profitability is influenced by a combination of structural and cyclical factors, similar to those influencing other European banks and global systemically important banks.
Main analytical conclusions
- Determinants of profitability:
- Net interest margins are a major support for Spanish banks’ profitability.
- NPLs and provisioning materially affect profitability for a subset of Spanish banks.
- Structural and cyclical factors both play roles in explaining profitability dynamics; these factors align with those found for other European banks and global systemically important banks.
- Methodology:
- Results are based on panel regression analysis (as summarized in the Technical Note).
Policy recommendations
- Reduce NPLs and legacy assets:
- The IMF mission recommends further steps to reduce NPLs and legacy assets to strengthen bank balance sheets and profitability.
- Cost efficiency:
- Continued cost-cutting measures are recommended to enhance the profitability of Spanish banks.
- Supervisory engagement:
- Stronger communication between supervisors and banks on business models is recommended to improve transparency and alignment of strategies with supervisory expectations.
Content in this bundle
- Country Report