## 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](https://www.imf.org/en/publications/cr/issues/2017/11/13/spain-financial-sector-assessment-program-technical-note-determinants-of-bank-profitability-45390)

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## Bibliographic details
- Published: November 13, 2017
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9781484327159.002

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### 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.

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## Content in this bundle

- **Country Report**
  - [Country Report (Markdown version)](/-/media/files/publications/cr/2017/cr17339.pdf.md){rel="alternate" type="text/markdown"}
  - [Country Report (PDF)](/-/media/files/publications/cr/2017/cr17339.pdf){rel="external" type="application/pdf"}

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_Source: https://www.imf.org/en/publications/cr/issues/2017/11/13/spain-financial-sector-assessment-program-technical-note-determinants-of-bank-profitability-45390_