Spanish Banks Hit Record Highs in 2024; Solid but Lower Profits Expected in 2025

Morningstar DBRS released a commentary discussing the F2024 results of seven Spanish banks: Santander, BBVA, Caixabank, Banco de Sabadell, Bankinter, Abanca, and Grupo Cooperativo Cajamar.

Key Highlights:
-- Spanish banks reported all-time high net results in F2024 with all profitability metrics (return on equity, efficiency, and net cost of risk) outperforming.
-- Asset quality metrics improved year-over-year on the back of a robust domestic economic performance and despite higher lending growth.
-- Looking to F2025, we expect Spanish banks' profitability to remain strong, although weaker than F2024 levels given lower rates.

"We expect F2025 Spanish banks' profitability to remain strong supported by the solid economic prospects in Spain, higher contribution of the ALCO portfolios, well-controlled operating costs, and moderate-to-low cost of risk", notes Maria Parra, Vice President, European Financial Institutions Group. "This view underpins our positive view on the Spanish banks' credit profiles, with one Spanish bank having a positive trend and two Spanish banks recently upgraded in February 2025".