Spanish Banks Report Strong H1 Results Amid Uncertain Environment

DBRS Morningstar released a commentary on the H1 2022 results of large Spanish banks. The banks posted solid results with all entities reporting a significant growth in Underlying Net Attributable Income. Summary highlights from the commentary include:

• Aggregated underlying net profit was EUR 10.8 billion for H1 2022, up 24% YoY. As a result, aggregated RoE (Return on Equity - as calculated by DBRS Morningstar) stood at around 10% in H1 2022 and above pre-pandemic levels.
• The rebound in profitability was largely due to a positive evolution in Net Interest Income (NII) combined with robust net fees generation and strict cost control. In addition, most banks reduced their Loan Loss Provisions (LLPs).
• NII was up 12.4% YoY driven by international operations. Domestic NII, however, was down 2% YoY. Higher interest rates are yet to pass-through into domestic balance sheets, as Euribor 12 months recorded an increase of around 150 bps YoY but the bulk of it took place in the last four months.
• New mortgage lending in Spain was solid with some banks recording substantial growth. Nevertheless, mortgage demand is expect to decelerate in H2 2022.

“DBRS Morningstar considers Spanish banks’ H1 2022 results as solid, with strong lending growth and solid asset quality metrics. However, we see that tailwinds, in the form of higher NII, and headwinds, in relation to potential economic deterioration due to high inflation and energy prices, are yet to fully materialize” said Pablo Manzano, Vice President from the DBRS Morningstar Global Financial team.