The strong negative impact of the economic crisis on the banking sector has forced it through an intense restructuring process with major adjustments in size and a large public funds’ injection. However, despite the efforts made, the banking sector still has a problem of viability, as its current profitability (5.2% ROE for consolidated groups and 2.8%, in the case of domestic business) does not reach the minimum required by investors (cost of capital = 8% - 10%). In the case of domestic business, since 2016, and for the first time in the 21st century, the net interest profits derived from deposits and loans have been less than the expenditures. Currently, this margin covers 92% of the operating costs.
Regulatory pressure, high volume of troubled assets (192,000 million euros) and private sector debts (166% of GDP) are the main issues affecting the recovery of the sector’s profitability.
In view of this difficult situation, the VIII Conference on the Spanish Banking Sector, organized by the Ivie in collaboration with the University of Valencia, which was held at ADEIT University–Business Foundation, analyzed the changes needed in the banking sector to regain profitability and to face future challenges.
Joaquín Maudos, Professor of Economics at the University of Valencia and Ivie Deputy Research Director, introduced the conference by analyzing the current situation of the sector. The following experts participated in the first part of the conference with a discussion on the transformation of the banking sector: Angel Berges (Vice-President of AFI), Santiago Carbo (Professor at Bangor University and CUNEF and Ivie Researcher) and José Luis Martínez Campuzano (Spokesman of the Spanish Banking Association, AEB).
In the second session of the conference, Bernabé Sanchez-Minguet, Executive Adviser of Cajamar, and Antonio Martínez, Chief Financial Officer and Deputy Director-General of Ibercaja, shared their view of the future of banking in Spain.
The conference highlighted some of the main concerns regarding the sector:
- The excess liquidity of banks in the Eurozone, which has continued to rise, despite increased penalizations of up to 0.4% interest
- The increase in Spanish bank consolidation, even more accentuated after the merge of Banco Popular with Santander
- Citizens experiencing financial exclusion as a consequence of bank branches closing in their towns due to cutbacks
- The bank sector’s low reputation. According to Metroscopia, only 15% of the population trusts banks