The profitability of Spanish banks increased to 11.15% in the first quarter, according to the Bank of Spain

The ratio of loans under special surveillance increased slightly, to 6.48%

MADRID, 20 Jul. (EUROPA PRESS) -

The annualized return on equity of Spanish banks increased to 11.15% compared to the 9.86% corresponding to the previous quarter and 10.56% in the same quarter of the previous year, according to the supervisory statistics of credit institutions corresponding to the first quarter of this year published by the Bank of Spain.

This statistic also shows that the ratio of loans under special surveillance of Spanish banks increased slightly, from 6.42% in the fourth quarter of 2022 to 6.48% in the first quarter of 2023. However, it decreased compared to the same quarter of the previous year, when this ratio stood at 6.56%.

In addition, the doubtful loan ratio of all credit institutions, excluding cash balances at central banks and other demand deposits at credit institutions, practically stabilized, standing at 3.10% in the first quarter of 2023 compared to 3.12% in the previous quarter. In the year-on-year comparison, it fell by 34 basis points.

By type of entity, the doubtful loans ratio of significant entities remained stable, standing at 3.20%, while for less significant entities it stood at 2.50%, falling slightly compared to the previous quarter.

Thus, the cost of risk increased to 1.04% in the first quarter of 2023, compared to 0.87% in the previous quarter.

On the other hand, the capital ratios of all credit institutions increased slightly in the first quarter of 2023. The ordinary capital ratio (CET1) stood at 13.32%, the Tier 1 ratio at 14.80%, and the total capital ratio at 16.85%. Compared to the same period of the previous year, there was a slight decrease in the ordinary level capital ratio, from 13.32% compared to 13.36%.

In this period, the total capital ratio of significant institutions stood at 16.48% and that of less significant institutions at 22.55%.

The aggregate leverage ratio increased, standing at 5.61% in the first quarter of 2023 compared to 5.53% in the previous quarter. This increase was a consequence of the increase in the amount of both components of the ratio, although the capital increased by 2.33%, compared to 1.01% of the total exposure

On the other hand, the liquidity coverage ratio of all credit institutions fell, standing at 173.90% in the first quarter of 2023 compared to 178.44% in the previous quarter. This drop in the ratio was due to both the 3.9% drop in the liquidity buffer and the 1.3% drop in the liquidity outflow. However, the Bank of Spain highlights that this ratio remains "well above" the regulatory requirement of 100%.

Lastly, the supervisor points out that the credit-deposit ratio increased slightly, standing at 101.57% in the first quarter of 2023.

In the statement sent today by the Bank of Spain, it explains that the European Banking Authority (EBA) communicated on December 16, 2022 the repeal, with effect from January 1, 2023, of the Guidelines on reporting and disclosure of exposures subject to measures applied in response to the crisis derived from COVID-19 (EBA/GL/2020/07).

For its part, the Bank of Spain itself has repealed the application to less significant Spanish institutions, for the purposes of the single supervisory mechanism, of the aforementioned EBA guidelines, which it adopted as its own in July 2022. The repeal takes effect from January 1, 2023.

Consequently, the supervisor no longer has the basic information necessary to prepare this information and it is being deleted.

"In any case, it should be noted that the variations in these loans only originated as a consequence of their amortization and that, for several quarters now, their amounts were practically irrelevant," he concludes.