Spanish banks will have ‘solid’ profitability in 2024, according to S&P Global

S&P Global published a report estimating that the Spanish banking sector will maintain “solid” profitability until 2024, as banks are expected to largely repeat last year’s results. Despite the limited prospects for new loans, profits are maintained through the revaluation of floating rate portfolios and the reimbursement of taxes and fees. In addition, asset quality issues are expected to be under control.

S&P Global published a report estimating that the Spanish banking system will continue to have “solid” profitability through 2024, as banks can largely repeat last year’s performance. Despite the limited prospects for new lending, earnings forecasts remain unchanged due to the revaluation of floating rate portfolios, which is expected to continue until mid-year.

The rating agency indicates that the expected impact of the special tax on banks will be offset by lower contributions to the Unified Problem Resolution Fund and the Deposit Guarantee Fund. While there may be some asset quality concerns, particularly in SMEs and consumer staples, the deterioration is expected to be contained, with cost of risk close to 50 basis points, the same as last year.

With this earnings outlook, banks will be able to maintain their dividend payments relative to earnings and will be able to continue to grow capital organically, according to S&P Global.