CONSOLIDATED INCOME STATEMENT
Spanish banks achieved an attributed profit of 14,846 million euros in 2018, a 23% increase compared to the previous year. The maintenance of the more recurring margins in the income statement in an environment of low interest rates, cost containment, and lower needs for provisions and write-downs explain the positive performance of profit.
Despite the Euribor remaining in negative territory for the third consecutive year, net interest income held steady at €59 billion at year-end 2018. Accordingly, the core margin, which includes interest, fees and dividends and reflects recurring operating income, stood at €80 billion, a figure similar to that of the previous year.
Higher gains on financial transactions were, however, more than offset by negative foreign-exchange differences, so that gross income fell by two percentage points at year-end 2018, to €83 billion.
Operating expenses decreased by 1.2% over the last twelve months and the efficiency ratio of Spanish banks remained below 50%, placing it among the best across banking systems in the European Union.
Provisions and impairment charges on financial assets continued the strong downward trend recorded in recent years and fell by €2.6 billion, or 13%, consistent with the ongoing effort to reduce non-performing loans.
Following the decline in profit attributable to minority interests, the €14.846 billion profit represents a return on equity (ROE) of 7.4%, compared with 6.1% in 2017, despite the 3% annual increase in average equity.
The consolidated balance sheet of €2.5 trillion as of 31 December 2018 is 0.2% higher than in 2017 and shows a similar trend to previous years in the decline in non-performing loans, higher coverage, strengthened solvency and the maintenance of the weight of the line items representative of the typical activity of the retail commercial banking model in Spain.
Customer lending grew by 2.6% and exceeded €1.5 trillion at year-end 2018, coming to represent 60% of the consolidated balance sheet and recovering the share it accounted for in total assets five years earlier.
The non-performing loan ratio stood at 4.1% at year-end 2018, which is half a percentage point lower than at the end of 2017, with a coverage level of 67% of doubtful assets, five percentage points higher than a year earlier.
Along the same lines, customer deposits exceeded €1.4 trillion as of 31 December, after an increase of almost 2% over the year, to represent 55% of the total balance sheet, compared with 54% at year-end 2017.
The loan-to-deposit ratio remains at the low of 108% reached the previous year and, together with a liquidity coverage ratio (LCR) substantially above 100%, reflects the solid liquidity position of Spanish banks.
Among the developments in the remaining balance-sheet line items, noteworthy are, on the one hand, the position maintained with central banks and credit institutions, which has been reduced in net terms to a minimum of €10 billion borrowed, and, on the other hand, the increase in debt securities issued, whose outstanding balance grew by 8.8% in 2018.
Accounting equity grew by 0.3% year on year and represents 7.9% of the total balance sheet. In terms of regulatory capital, the CET1 fully loaded ratio reached 11.3% in December 2018, standing 23 basis points above the corresponding figure a year earlier.
