THE IMPROVEMENT IN SOLVENCY IS REFLECTED IN A 60 BASIS POINT INCREASE IN CORE CAPITAL, THE HIGHEST QUALITY CAPITAL, REACHING 8.36%
SPANISH BANKS HAVE AN EXCESS OF €47,792 MILLION IN OWN FUNDS ABOVE THE REQUIRED REGULATORY MINIMUMS
THE BUSINESS MODEL AND EXPENDITURE DISCIPLINE ALLOW THE OPERATING MARGIN TO BE MAINTAINED AT LEVELS SIMILAR TO THOSE OF 2009
Spanish banking groups have recorded an attributable profit of €11,089 million in the first nine months of the year, representing a decrease of 12.8% compared to the same period of the previous year. Consolidated profit amounted to €12,319 million, 9.7% less than in the same period of 2009.
These results have been accompanied by a consistent strengthening of the balance sheet, resulting from the increase in the quality of own funds and the significant effort made in provisions, to which €16,367 million have been allocated.
The solvency ratio of Spanish banking groups as of September 30, 2010 stands at 12.47%, allowing them to have an excess of €47,792 million in own funds above the required regulatory minimums. Additionally, the so-called core capital, or highest quality capital, has increased by 60 basis points compared to September 2009, reaching 8.36%.
The business model of Spanish banks and their discipline in managing operating costs have enabled them to achieve a return on assets (ROA) of 0.75%, only 11 basis points lower than that recorded a year earlier, despite the significant amount allocated to provisions. Regarding return on average equity (attributable ROE), the decrease has also been moderate, from 13.91% in September 2009 to 11.27% in the same month of 2010, after the denominator of the ratio, average equity, recorded a notable annual increase of 7.7%.
The consistency of the consolidated income statement of Spanish banks is evident in the evolution of the most recurring margins. Thus, the net interest margin in absolute values has increased by 3.9% compared to the same period of the previous year; this increase reaches 4.1% if dividends received and net fee income are added to the net interest margin.
The favorable evolution of financial margins allows the operating margin (before provisions) to remain stable (+0.1%) compared to a year earlier. Overall, the effort in provisions and allowances amounts to €16,367 million (0.99% on average total assets), equivalent to an increase of 2.3% compared to the €15,993 million allocated to provisions during the first nine months of 2009.
This greater effort in provisions and allowances explains the slight decline recorded in operating profit, 2.1% year-on-year, as well as the 9.7% decrease in consolidated profit, which has not benefited from the generation of extraordinary results in this year.
The consolidated balance sheet as of September 30, 2010 amounts to €2.26 trillion, €188,775 million more and 9.1% higher than at the end of the same period of the previous year.
It is precisely traditional retail banking, closer to the customer, that explains the main variations in the balance sheet of Spanish banks during this period. On the asset side, the item with the greatest increase has been customer loans, which increased by €65,677 million (+5%), while on the liability side the main variation is found in customer deposits, with an increase of €148,084 million (+15.9%). This evolution improves the deposit-to-loan ratio, which stands at 78% compared to 70% a year earlier.
The aforementioned effort in attracting deposits has allowed Spanish banks to more than offset the decrease of €25,222 million in securities issued (-5.4%), while improving their net treasury position, so that the net balance taken from central banks and credit institutions has been reduced by €58,237 million (-47.5%) in the last twelve months.
