THE MOST REPRESENTATIVE MARGINS OF BANKING ACTIVITY REMAIN AT LEVELS SIMILAR TO THOSE OF 2014 DESPITE THE LOW INTEREST RATE ENVIRONMENT.
THE NON-PERFORMING LOAN RATIO DROPPED BY ONE POINT TO 6.2%, WHICH ALSO REDUCED THE NEED FOR PROVISIONS AND WRITE-OFFS. ALL THIS WITHOUT AFFECTING THE COVERAGE LEVELS OF NON-PERFORMING LOANS.
ALL AEB BANKS PRESENT CAPITAL LEVELS HIGHER THAN THOSE REQUIRED BY THE SUPERVISOR. THE HIGHEST QUALITY CAPITAL RATIO, CET1, REACHED 12.38%, 36 BASIS POINTS HIGHER THAN A YEAR AGO.
FOR THE SECOND CONSECUTIVE YEAR, THE CONSOLIDATED BALANCE SHEET OF SPANISH BANKING GROUPS GREW AT AN ANNUAL RATE OF 9%. NEW LENDING OPERATIONS IN SPAIN GREW BY 25% FOR HOUSEHOLDS AND 15% FOR SMES.
The attributable profit of Spanish banking groups, as of December 31, 2015, amounted in aggregate terms to €10,389 million, representing an increase of 5.6% compared to the previous year. For its part, consolidated profit was 9.3% higher than that obtained at the end of 2014, reaching an amount of €12,647 million and a return on total assets (RoA) of 0.50%, a figure similar to that recorded the previous year.
In the past year, the profit and loss account of Spanish banks associated with AEB has been characterized by the maintenance of the most recurring margins of typical banking business, as well as by lower provisioning and allocation needs and by negative extraordinary results.
Despite the low interest rate environment observed in recent years, the interest margin maintained the positive trend initiated in 2014 and stood at 2.22% on average total assets (ATA), with an increase of 11% annually in its amount and 3 basis points improvement in return on assets.
The slight increase in net fee and commission income and lower results from financial operations, partially offset by better results from exchange rate differences, place the gross margin at 82,679 million, or 3.24% of ATA, just 5 basis points less than a year earlier. Despite the aforementioned interest rate levels and reduced global economic growth, this evolution of the gross margin reflects the positive effect of the geographical and currency diversification developed by Spanish banks in recent years.
In line with the trend followed in previous years, operating expenses remain at levels similar to 2014, which allows maintaining the efficiency ratio at 49% with 1.60% on ATA, one basis point less than in 2014.
The profit and loss account reflects the lower provisioning and write-down needs that Spanish banking institutions had to make in 2015, although they reach an aggregate amount of €22,000 million, with a decrease of 13 basis points on ATA compared to the previous year.
Extraordinary and atypical results were, as a whole, negative during 2015, in contrast to the profits obtained in the previous year. All these factors, together with lower tax expenses recorded, placed the attributed profit at 10,389 million euros, representing a return on equity (RoE) of 5.5%, 20 basis points lower than that achieved in 2014.
As of December 31, 2015, the aggregate consolidated balance sheets of Spanish banking groups amounted to €2.6 trillion and, as in the case of the profit and loss account, was 9.2% higher than the previous year due, in large part, to the incorporation of new entities into the consolidation perimeter, as a result of acquisitions of entities carried out by AEB member banks.
This increase in the balance sheet was reflected in the figures for customer loans and deposits, which increased by approximately 150,000 million euros in each of these two headings. This growth maintains the loan-to-deposit ratio (LtD ratio) at 112%, a level similar to previous years.
The non-performing loan ratio in consolidated balance sheets decreased by one percentage point to 6.2%, and the coverage ratio of doubtful assets remains at 64%.
With an increase of 13,181 million, equity represents 7.3% of the total balance sheet. The increase in equity has offset the drop in valuation adjustments due to available-for-sale financial assets and exchange rate differences.
Eligible capital, measured under Basel III criteria and according to the progressive implementation schedule, results in a highest quality capital ratio, CET1, of 12.38%, 36 basis points more than a year ago, above the minimum requirements. Following the supervisory review exercise carried out by the European Central Bank, all AEB banking groups present capital levels higher than those required by the supervisor.
INDIVIDUAL FINANCIAL STATEMENTS
In 2015, the aggregate individual income statements of Spanish banks showed a stabilization of the most recurring margins of banking business and a clear decrease in the provisioning needs of institutions, which allowed reaching a profit for the year of €7,247 million, 35% higher than the previous year, with a return of 0.50% on ATA.
The components of the basic margin—the most representative of typical banking activity since it is the result of adding interest, fees, and dividends—remain at levels similar to those of the preceding year, exceeding €25,000 million, with a return on ATA barely 3 basis points lower than in 2014.
Two further aspects to highlight in the income statement for the year are, on the one hand, the decrease in results from financial operations (16 basis points less on ATA), and on the other, the lower requirements for provisions and allowances (21 basis points less on total assets). Provisions made in 2015 amounted to 7,068 million euros, 27% lower than those in 2014, although this is still a significant figure that shows how entities continue to support the process of cleaning up their respective balance sheets.
Operating expenses, two basis points less than the previous year, and better sales results finally placed the profit for the year at the aforementioned €7,247 million, representing a return on assets of 0.50% (RoA) and 5.2% on equity (RoE), with respective improvements of 12 basis points and one percentage point compared to the previous year.
Regarding the aggregate individual balance sheets, as of December 31, 2015, it was one percentage point lower than a year earlier due to a reduction in the perimeter, since one entity ceased to include its accounts in the aggregate.
Customer loans and deposits decrease by around 3% annually, leaving the loan-to-deposit ratio (LtD ratio) at 106%, a level similar to the previous year.
Lending shows a non-performing loan ratio of 10.8%, two percentage points less than in December 2014, while coverage levels remain at the 57% seen in the previous year. The granting of new lending operations deserves special mention, the amount of which has increased by 25% annually for loans to households and by 15% for non-financial corporations (less than one million euros), the latter being representative of SME financing.
Notable is the evolution of equity which, in line with the trend of recent years, has increased by more than €10,000 million, reaching €144,000 million in December 2015. This growth, of 7.5% annually, has placed the equity ratio on total balance sheet at 10%, the highest figure reached in recent years.
