The attributable profit of Spanish banking groups as of December 31, 2016, amounted to 7,987 million euros, representing a 23.1% decrease compared to the previous year. These results have been affected by a series of singular factors, without which the attributable profit for 2016 would have been 12% higher than that achieved in the preceding year.
Among these factors, the negative evolution of exchange rates against the euro for the main currencies in which Spanish entities operate, the provisions required to comply with the resolution of the Court of Justice of the European Union (CJEU) regarding the so-called floor clauses, and the extraordinary write-downs carried out in the last quarter of the year should be noted.
In a scenario of very low, even negative, interest rates, the consolidated profit and loss account for all banking groups associated with the AEB continues to show a high recurrence of margins representative of typical retail commercial banking activity. This is reflected in the positive evolution of the basic margin (which includes net income from interest, commissions, dividends, and results from equity method investments), which registered a year-on-year increase of 0.3%.
In line with this recurrence, operating expenses have been contained, growing at a rate of 2% for the year, which is lower than the 2.5% increase in the average total assets of the consolidated balance sheet. Similarly, the effort in provisions for insolvencies has been maintained in aggregate terms, although it has been affected by the extraordinary write-downs carried out in the final part of the year.
As previously noted, the decrease in results during 2016 is mainly explained by a series of singular factors. Firstly, by the negative net result from exchange differences and financial operations, which was 1,092 million euros lower than that recorded in the preceding year. Despite this, the gross margin remained at 81,840 million euros, barely 1% lower than the previous year.
Additionally, extraordinary provisions due to the CJEU ruling, the almost 10% annual increase in corporate tax expenses, and the increase in minority interests following the global integration consolidation of a significant subsidiary, all contributed to a downward trend in attributable profit, which stood at the aforementioned 7,987 million euros.
Meanwhile, the consolidated profit for the year amounted to 10,803 million euros, 14.6% lower than the previous year, and represents a return on assets (ROA) of 0.41%, compared to 0.50% in 2015, a ratio that has been affected by the negative results recorded by some of the AEB’s partner banks.
The consolidated balance sheet of Spanish banking groups as of December 31, 2016, amounted to 2.6 trillion euros, a decrease in final balances of approximately 29 billion euros, or 1%, compared to the end of the previous year.
Customer loans, totaling 1.54 trillion euros, remained at levels similar to those of a year ago, with a minimal decrease of 8 billion euros, barely a 0.5% year-on-year variation. Non-performing loans decreased to 5.7%, compared to 6.2% at the end of 2015, while the coverage level for operations increased by one percentage point during the year, reaching 65% of balances classified as doubtful.
Customer deposits also showed a moderate evolution, with an increase of 10 billion euros, or 0.8% over the year, reaching 1.39 trillion euros. This amount is the highest ever achieved by AEB banking groups, representing 54% of the balance sheet structure, 10 percentage points more than at the beginning of the recent crisis. These figures place the loan-to-deposit (LtD) ratio at 110%, two percentage points lower than a year ago.
The evolution of accounting equity deserves special mention, as it has grown uninterruptedly for over a decade, more than doubling its amount to the current 195 billion euros, 2.7% above the previous year. As of December 31, 2016, this figure represented 7.5% of the total assets of AEB banking groups.
This year-on-year increase, 3.4% in the case of average equity for the year, combined with the decrease in attributable profit, caused the ROE to fall from 5.5% in 2015 to 4.1% at the close of 2016. Regarding solvency ratios, the highest quality own funds, CET1, stood at an average of 12.36% of risk-weighted assets at the end of the year, a figure similar to that of a year earlier.
In the aggregate of the individual profit and loss accounts of Spanish banks, the profit for the year as of December 31, 2016, was 3,032 million euros, 58% lower than in 2015, on an average balance sheet also 1.3% lower than the preceding year.
During 2016, the gross margin obtained remained at levels only slightly lower than the previous year, mainly because the basic margin, the most representative of typical banking activity, increased by just over 1 billion euros, or 4.1%, reaching 27 billion euros, thereby offsetting the lower results from financial operations for the year.
Operating expenses increased by 950 million euros as a result of the resizing of the branch network, while extraordinary write-downs, significantly increased compared to those made in 2015, exceeded 9 billion euros, as they include, among others, the effect derived from the ruling of the Court of Justice of the European Union regarding the so-called floor clauses.
These increased non-recurring provisions and write-downs, net of the tax effect, explain why the profit for the year decreased from 7,250 million euros in December 2015 to 3,032 million euros a year later, a 58.2% reduction, leaving the ROA at 0.21%, 29 basis points lower than that recorded in 2015.
Regarding the individual balance sheet of Spanish banks, as of December 31, 2016, it presented a total asset volume of 1.41 trillion euros, with a decrease of 25 billion euros, or 1.7%, compared to the same date of the previous year.
The two most significant trends observed in the balance sheet during the year are the change in the investment structure of entities, with a year-on-year decrease in debt portfolio balances of more than 24 billion euros, and an annual increase of 3.4% — approximately 23 billion euros — in customer deposits, reaching 700 billion euros by the end of 2016.
Regarding customer loans, the balance increased from 721 billion to 727 billion euros, representing a slight increase of 0.8%. This evolution places the loan-to-deposit (LtD) ratio at 104%, three percentage points lower than in 2015. The non-performing loan ratio for loans granted in Spain by AEB entities decreased to 10%, 80 basis points less than a year ago, and the coverage of doubtful assets improved to 62%.
As in the case of the aggregate consolidated balance sheets, equity continues the positive growth trend observed in previous years. Since December 2015, it has increased by 1.9% to almost 147 billion euros, equivalent to 10.4% of total assets. These figures bring this heading to its historical maximum and represent a leverage of AEB banks of less than 10 times.
