CONSOLIDATED INCOME STATEMENT
Spanish banks registered losses of 6.955 billion euros in 2020 after strengthening their balance sheets with extraordinary provisions and write-offs totaling 12 billion euros to cope with the economic effects of the health crisis caused by the coronavirus.
The entirety of the negative results for the full year is attributable to the increased provisions and write-offs made during the first half of the year, while in the last two quarters, the aggregate result was 4.5 billion euros in profits.
Gross margin decreased by 11.2% compared to 2019 due to the combined effect of sustained low interest rates, exchange rate differentials, and reduced activity as a consequence of the pandemic, which negatively impacted both the financial margin and net commission income.
Operating expenses significantly decreased by 11.9% year-on-year, with an improvement of 23 basis points. This positive evolution of expenses allowed the efficiency ratio to stand at 48.9%, compared to 49.3% a year earlier.
During 2020, provisions for insolvencies and write-offs were made, totaling over 35 billion euros, of which more than 12 billion were extraordinary, in anticipation of the potential consequences of the crisis on future asset quality.
This effort in provisions and write-offs, together with lower extraordinary results and higher tax expenses, explains the losses of 6.955 billion euros recorded at year-end, compared to the 11.547 billion euros in profits obtained in 2019.
CONSOLIDATED BALANCE SHEET
The aggregate of consolidated balance sheets amounted to 2.7 trillion euros at the close of fiscal year 2020, an increase of 2.4% compared to December of the previous year.
Customer loans, affected by the exchange rate, decreased by more than 5% year-on-year, with a non-performing loan ratio that fell to 3.64%, compared to 3.71% a year earlier. The coverage ratio increased, as a result of the high provisions made during the year, to 75% of non-performing assets, which is 7 percentage points higher than at the close of the previous year.
Customer deposits remained at similar levels to those in December 2019, placing the loan-to-deposit ratio at 103%, compared to 109% a year earlier.
Net equity was negatively affected by the year’s losses, decreasing by 12% year-on-year, although this effect was not transferred to the solvency ratio, which stood at 11.86% as of December 31 in terms of fully loaded Common Equity Tier 1 (CET1 fully loaded), 40 basis points higher than at the close of fiscal year 2019.
