It is striking that in some forums the need for banks to be profitable is questioned. This profitability, on the other hand, remains lower in European and Spanish banking than the cost of equity. Having adequate profitability allows for obtaining financing and resources that strengthen medium- and long-term viability. Profitability is synonymous with stability, given that the banking business relies on the trust of both customers and shareholders. <\/p>\n
The economic deterioration during the crisis and the sharp adjustment carried out by the sector resulted in a significant decline in the profitability of European banks. The economic improvement of recent years has not allowed for the recovery of lost profitability, which currently sits at the bottom of the ranking of economic sectors. Part of the explanation lies in the historical anomaly of having zero or negative official interest rates during the expansionary phase of the economic cycle, which penalizes the traditional financial intermediation activity of banks. <\/p>\n
Profitability allows banks to provide the high-quality service demanded by increasingly discerning customers. Despite not yet having achieved profitability above the cost of capital, the banks of the Spanish Banking Association are making a significant effort to adapt to the digital transformation requested by their customers, investing more than \u20ac1.7 billion each year to improve efficiency and respond to the growing demands of clients, who want to be able to operate with their financial institutions through any channel under very competitive conditions. <\/p>\n
The European supervisor is calling on banks to improve their profitability by being more efficient, reducing the legacy of the crisis still on their balance sheets, and diversifying their sources of income. Fee income is derived from a wide range of financial services provided by banks, which incur investments and costs to provide them. On an individual scale, the final decision on the price of the financial services provided by each bank depends on its cost structure and commercial policy. The greater efficiency of banking in Spain compared to most of its European competitors, together with an operating model based on a stable and lasting relationship with its customers, allows Spanish consumers to enjoy fees that are 58% lower than the average charged in the main European Union countries. In Spain, up to 115 financial services are offered compared to 82 in the EU. More than 75% of services are offered free of charge and through different channels for the greater convenience of customers. The weight of fee income over the interest margin in Spain is lower than in most Eurozone countries, meaning its contribution to the increase in total results is marginal. <\/p>\n
Banks are fundamental to the economy by financing its growth. They provide the financial services that families and businesses require for their own activity. Banks increase their profits within a context of economic recovery from which the rest of the economic agents benefit. They comply with demanding regulations to strengthen trust and transparency for the benefit of consumers. Improving profitability is a priority for banks that benefits society as a whole. <\/p>\n