S&P expects Spanish banks to resist and credit quality deterioration to be manageable in 2023

Projects a non-performing assets (NPAs) ratio of 6% in 2023 and expects profit to improve even after tax

November 17 () –

S&P Global Ratings believes that Spanish banks will demonstrate their resistance to the worsening economic environment, being able to handle the possible deterioration in credit quality and improving their profits despite the impact of the extraordinary tax on the sector.

In a report on her global vision of banking for 2023, the Spanish bank analyst for S&P, Elena Iparraguirre, projects her estimates for credit growth (2%), the ratio of non-performing assets (6%) and profitability on weighted assets (0.5%).

Although S&P expects the Spanish economy to slow down sharply in 2023, real GDP growth will outpace all other major European economies and employment will remain.

The rating agency expects problematic loans to increase, especially among SMEs and in consumer loan portfolios, but in any case believes that the deterioration in asset quality will be “manageable.”

This scenario, according to the analyst, will not cause a significant increase in credit losses either, which will be limited to around 50 basis points in 2023, thanks to the provision buffers created during the pandemic and the volume of exposures of companies covered by public guarantees. .

On the other hand, the S&P expert believes that the profits of Spanish banks, with high retail deposits, will benefit from the sharp rise in interest rates, which will be “a tailwind” for their profitability.

Likewise, the low cost structure of Spanish banks, as a result of the personnel adjustment processes of the last decade, positions the sector well to face inflationary pressures.

“Therefore, we expect bottom line earnings to improve, even after taking into account the new extraordinary taxes from Spain,” the S&P report concludes.