Spain: Financial Sector Assessment Program-Technical Note-Determinants of Bank Profitability

International Monetary Fund

No 2017/339, IMF Staff Country Reports from International Monetary Fund

Abstract: This Technical Note discusses the recommendations in the Financial Sector Assessment Program for Spain regarding determinants of bank profitability. Profitability remains higher for Spanish banks than for European peers, especially supported by relatively high net interest margins; however, some Spanish banks still have higher nonperforming loans (NPLs) and provision-to-asset ratios. Panel regression analysis suggests that Spanish banks’ profitability is influenced by a combination of structural and cyclical factors, similar to those influencing other European banks and global systemically important banks. The IMF mission recommends further steps to reduce NPLs and legacy assets, continued cost-cutting measures to enhance the profitability of Spanish banks, and stronger communication between supervisors and banks on business models.

Keywords: ISCR; CR; bank; profitability; Spanish bank; bank characteristic; interest margin; return on equity; bank size; bank supervisor; Personal income; Bank soundness; Short term interest rates; Nonperforming loans; Global systemically important banks; Global (search for similar items in EconPapers)
Pages: 35
Date: 2017-11-13
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