In 2023’s final quarter, Abanca continued to ride the wave of higher interest rates that swept through Spain’s banking sector, following the country’s major financial players. The Galician leader reported annual revenue of 711 million euros, a surge of 227 percent from the previous year and a milestone the group described as its most profitable year to date in an earnings presentation. Management highlighted strong governance, resilience in the Spanish economy, sturdy employment, and inflation containment as the pillars of this performance. Profitability rose to 16 percent, enabling comfortable coverage of elevated capital costs driven by the new rate environment.
The gap between the interest earned on loans and the cash paid on deposits narrowed, yet the effect on the margin was positive. The fourth quarter witnessed a trade spread of 3.2 percent, with new loan concessions averaging 5.10 percent compared to 4.05 percent for loans already in the book. Fees on term accounts softened slightly, from 1.90 percent to 1.84 percent for operations concluded between October and December. This dynamic contributed nearly 1.232 billion euros to the interest margin, marking an annual rise of 61 percent and underscoring the core driver of the bank’s profitability.
With the acquisition of Targobank, total normal loan volume rose by 0.4 percent to 45.190 billion euros. CEO Francisco Botas explained that the trajectory would lift by 11.2 percent, aided by Abanca’s new Portuguese subsidiary EuroBic. Lending grew 15.3 percent in Portugal and 14 percent in Spain. The group approved 10,000 new mortgages and provided 23,000 financing injections for small and medium enterprises as well as self-employed professionals.
Even amid a cooling economy, the default situation remained contained. The default rate ticked up slightly to 2.4 percent at the end of 2023, from 2.1 percent in December 2022, with the system average around 2.9 percent. Officials emphasized that these are modest figures that do not alter the bank’s risk profile, reaffirming a historically low relative level in the sector. If GDP remains on its current growth path, this scenario should continue to hold, according to Botas.
Escotet noted that employment records and expectations for potential rate cuts, as hinted by the European Central Bank, add a favorable backdrop. He also warned that growth in new production would face more challenges and that portfolio stock could show negative growth by year end. Coverage of doubtful assets stood around 74 percent, while seized assets stood at about 63 percent as part of the bank’s risk management framework.
Deposits expanded by 9.5 percent, reaching 53.5 billion euros. Abanca earned 17 basis points in the domestic market and 15 basis points in Portugal. Customer composition remained concentrated, with 93 percent coming from families and businesses and 71 percent holding balances below 100,000 euros. Executives described a highly granular savings mix. The insurance unit grew by 12.9 percent, approaching 14,000 million euros, driven by robust performance across health, automotive, corporate, and life segments.
Abanca’s growth strategy blended organic expansion with acquisitions, resulting in 130,000 new customers in 2023. Seven corporate transactions supported this expansion. The integration of Targobank technology is slated for completion in mid-June, while regulatory approvals to adopt EuroBic are expected around the same time. The bank aims to be the seventh financial group operating across Spain and Portugal with a combined business volume near 124,000 million euros. Excess capital above regulatory requirements stood at 1.499 billion euros. Escotet highlighted a preference for complementary opportunities while noting that margin opportunities from new acquisitions may gradually compress as profitability in incumbent peers improves and appetites for selling activities moderate.
Entity insists: There is no rush regarding Nueva Pescanova
Nueva Pescanova announced in October that it ended its relationship with Canadian Cooke. The group’s largest shareholder remained confident in the new leadership under Jorge Escudero, signaling continued alignment with the strategic plan. Juan Carlos Escotet stressed that the organization seeks the best possible financial and industrial partner but is not hurried in this process. He also credited the management of Deportivo for progress toward a potential recovery by mid-year, while confirming that the roadmap remains protected and free from regulatory imposition. The executive added that the new team’s work has been solid despite sector-wide challenges and that disinvestment will occur when deemed appropriate.
We believe that the bank tax will disappear
When asked about the government’s decision to extend the special tax on banks amid high profits, Escotet acknowledged that the move is not favorable. He did not disclose the precise tax impact on Abanca’s 2023 accounts, but noted it affects tax invoicing and regulatory costs at a broad level. The executive argued that the tax negatively impacts credit availability and competitiveness, pointing to a comparatively lower valuation of listed Spanish banks versus some European peers. He expressed cautious optimism about negotiating a resolution and suggested that prolonged extensions were unlikely.