Spanish Banking Sector Delivers Record Nine-Month Results Amid Higher Rates
Six main Spanish banks listed on the Ibex 35 — Santander, BBVA, CaixaBank, Sabadell, Bankinter, and Unicaja Banco — combined for a net income of 19.761 billion euros in the first nine months of the year, up 23.4 percent from 16.014 billion a year earlier. The continued rise in official euro area rates to 4.5 percent has boosted bank earnings in 2023. The six lenders are anticipated to pay more than 1.1 billion euros in banking tax this year after the government shifted the levy from temporary to permanent status.
Analysts note that the sector still shows expanding profits driven by higher net interest margins and stronger fee income. This has helped many Spanish banks reclaim pre pandemic trading levels, with several reporting their strongest ever results. Yet uncertainty persists as market dynamics could shift in the coming months due to geopolitical tensions, inflation, policy moves by central banks, bond yields, and energy costs.
Slower loan demand resulting from higher rates and tighter financing conditions may temper earnings growth and the possibility of higher defaults. At the same time, deposit volumes have declined as returns compress, and price pressures touch consumer costs. Observers also see rate hikes potentially nearing an inflection point, as the European Central Bank paused further increases after the US Federal Reserve halted tightening in recent meetings. If rate increases stall, banks might respond by adjusting deposit fees to prevent funding outflows.
Santander reported an attributable net profit of 8.143 billion euros, up 11.3 percent from the prior year. This marks the best nine-month result since the bank began operations in 1857, supported by a higher rate environment across the global system. Spain remains the strongest profit contributor for Santander, with profits rising 68 percent to 1.854 billion. The bank noted that the tax on banking activity shaved about 224 million from profit and its CEO called the tax discriminatory when compared with other firms that do not pay it. Leadership also referenced pricing moves as a competitive response, echoing Sabadell’s strategy of online account charges.
Bankinter posted solid nine-month results, excluding 2021 when a large capital gain from the sale of Línea Directa skewed comparisons. Net profit reached 685 million euros between January and September 2023, up 59.2 percent versus the prior year. Banking tax paid amounted to 77.5 million euros, and a case over this tax was brought to court. The bank emphasized that higher activity and a friendlier rate environment improved margins, profitability, and capital metrics.
Sabadell Bank earned 1.028 billion euros in the first nine months of 2023, up 44.9 percent and surpassing the total annual profit of any single year since its 1881 founding. The CEO argued that profits are not excessive and stressed that maintaining sound capital levels remains a priority while opposing measures to extend protections for mortgage holders without broader lender support.
CaixaBank posted 3.659 billion euros in net income from January to September, up 48.2 percent from 2.469 billion in the prior year period. Nine-month revenue rose 16.3 percent versus all of 2022. The tax on banking activity reduced total income growth to 28.9 percent. Management framed the result as evidence of financial resilience and steady profitability, enabling continued support for shareholders, the La Caixa Foundation, and the State via FROB, while maintaining social commitments to families and businesses.
BBVA reached 5.961 billion euros in revenue for the January-September window, setting a record for profit growth that surpassed 2022 by 24.3 percent thanks to a stronger recurring income base from higher rates. The group also disclosed its third-quarter performance, with net profit up 13.4 percent and earnings per share up 17.8 percent, aided by share repurchase programs.
Unicaja Banco, the latest Ibex 35 entrant, posted a net profit of 282 million euros in the first nine months of 2023, up 4.9 percent from 2022. The bank paid about 63.8 million euros in banking tax; excluding this impact, net profit would have been around 349 million, 28.4 percent higher than a year earlier. The result reflected a 25.4 percent rise in annual interest margin, a 1.6 percent uptick in net commissions, stronger ordinary income, and lower personnel costs. Lower credit losses also contributed to the improvement.
Record Outlook for 2023
Looking ahead at the latest figures for the January-September period, analysts see records being challenged by external factors. Santander projects a return on tangible capital around 15 percent for 2023, assuming no new adverse shocks. Total annual profit could land between 10.9 and 11.0 billion euros, up from 9.605 billion in 2022. Sabadell also anticipates a strong finish for 2023, potentially achieving a return on tangible capital around 11.5 percent and closing near 1.3 billion euros in profit, well above 2022. CaixaBank is expected to approach its 2021 high of 5.226 million in profit, helped by strategic acquisitions and ongoing efficiency gains.
These developments illustrate how a higher-rate environment is shaping the profitability landscape for Spanish banks, while also underscoring the sector’s sensitivity to policy shifts and macroeconomic forces. The balance between higher margins and potential deposit competition remains a central theme as the industry navigates a year marked by dynamic rates and evolving regulatory expectations.