Spanish banks to record revenue, profit growth in Q2 even as lending income dips

Spain's largest banks are expected to have overcome a small quarterly fall in lending income in the second quarter to post strong growth in revenues and profits, S&P Global Market Intelligence estimates data shows.

Aggregate net interest income (NII) — the difference between what banks earn from loans and pay for deposits — among the lenders is forecast to have dipped by 0.7% to €23.3 billion in the second quarter, according to Market Intelligence calculations based on consensus analyst estimates.

The quarterly contraction follows several quarters in which NII has frequently increased strongly at the lenders — Banco Santander SA, Banco Bilbao Vizcaya Argentaria SA, CaixaBank SA, Banco de Sabadell SA, Bankinter SA and Unicaja Banco SA.

Spain's banks have been among the biggest European beneficiaries of the rapid rise in interest rates throughout 2022 and 2023 due to their lending-focused business models, largely variable-rate loan books, and strong liquidity that has helped them keep deposit costs low.

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Four of the five lenders yet to report second-quarter results are expected to record quarterly drops in NII when they announce second-quarter earnings results later in July. Bankinter announced its results July 18, beating expectations of a slight quarterly dip of 0.2% in NII in the second quarter with a 1% rise to €583 million.

Sabadell had been the only bank forecast to have achieved a quarterly increase in NII at 0.6% to €1.24 billion. Unicaja is predicted to have the largest quarterly decrease in NII at 2.1% to €382 million.

All six are still projected to have delivered strong annual and quarterly growth in revenues and profits for the three months to June-end. Aggregate revenues at the lenders are estimated to have grown 13.3% year over year and 5.7% quarter over quarter to more than €31 billion.

Unicaja is expected to have the strongest quarterly growth in revenue at 18.6% and the second-strongest annual increase at almost 20% to €548 million. BBVA is predicted to announce the strongest annual rise in revenue at 20.7% for the period to €8.67 billion.

Unicaja is also forecast to post the strongest annual and quarterly growth in second-quarter profits. The bank — whose business is entirely focused on Spain, unlike the other five lenders — is projected to have achieved a more than 61% annual rise and almost 66% quarterly surge in profits to €184 million.

Those banks that derive most of their revenues from Spain — CaixaBank, Sabadell, Bankinter and Unicaja — are expected to record quarterly profit growth of at least 30% for the second quarter. The quarterly profit performance is set to be much stronger than Santander's and BBVA's, which derive a much larger portion of their income from other countries.

Santander's profits are estimated to have increased 9.3% quarterly and 16.8% year over year to €3.12 billion, while BBVA's are predicted to have risen by 9.8% quarter over quarter and almost 19% annually to €2.42 billion.

Aggregate loan loss provisions across the six lenders are forecast to have ticked up by almost 20% annually and 5% quarterly to €5.37 billion in the second quarter as more borrowers struggle with higher interest rates.