Banks reacted smartly to Spain’s sharp contraction in growth last year — with the resulting numbers showing that they are nicely positioned for the future.

At the height of the Covid-19 pandemic in 2020, Spain experienced a year of two very different halves. In the opening six months, the economy was hit particularly hard, as severe lockdown measures brought activity to a standstill. But by the end of the second half of the year, the picture had started to improve. Government and household consumption picked up, supporting a 0.4% growth increase in the fourth quarter, contributing to a much-needed boost in fortunes for Spain’s private sector. Despite this late revival of fortunes, the economy as a whole shrank by 10.8% over the year, making it one of the sharpest contractions in continental Europe. 

In response to these challenges, Spanish banks performed admirably. Not only did they adopt prudent macroeconomic assumptions in terms of their provisioning needs, but they also played an outsized role in supporting the economy through a national crisis.

The best-performing bank in this year’s ranking among the 10 largest Spanish lenders is Kutxabank with an overall score of 5.41. Underpinning this outcome is the lender’s strong showing in the leverage, profitability, soundness and asset quality stakes. Kutxabank achieved a global ranking of 234th in terms of its Tier 1 capital position, while coming sixth on the same metric among the featured Spanish banks.

Diversification helps

In close second position is CaixaBank, with an overall performance score of 5.37. Notably, it secures first position with respect to its profitability, operational efficiency and return on risk. Benefiting from a highly diversified business, CaixaBank is also one of the fastest growing Spanish banks in the 2021 ranking. Meanwhile, Abanca Corporación Bancaria and Unicaja Banco secure third and fourth place in the overall performance ranking, with scores of 5.27 and 5.16, respectively. 

Bankinter and Banco de Sabadell come in at seventh and eighth positions, respectively, among the country’s best-performing banks. In the case of Bankinter, the bank scores particularly well based on its operational efficiency numbers, while Banco de Sabadell is among the top three banks in the country based on the leverage indicator. Banco de Sabadell is pushing hard to reduce its operating costs as it looks to boost its profitability numbers in the coming years. 

Banco Santander, the country's largest lender, secures ninth position in the best-performing table, with an overall score of 4.37. Notably, it has achieved generally robust outcomes in its soundness, asset quality and operational efficiency numbers. Banco Santander has been working particularly hard on its digital banking propositions for customers across Spain in recent years, an investment that clearly paid off during a period in which stringent lockdowns were a frequent feature of daily life. 

Spain’s banking sector has emerged from the worst of the Covid-19 pandemic in relatively good shape. Though scope remains for improved profitability numbers, as is the case in other European markets, well-diversified business models coupled with generally prudent management strategies have positioned most Spanish banks well for the years ahead.


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