Spanish banking, among the strongest: it is the one that would best withstand a hypothetical scenario of economic stress
Spanish banks, despite currently having the lowest capital levels in the European Union (EU), are at the same time the ones that best withstand a hypothetical stress scenario in which the economy would enter a deep recession and the interest rates would skyrocket.
This is the main conclusion of the stress tests carried out by the European Banking Authority (EBA) published this Friday at the close of the market, read in Spanish.
In this exercise, the European banking sector started with an average capital of the highest quality (CET1 in the jargon) of 15% at the end of 2022, which would drop to 10.4% at the end of 2025 in a stressed scenario, which equivalent to losses of 496,000 million.
Below this average, and with a ratio of less than 10% in 2025 in the most adverse scenario of the test, are the financial systems of large nations such as France and Germany, as well as the Netherlands and Spain.
However, it is striking that of the entire sample, Spanish banks are among those that destroy less capital. Taking into account that its initial ratio did not reach 13% in 2022, as it was 12.58%, the loss of less than 2.6% means that it would be the one that would best withstand a deep recession.
Spanish banking
Bankinter, Santander and Kutxabank have positioned themselves as the most resilient Spanish entities in the face of the adverse scenario to which the European Banking Authority (EBA) has subjected them in the stress tests that it has made public this Friday.
Specifically, Bankinter started in December 2022 with a CET1 capital ratio in its fully loaded variant of 11.86%. By applying the adverse scenario posed by the EBA in its test, the capital ratio drops to 10.28% by 2025, so the impact is 158 basis points.
In second position was Banco Santander, which reflects an impact on its solvency of 171 basis points, going from 12.04% of CET1 in December 2022 to 10.33% in 2025. The podium is closed by Kutxabank, with a negative impact of 195 basis points, which is the equivalent of registering a fully loaded CET1 capital ratio of 15.26% in 2025, from 17.21% at the start of the test.
These three entities are the only ones that have achieved a better result than the whole of Spain. According to the EBA, the impact for all Spanish entities is 242 basis points, going from a CET1 capital ratio of 12.41% in December 2022 to one of 9.99% at the end of the test.
In any case, the data for Spain are better than the average observed by all the banks analyzed by the EBA, which suffer an impact in the adverse scenario of 479 basis points, going from 15.18% of CET1 capital to 10.39 % in 2025.
Returning to the Spanish entities, behind the first three is Abanca as the fourth with the best result, with an impact of 275 basis points, going from a CET1 ratio of 11.95% to 9.20%. In fifth place is BBVA, which went from 12.61% to 9.66% (295 basis points less), while Caixa reached sixth place, with 313 basis points (from 12.48% of CET1 to 9.35%).
The last two positions of the Spanish banks that the EBA has examined correspond to Unicaja, which faces an adverse impact in the stressed scenario of 326 basis points, going from a starting CET1 capital ratio of 12.98% that drops to 9, 72%, and Banco Sabadell, with a drop of 374 basis points in its solvency, as the CET1 capital ratio dropped from 12.55% to 8.81%.