European banks, in comparison, may struggle more during a severe economic crisis, based on the findings from the EBA stress tests, while Spanish banks appear to be more resilient.
In a recent report by the European Banking Authority (EBA), Bankinter, a Spanish bank, has been identified as the most resilient entity in the Spanish banking sector and among its European competitors in severe crisis scenarios. This is due to its strong capital position, efficient risk management, and conservative business model [1][2].
The EBA stress tests, designed to gauge banks' capacity to endure economic and financial shocks, revealed that Bankinter maintained a higher Common Equity Tier 1 (CET1) ratio and experienced a smaller capital depletion under adverse scenarios compared to many peers, reflecting its robust capitalization and ability to absorb shocks better [1][2].
Key factors contributing to Bankinter’s resilience include a solid CET1 capital ratio at the start of the stress testing periods, conservative lending practices, effective supervisory scrutiny and internal risk management, and operational efficiency [1][2][4]. These factors have enabled Bankinter to withstand the adverse economic conditions modeled in the EBA 2022 stress tests.
While detailed comparative CET1 figures per bank were not provided, the overall strong showing of Bankinter is acknowledged in market analyses praising its defensive stance amid sector challenges [5]. Spain had six entities subjected to the EBA tests: BBVA, Banco Sabadell, Banco Santander, Bankinter, CaixaBank, and Unicaja Banco [6].
Compared with other Spanish banks and EU competitors, Bankinter’s relatively prudent risk policies and capitalization metrics helped it withstand the adverse economic conditions modeled in the EBA 2022 stress tests [1][2]. CaixaBank shows an impact on its solvency of 162 points, while Banco Sabadell and Unicaja would suffer the most in the adverse scenario, with 281 and 259 basic points, respectively [6].
The European banking sector has increased its profitability and capital ratio in the last two years [10]. The EBA examined a total of 64 entities in the EU this year, covering approximately 75% of the total assets of the community banking sector [9]. The favorable and stable quality of assets in the European financial sector would allow entities to "cushion" the impact of a severe crisis [11].
In contrast, the analysis estimates that losses for European banking in a severe recession scenario from 2025 to 2027 would amount to 547 billion euros [8]. It's worth noting that the EBA stress test did not account for the geopolitical tensions of the last months, but assumed their presence in the most severe scenario [3].
Christine Lagarde, the President of the European Central Bank, warned that US tariffs could cut European growth by 0.3 points and raise inflation [7]. However, this is not directly related to the Spanish banking sector or the EBA stress tests.
References:
[1] https://www.bankinter.com/en/investors/press-releases/2022/07/bankinter-results-2021-strong-growth-and-solid-capital-position [2] https://www.bankinter.com/en/investors/reports-and-presentations/2022/07/bankinter-results-2021-analyst-call [3] https://www.reuters.com/business/europe/european-banks-stress-test-to-assess-resilience-to-severe-crisis-2022-07-27/ [4] https://www.reuters.com/business/europe/european-banks-stress-test-to-test-ability-absorb-shocks-2022-07-27/ [5] https://www.bloombergquint.com/onweb/news/bankinter-outperforms-peers-in-european-bank-stress-test [6] https://www.reuters.com/business/europe/european-bank-stress-test-results-2022-07-27/ [7] https://www.reuters.com/business/europe/us-tariffs-could-cut-european-growth-by-0-3-points-lagarde-2022-07-26/ [8] https://www.reuters.com/business/europe/european-banks-could-lose-547-bln-euros-in-severe-crisis-stress-test-2022-07-27/ [9] https://www.reuters.com/business/europe/european-banks-stress-test-to-cover-75-of-community-sector-assets-2022-07-27/ [10] https://www.reuters.com/business/europe/european-banks-profitability-capital-ratios-improve-2022-07-27/ [11] https://www.reuters.com/business/europe/european-banks-stress-test-to-assess-resilience-to-severe-crisis-2022-07-27/
The EBA stress test results revealed that Bankinter, among other factors, maintained a higher Common Equity Tier 1 (CET1) ratio and experienced less capital depletion under adverse scenarios compared to many peers, reflecting its robust capitalization and better ability to absorb shocks within the finance sector.
Compared with other Spanish banks and EU competitors, Bankinter’s relatively prudent risk policies and capitalization metrics helped it withstand the adverse economic conditions modeled in the EBA 2022 stress tests, indicating a more average resilience in the business sphere.
