Banking faces a challenging 2025. The rate cut initiated by the European Central Bank (ECB) will complicate the maintenance of the record profits and profitability achieved in the last two years with its previous increase. But the entities have anticipated the reversal of monetary policy, reinforcing its investment in fixed income to limit its impact, and they hope to boost the account with a growing business and a higher commitment in activities such as asset management, insurance and personal and private banking, along with business banking.
The listed banking (Santander, BBVA, CaixaBank, Sabadell, Bankinter and Unicaja) are on their way to end the current year with a profit of 30,589 million euros, an amount 17.84% higher to that achieved in 2023. In 2025 and, according to the consensus of Bloombergthe figure could fall 4.39% year-on-year, to 29,250 million.
The scenario that the market handles is that the ECB will lower rates from the current 3% to 2%, less than half of the maximum 4.5% to which it raised them to put a stop to the inflation problem, thereby boosting the income of banking.
The positive part of the reduction is that it has led to a resurgence in demand for credit that the sector hopes to maintain with delinquencies under control (in October it stood at 3.41%, its lowest level since 2009). Two factors likely to favor this impulse are the launch of ICO guarantees on mortgages for young people and loans from the Next Generation EU for business, SMEs and self-employed projects.
The drop in rates and high commercial competition puts, in any case, pressure on an industry where bankers are once again talking about potential concentration operations to, precisely, address the contraction of margins. They give few options to transnational unions due to regulatory barriers and despite the offensive of Andrea Orcel -CEO of UniCredit- about Commerzbank and Banco BPM.
BBVA’s takeover bid
In domestic key, The attention is drawn to BBVA’s hostile takeover of Sabadell due to the impact on both banks and the opportunities that their rivals may find. The ball is in the court of the CNMC, but by taking the analysis to Phase II it paves the way for a statement from the Government, contrary to the transaction, although it cannot veto the takeover bid.
BBVA maintains that the operation is profitable, even without merging Sabadell, and has warned that it will give up if the Competition Authority torpedoes the value with strong conditions. The deadlines do not play, in any case, in their favor since their leadership – Carlos Torres and Onur Genç – must renew their mandate this year.
#Banks #fight #win #business #maintain #profits #falling #rates
