Banks are some of the most profitable financial institutions in the world. Most of the profit tends to come from issuance of loans and mortgages for purchase of property, land or items like cars. The financial times reports that banks have found it difficult to make the staggering profits they once made, owing to reduced lending rates. However, the most innovative banks have still managed to come up with ways of maintaining a steady stream of profits. In Spain, there are many banks, all competing for the same market. They will periodically request investors to lend them capital and offer them shares in return. The shares offer the possibility of a capital gain if the share price rises. Equally, most shares will offer yearly dividends, representing annual income. Any gains from such an investment will be directly dependent on the company’s profitability. For this reason, Investing in any given bank requires diligent study of the banks historical financial performance which serves as a yard stick for predicting future performance. This article seeks to identify the top Spanish banks that offer the best investment opportunities.
- Banco Santander
The lender stands out as the most profitable bank in Spain and the company that offers investors the best chance to make money. Pre-tax profits for the year ended 31st December 2014, stood at an astonishing €5.816 billion while the bank has already made €2.922 billion in the first half of 2016. An investment in this financial giant would nearly guarantee returns.
It’s Spain’s second biggest bank by market value and profits. The lender reportedly earned€2.644 billion in 2015. Representing a 1% increase in earnings compared to the year 2014. Half year profits for 2016 stand at €709 billion. The bank has followed the guidelines by The Bank of Spain, requiring it to increase capital cushion in a bid to protect investors from massive financial shocks that could lead to losses.
This is another institution that presents good value for money. In 2015, reported profits stood at €1040 million, representing a 39.2% increase when compared to year 2014. Following the impressive results, the bank proposed a 50% increase in dividends.
- Caixa bank
The bank acquired Barclays bank Spain in early 2015, in a move aimed at boosting performance. Following the move, 2015 profits rose by an astonishing 31.4% to stand at €814 million. Potential investors should be pleased with the news that the cost-to-income ratio improved as a result of strong income generation capacity. Euromoney named Caixa bank as the best Spanish bank of 2015.
- Banco Sabadell group
The bank posted a 90.6% increase in net attributable profit in 2015, to €708.4 million. These results beat market predictions. Outside Spanish soil, the group has been consolidating TSB banking group in the UK, a step aimed at increasing its market share and diversifying its overall portfolio.
These banks are the most promising banking institutions in Spain and offer buyers the highest chance of reaping big. According to the European banking authority, all the five banks have fulfilled capital requirements. While this article has highlighted a few important guidelines related to investment in Spanish banks, it’s imperative for potential investors to dig deeper into their chosen investment vehicle so as to have a more concrete analysis of its financial health.