Navigating Spanish Banking Investments: Post-Crisis Recovery and Current โฃvaluations
The Spanish banking sector carries the weight of a notable restructuring, born from the deep brick crisis and the 2012 bank rescue. This period necessitated drasticโค cost-cutting measures,โค including substantial employment adjustments and office closures, alongside a forceful recapitalization of institutions. Now, years later, investors are reassessing the landscape.
Valuation Concerns Emerge After Rally
Following a โperiod of strong gains in the Spanish stock market, bank โvaluations are a key point of contention. The historical discount to book value previously seen in Spanish banks has vanished, with โsome, like Bankinter, now trading at a premium not observed in over a decade – around 100%. This has prompted caution โขfrom some analysts. Vรญctor รlvarez, Director ofโค variable Income at Tressis, argues โคthat current valuations already reflect a โhighly optimistic scenario, leading him to recommend reducing exposure to Spanish bankingโค rather than increasing it. He anticipates slower business growth as interest rates appear to have bottomed out in the Eurozone.
PER Analysis: A More Nuanced Picture
However, a price-to-earnings ratio (PER) comparison suggests โคSpanish banks aren’t significantly overvalued comparedโข to their European peers. โข Commerzbank currently has anโ estimated PER of 10.5 times for 2026, whileโ Deutsche Bank stands at 9.3 times, according to FactSet consensus. Within Spain, Sabadell appears particularly attractive based on it’s PER, estimated at nine times when excluding the contribution of itsโ British subsidiary, TSB, which is slatedโ for sale inโ early โ2026.
Analyst Recommendations & Positive Outlook
Despite โฃรlvarez’s caution, several firms maintain a positive outlook.โฃ Jefferies recommends CaixaBank as its top pick within the Spanish domestic banking sector,recently raising its target price to โฌ10 per share.Barclaysโฃ favors BBVA, aligning with its overall โoptimistic view of the Spanish banking market. โคBarclays analyst Cecilia Romero highlights the strong performance of Spanish domestic banks,โ driven byโฃ faster loan and โdeposit โgrowth and favorable funding costs, alongside the potential of internationally diversified banks โคwith attractive valuations. โฃRomero believes strong bank performance will continue to โsupport the broader Ibex 35 index.
Potential for Consolidation
The โขpossibility of further mergers and acquisitions remainsโค a โขtopic of โdiscussion. S&P โคfinancial institutions analyst Luigi Motti suggestsโ concentrationโ movements areโ likely, particularly among mid-sized โขentities, โฃdue to a gap in market positioning between the largest banks and the โrest. However,marisa Mazo counters that the unsuccessful takeover โattempt of Sabadell indicates no immediate urgency for consolidation. She argues that current profitabilityโข levels across โSpanish banks -โค all now exceeding their cost of capital – remove the โpressure โคto pursue mergers solely for profitability improvement.
