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The confirmation in early June that Spain’s sixth largest bank was failing or likely to fail surprised almost no one. It was the speed with which the resolution of Banco Popular was completed that was the main source of surprise for investors.
According to rating agency DBRS, net profits among the nine largest Spanish banks were down by 20% in 2016. Strip out the €3.5 billion loss reported by Popular, however, and they were up 10%. True, much of this increase was driven by the international operations of Santander, BBVA and Sabadell. Net profits in the domestic market were down by 2% (excluding Popular) last year, which was predictable in an environment of punishingly low interest rates and flat loan growth.
But it was not just Popular’s loss that let the side down for the fast-recovering Spanish banking industry in 2016.