Spain

While system-wide profitability for Spanish banks has recovered gradually since the crisis, the return on equity remains below the cost of capital (Bank of Spain May 2016 FSR).2 Profitability remains higher for Spanish banks compared with European peers, especially supported by relatively high Net Interest Margins (NIMs), however, some Spanish banks still have higher non-performing loan (NPL) and provision to asset ratios.3 The internationally oriented Spanish banks perform more strongly in NIMs compared with domestically oriented banks, mainly supported by their subsidiaries abroad (particularly in Latin America). The efficiency of Spanish banks as measured by the cost-to-income ratio remains favorable compared with peers. On excess capacity, the branch per capita level is relatively high for Spanish banks, while bank employees per capita remains low compared with European peers.