...Economic Recovery Supports Banks' Performance Spain's consistent economic recovery, with GDP growing 3.2% in 1H17 and the unemployment rate declining to 17.7% at end-May 2017 (from 20.2% a year earlier), has translated into a solid performance of the domestic business across the five largest Spanish banks in 2Q17. Loan production increased and spreads were broadly stable, supporting net interest income. Fee income behaved well while cost cutting efforts continued. The improving economic environment also resulted in lower NPL entries, larger recoveries and allowed banks to increase foreclosed real estate property sales. On average, the five largest banks (excluding Popular) reduced their stock of problem assets by 14% yoy in 2Q17. We expect the positive asset quality trend to continue in the second half of 2017, but the banks' outstanding legacy problem assets are still large and will take longer to fully digest. Limited IFRS9 Impact Expected: Spanish banks expect a limited impact of the...
