...Revenues Shrinking; Asset Quality Improves Low interest rates and sluggish business volumes are hampering Spanish banks' domestic revenues. Increased competition is also compressing client margins. In recent years, cheaply funded securities portfolios have to some extent supported banks' revenues. However, the narrowing Spanish sovereign spreads and portfolio rotation have reduced significantly the revenue contribution from the securities portfolios. The six largest banks' aggregated domestic net interest income declined 8.5% yoy in 9M16. Asset management fees and trading income also suffered from the increased volatility in capital markets during the period. The banks are cutting costs to offset the pressure on revenues, but the scope for lowering deposit rates is limited and the savings from voluntary redundancy schemes and branch closures have upfront costs and take longer to feed through. Lower loan impairment charges (down 34% yoy) were the main factor supporting domestic earnings...
