BRANCHES are closing and jobs are being slashed by Spanish banks as profitability is hit by stiff competition.
The three biggest lenders in the country, Santander, BBVA and CaixaBank, all posted dwindling first quarter net profits, especially in Spain, which is fighting a jobless rate of 21 per cent.
The Eurozone’s biggest bank by market capitalisation, Santander, plans to close 450 smaller branches and cut 1,400 jobs in Spain. This equates to about 5 per cent of jobs in its home market, through voluntary departures.
The bank has forecast that this move will save between €75 and €110 million every year from 2017.
Whilst Spain’s third-largest bank, Barcelona-based CaixaBank plans to cut 500 of its 32,500 jobs in the country and will be looking to achieve this through early retirement plans.
Ignacio Soto of the UGT union, said: “We fear that the job cuts in the banking sector have not ended.”
Currently Spain has the highest number of bank branches per resident in Western Europe, with 8.6 branches per 10,000 residents, according to Roland Berger, a consultancy firm. Spain’s number which is vastly higher than the average in the EU which is five per 10,000 residents.
In 2008 the Spanish economy underwent a drastic restructuring after the dramatic collapse of a decade long property bubble in 2008.
The predicament led Spain to take a €41.3 billion loan from the EU with the aim of restructuring its banks, which were burdened with property and loans whose value had nose-dived.
According to the Bank of Spain, between 2008 and 2015 the sector ditched 75,000 of its roughly 278,000 jobs, and more than 13,000 branches closed their doors.
Strained and small regional savings banks merged with larger banks or were bought by Spain’s large lenders.
Banks started to perform better in 2014 as demand for loans increased, although lenders were hesitant to get involved with the troubled real estate sector.
Although the rate of bad debt in Spanish banks is reducing, the rate is still 10 times higher than the average in the EU.
Households have been spending more but are still cautious of taking out too many loans and banks have therefore started a price war to attract customers, which reduces their margins.
Spanish lenders profitability has also been dented with the European Central Bank’s cut to interest rates as it leads to lower payment on loans for consumers and businesses.
“Bank customers will have to get used to paying for services which up until now have been free,” said the head of the Spanish Banking Association, Jose Maria Roldan.
There has been a recent shift to online and mobile banking, especially by younger customers.
The Roland Berger consultancy expects that “the trend of branch closures and reduction of staff will continue.”
One think tank, Funcas, expects that the banking sector could close up to 3,000 branches by 2019, and cut around 15,000 jobs to end up with around 180,000 positions.
Spain’s governor for banks Luis Maria Linde is calling for a new set of mergers, meaning in the coming years the banks could group together and undergo considerable change as they streamline their processes.