Cost efficiency in the Spanish banking sector in the face of margin pressures: Contrast between SIs and LSIs
Banking sector
Fecha: marzo 2025
Marta Alberni, Ángel Berges and Lucía Ibáñez
SEFO, Spanish and International Economic & Financial Outlook, V. 14 N.º2 (March 2025)
Despite driving considerable improvement in margins over the last three years, the rapid increase in interest rates since 2021 has also contributed to rising operating expenses across the Spanish banking sector, prompting banks to prioritize cost efficiency. With little additional upside for margins, the banks now need to focus hard on streamlining their operating expenses. Within this context, an examination of the trends in operating expenses over the past three years based on the financial statements of both significant institutions (SIs) and less significant institutions (LSIs) shows that while LSIs have faced more pronounced cost growth–especially in staff expenses–their efficiency metrics have improved more than those of SIs, reflecting a combination of business expansion, technology investments, and shifts in their cost structures. Despite these gains, both types of institutions now face the challenge of sustaining efficiency in a period of slowing income growth, requiring a focus on productivity, digitalization, and alternative revenue streams.