Spanish banks across the 2020–2025 rate cycle: Divergent margin drivers between SIs and LSIs
Spanish banks
Fecha: enero 2026
Marta Alberni, Ángel Berges and Laura Ciriza
SEFO, Spanish and International Economic & Financial Outlook, V. 15 N.º1 (January 2026)
The near six-year period from 2020 to mid-2025 offers a complete interest-rate cycle for analysing the evolution of Spanish banks’ net interest margins. After prolonged margin compression under zero or negative rates, the rapid monetary tightening of 2022–2023 enabled a recovery driven primarily by funding cost dynamics, followed by a more gradual adjustment as policy rates returned toward a “new normal” of 2%. Disaggregating the margin highlights an asymmetric adjustment between assets and liabilities: funding costs showed lower sensitivity during the tightening phase, while asset yields were more sensitive, driving margin expansion as rates moved lower, this pattern partially reversed, reducing the extraordinary boost from the liability side and restoring a more balanced contribution to margin generation. However, aggregate results mask structural differences between significant institutions (SIs) and less significant institutions (LSIs). During the tightening phase, LSIs exhibited higher starting margins and lower funding-cost, widening their advantage, whereas SIs sustained comparatively higher asset yields due to portfolio composition. Overall, the cycle confirms that margin resilience depends not only on rate levels but on institutional structure, balance sheet mix, and competitive dynamics in both credit and deposit markets.