Spain

Macroeconomic &
Financial Outlook
September 2024

SPAIN: MACROECONOMIC AND FINANCIAL OUTLOOK is a publication by CaixaBank Research that contains information and opinions
from sources considered to be reliable. This document is for informative purposes only and CaixaBank is not liable in any way for any
use made thereof. The opinions and estimates are those of the CaixaBank Research and are liable to change without prior notice.
© CaixaBank S.A., 2024
Prepared with information available as of September 5th, 2024
p. 1
Key messages

 Summer’s batch of data on inflation and wages moved in the right direction and should encourage a rate cut in September. After
cutting rates in June (-25pb; depo at 3.75%) and leaving policy unchanged in July, financial markets are fully discounting 25bp rate cuts
in both September and December 2024 (when the ECB updates its macroeconomic projections).
 Spanish GDP grew by 0.8% qoq in the second quarter of the year (2.9% yoy), well above the eurozone's growth (0.3% qoq) and above
our expectations. The external sector was the main driver of growth, contributing 0.5 p. p. to qoq GDP growth, while domestic demand
contributed 0.3 p. p.
 GDP growth is expected to remain above 2% over 2024-2025 as it rebalances towards internal demand. In 2022-2023 GDP largely
grew on the back of public consumption and external demand. Looking ahead, we expect private consumption and investment will gain
prominence. Tourism will contribute to growth in 2024-2025 albeit to a smaller extent than in 2023.
 Early Q3 indicators have moderated somewhat compared to the previous quarter. In the July-August average, employment has grown
Activity 0.3% qoq, below the 0.8% qoq rate of Q2 2024. The composite PMI ticked up 0.1 points in August compared to the previous.
Nevertheless, the July-August average, at 53.5 points, remains below the Q2 average of 56.0 points.
 Headline inflation declined 0.6 pp. to 2.2% in August, below our expectations. The flash estimate points to lower gasoline and food
prices behind the fall in headline inflation. At the same time, underlying inflation declined 0.1 pp. to 2.7%. Latest inflation data by
component suggest an easing in inflationary pressures, particularly in services and food inflation.
 Housing prices growth accelerates in Q2 2024. According to INE (transaction prices), house prices grew 7.8% yoy in Q2 (6.3% in Q1) and
grew 9.4% according to Registrars (repeated sales). Q2 data are not yet available for MIVAU (appraisal value). The introduction of this
data, above expectations, will lead to a new upward revision of the housing prices forecast for 2024 and 2025.
 Direct taxes and social security contributions are growing at a good pace. The data is consistent with our forecast of a 3% public deficit
in 2024.

 New lending shows positive dynamics. In terms of new credit, activity recovers in the months to date in 2024, so the stock of credit to
Banking the Spanish resident private sector is stabilizing. Domestic NPL ratio stands at 3.4% in June, lower than in dic’23, and 139 bps below pre-
Sector covid level of February 2020. Profitability improves and ROE reaches 12.4% in 1Q24 (vs. 10.6% in Euro Zone), driven mainly by good
performance of the interest margin.

p. 2
Main economic forecasts
Forecast

%, YoY, unless otherwise specified 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
GDP 3.8 3.0 3.0 2.3 2.0 -11.2 6.4 5.8 2.5 2.4 2.3
Private Consumption 2.9 2.6 3.0 1.8 0.9 -12.4 7.2 4.8 1.8 2.2 2.4
Public Consumption 2.0 1.0 1.0 2.3 1.9 3.6 3.4 -0.2 3.8 1.7 1.0
Gross Fixed Capital Formation (GFCF) 4.9 2.4 6.8 6.3 4.5 -9.0 2.8 2.4 0.8 2.5 3.6
GFCF - equipment 9.1 1.8 9.2 4.7 2.0 -12.6 4.4 1.9 -1.6 2.2 4.6
GFCF - construction 1.5 1.6 6.7 9.5 7.2 -9.2 0.4 2.6 2.3 2.9 3.1
Exports 4.3 5.4 5.5 1.7 2.2 -20.1 13.5 15.2 2.3 3.6 2.4
Imports 5.1 2.6 6.8 3.9 1.3 -15.0 14.9 7.0 0.3 2.9 2.5
Unemployment rate 22.1 19.6 17.2 15.3 14.1 15.5 14.9 13.0 12.2 11.6 11.1
CPI (average) -0.5 -0.2 2.0 1.7 0.7 -0.3 3.1 8.4 3.5 3.2 2.5
External current account balance (% GDP) 2.0 3.2 2.8 1.9 2.1 0.6 0.8 0.6 2.6 2.7 2.7
General Government Balance (% GDP) -5.3 -4.3 -3.1 -2.6 -3.1 -10.1 -6.7 -4.7 -3.6 -3.0 -2.6
General government debt (% GDP) 103.3 102.7 101.8 100.4 98.2 120.3 116.8 111.6 107.7 106.0 105.0
Housing prices 1.1 1.9 2.4 3.4 3.2 -1.1 2.1 5.0 3.9 4.4 2.8
Risk premium (vs. 10Y Bund, bps, Dec.) 120 124 120 97 88 86 67 104 102 85 82
Bank credit (to the private domestic sector) -4.3 -2.9 -1.9 -2.6 -1.2 2.5 0.5 -0.4 -3.4 -0.4 1.7

Note: All GDP figures are based on ESA-2010 methodology.

Source:
. CaixaBank Research.

p. 3
 The ECB should resume cutting rates after the summer
Euro area: HICP inflation ECB deposit rate
(%) (%)
12 4.25
4.00
3.75
10 3.50
3.25
3.00
8 2.75
2.50
6 2.25
2.00
1.75
4 1.50
1.25
1.00
2 0.75
0.50
0 0.25
0.00
-0.25
-2 -0.50
-0.75
May-19

May-20

May-21

May-22

May-23

May-24

May-25
Jan-19

Jan-20

Jan-21

Jan-22

Jan-23

Jan-24

Jan-25
Sep-19

Sep-20

Sep-21

Sep-22

Sep-23

Sep-24

Sep-25

Apr-21

Apr-22

Apr-23

Apr-24

Apr-25
Jan-21

Jan-22

Jan-23

Jan-24

Jan-25
Oct-21

Oct-22

Oct-23

Oct-24

Oct-25
Jul-21

Jul-22

Jul-23

Jul-24

Jul-25
Headline Core €STR forwards as of August 30 CABK Research forecast

 The ECB is geared towards lower rates, but it will move cautiously. ECB cuts are supported by a significant progress in the euro area’s disinflation as well as the expectation that the
inflation outlook will improve further. Yet, the ECB is likely to keep an anti-inflationary bias and move cautiously, responding to; a long period of above-target inflation; inertia in some
prices (e.g., services); short-run volatility in data (e.g., due to the withdrawal of energy-related support measures); and the fact that second-round effects, which cannot be dismissed
yet, play out with a lag.
 Summer’s batch of data on inflation and wages moved in the right direction and should encourage a rate cut in September. After cutting rates in June (-25pb; depo at 3.75%) and
leaving policy unchanged in July, financial market are fully discounting 25bp rate cuts in both September and December 2024 (when the ECB updates its macroeconomic projections).
In 2025, markets see an additional decline of 125bp in ECB rates (to a depo rate of 2%).
 Balance sheet reduction will continue in a passive way: the last TLTROs will be repaid in 2024, the APP portfolio is mechanically declining under a zero-reinvestment strategy, and
PEPP reinvestments will drop from 100% to ~50% in the second half of 2024 (and to 0% in 2025).
p. 4
 Growth concerns pair back commodity prices
Brent oil prices (and futures) Commodity prices
$ per barrel
Change (%)
140 Metric Price Last Year to
2022 2023
Month Date
120 Commodities index 95,2 0,5 -3,5 13,8 -12,6
Energy index 27,7 -2,1 -9,8 33,5 -25,6
100 Brent $/barrel 74,4 -3,1 -3,4 10,5 -10,3
Natural Gas (Europe) €/MWh 36,6 -0,1 13,1 8,5 -57,6
Precious Metals index 257,7 1,2 15,2 -1,9 4,1
80
Gold $/ounce 2488,7 3,2 20,6 -0,3 13,1
Industrial Metals index 140,2 1,4 -1,7 -4,4 -13,7
60
Aluminum $/Tm 2407,5 6,4 1,0 -15,3 0,3
Copper $/Tm 8954,5 -1,1 4,6 -13,9 2,2
40
Agricultural index 55,0 1,9 -11,9 13,2 -9,3
01/21
04/21
07/21
10/21
01/22
04/22
07/22
10/22
01/23
04/23
07/23
10/23
01/24
04/24
07/24
10/24
01/25
04/25
07/25
10/25
Wheat $/bushel 555,0 3,0 -11,6 2,8 -20,7

 Oil prices fall as demand woes overshadow any possible supply recovery. Brent prices have tumbled 9% between July and August on persistent concerns about the economic
outlook in US and China (key consumers) and expectations of adequate global supply. In early trade sessions in September, the Brent price hit a new low since June 2023 (below $73
barrel), as markets priced that OPEC+ could be on track to gradually unwind production cuts in October (180.000 barrels a day). Additionally, while geopolitical risks remain (as the
concerns on US elections in November), markets reduced the Middle East risk premium on prices as a truce in the conflict could be on the table. Although OPEC+ has reached a deal
to extend production cuts for 2 months (until December) to prevent oil prices from dropping further, we consider they could extent them further following weak economic data (in
the US and China) signaling soft demand prospects in 4Q and 1Q25. All in all, we are likely to revisit our forecast downwards as we consider the barrel price could hover around $72-
$78 in December 2024 (vs $86 before).

p. 5
 Spain: Q2 2024 GDP growth surprised on the upside
Contributions to quarterly GDP growth Components of GDP
Percentage points and percentage change (%) Quarter-on-quarter change (%)
3.0 -1.0 -0.5 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5
2.5
2.5
GDP 0.8
2.0 0.8

1.5 0.3
Private consumpion
0.8 0.8 0.4
1.0 0.7
0.3 0.5 0.5 0.4 0.5 0.5
0.5 Public consumption 0.2
-0.6
0.0
Investment 0.9
-0.5 2.6
-1.0
Exports 1.2
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 3.3
2022 2022 2022 2022 2023 2023 2023 2023 2024 2024

Imports -0.2
External demand Domestic demand 2.2
GDP (%) GDP EA (%)
Q2 2024 Q1 2024
Note: GDP is quarter-on-quarter variation

 Spanish GDP grew by 0.8% qoq in the second quarter of the year, well above the eurozone's growth (0.3% qoq) and above our expectations, which anticipated a 0.5% qoq increase.
In year-on-year terms, the rate accelerated compared to the previous quarter, from 2.6% to 2.9%.
 The breakdown delivers a healthy composition of growth, with the external sector as the main driver of growth, contributing 0.5 p. p. to qoq GDP growth, and domestic demand
also growing, although at a more modest pace, contributing 0.3 p. p. to GDP growth. Private consumption advanced by 0.3% qoq and public consumption by 0.2%. Investment grew
at a strong pace of 0.9% qoq, mainly driven by investment in construction. Regarding the external sector, exports grew by 1.2% qoq while imports declined by 0.2%. Growth in
exports was broad-based, with substantial increases in both goods and services exports (1.3% and 1.0% qoq, respectively). Tourist exports’ rate of growth was substantial, at 2.5%
qoq, although it has softened a great deal relative to the first quarter reading (17.4% qoq).
p. 6
 Consumption and investment will gain importance in 2024-2025
Macroeconomic scenario GDP: analysts’ forecast
Year-on-year (%) Year-on-year change (%)
Cum.
2023 2024 2025 2026 2024 2025
2 years
BBVA Research (June) 2.5 2.1 4.7
GDP 2.5 2.4 2.3 2.1 Funcas (July) 2.5 1.8 4.3
CaixaBank Research (July) 2.4 2.3 4.8
Unemployment rate Government (July) 2.4 2.2 4.7
12.2 11.6 11.1 10.8
(% labor force)2 IMF (July) 2.4 2.1 4.6
Funcas panel (July) 2.4 2.0 4.4
Inflation rate Airef (July) 2.4 - -
3.5 3.2 2.5 2.1
(average of period, %)
Bank of Spain (June) 2.3 1.9 4.2
Consensus forecast (July) 2.3 1.9 4.2
House prices 3.9 4.4 2.8 2.6 European Commission (May) 2.1 1.9 4.0
OECD (May) 1.8 2.0 3.8

 GDP is expected to sustain growth above 2% over 2024-2025 as it rebalances towards internal demand. In 2022-2023 GDP largely grew on the back of public consumption and
external demand. Looking ahead, we expect private consumption and investment will gain prominence. There is room for these two components to grow: investment remains in Q2
2024 1.3% below its Q4 2019 level, whereas private consumption is just 0.7% above. Investment will grow at an average of 3.1% in 2024-2025 spurred by energy transition needs
and NGEU funds. Private consumption will grow at an average of 2.3% against the backdrop of strong migration inflows and dynamic gross disposable income growth that has placed
the savings rate at 11.7% at the end of 2023, above its historical average (8.2% in 2000-2019). Tourism will contribute to growth in 2024-2025 albeit to a smaller extent than in 2023.
 There is further upside potential over the next years in private consumption and investment that could be partially materialized. First, despite private consumption growing at 2.3%
on average in 2024-2025, it will take time for the savings rate to normalize, and we expect it to sit in 2025 clearly above its historical average. Second, investment to GDP ratio will
still remain below its 2000-2019 average.
p. 7
 Early Q3 indicators suggests growth may moderate slightly
PMI indices Social Security registered members*
Level Month-on-month change (thousand)
Aug-24
65
100
Expansion

60
55
80
50
45
Contraction

40 60
35
30 40
25 Aug-24
20
20
15
10
5 0
jul

jul

jul

jul

jul
mar
may

mar
may

mar
may

mar
may

mar
may
nov

nov

nov

nov
20

sep

21

sep

22

sep

23

sep

24
Manufacturing Services Note: (*) Seasonally adjusted.

 Early Q3 indicators have softened somewhat relative to the previous quarter. Employment (as measured by workers registered to the S. S. system) added c. 30k workers in
seasonally adjusted terms in August. In the July-August average, employment has grown 0.3% qoq, below the 0.8% qoq rate of Q2 2024. Employment in Spain stands at 21.2 million
people, with an increase of 483k workers in the last year. Since June, the manufacturing PMI has been declining and in August reached 50.5 points, still within the growth region of
the indicator (> 50 points), but suggesting growth in the sector has moderated. The services PMI, after declining in July, bounced back in August and reached 54.6 points, which
suggests that growth in the sector remains strong.
 We expect GDP growth of 0.5% qoq in Q3, a solid figure, albeit more moderate than the rates of growth posted during the first half of 2024 (of 0.8% qoq on average).

p. 8
 Inflation will gradually converge to 2%
CPI and its components in Spain Headline, underlying and core CPI
Average year-on-year change (%) Year-on-year change %

Cum. since 12
Jul.-24
Dec. 2019 (%)
10
Headline inflation 2.8 17.9
8
Underlying inflation 2.8 15.6
(excl. energy and non processed food)
6
Core inflation 2.6 11.5
(excluding energy and food)
4
- Industrial goods 0.7 6.4
2
- Services 3.4 13.7

Food, beverages & tobacco 3.2 31.1 0

Energy 2.7 20.8 -2

01/20
04/20
07/20
10/20
01/21
04/21
07/21
10/21
01/22
04/22
07/22
10/22
01/23
04/23
07/23
10/23
01/24
04/24
07/24
- Electricity 7.4 15.4
- Fuel 0.1 19.3
ESP: headline ESP: core* ESP: underlying*

 Headline inflation declined 0.6 pp. to 2.2% in August, below our expectations. The release of the flash estimate points to lower gasoline and food prices behind the fall in headline
inflation. In August, gasoline prices decreased 2.1% m/m compared to a 5.5% m/m increase in August 2023. At the same time, underlying inflation declined 0.1 pp. to 2.7%.
 Latest inflation data by component suggest an easing in inflationary pressures. In July, services and food inflation went down by 0.3 pp. and 0.9 pp. respectively. Together with
early indicators, these indicate the kick-off of the disinflationary process in the categories with the highest inflation rates in 2024.

p. 9
 Strong tourism demand in 2024
International tourists that visit Spain Overnight stays in touristic accommodation
Millions of people Gap with respect to 2019
12 20%

10
0%

8
-20%
6
-40%
4
-60%
2
-80%
0
July

October
August
April

September

November
June
January

May
March

December
February

-100%

Apr-20

Apr-21

Apr-22

Apr-23

Apr-24
Oct-20

Oct-21

Oct-22

Oct-23
Jan-20

Jan-21

Jan-22

Jan-23

Jan-24
Jul-20

Jul-21

Jul-22

Jul-23

Jul-24
2019 2021 2022 2023 2024 Residents Foreigners Total

 International tourism demand remains strong. International arrivals in July were 9.9% above the same month of 2019, while international tourist expenditure attained a level 30.1%
above. Demand for tourist services is holding up despite the strong increase in tourism related prices: Inflation in tourism services is up 5.3% on average in 2024 and CPI hotel prices
in July increased by 4.9% year-on-year, attaining a level 33.6% above the same month of 2019. Tourist arrival figures in July were boosted by stronger tourist flows from the Americas
(+26.9% w.r.t. July 2019) and by tourism from the EU (+15.1% w.r.t. July 2019).
 The persistent inflationary shock in tourism services has barely dented domestic tourism demand. After achieving remarkable figures since mid-2022 (well above 2019 level),
domestic tourism performance remains positive. Overnight stays by residents in touristic accommodations fell by a modest -2.1% year-on-year in July, landing at a level 5.7% above
July 2019. Looking ahead, we expect a modest rate of growth but activity remaining at high levels.

p. 10
 Renewed momentum in housing prices
Updated forecasts for the real estate market CaixaBank Research housing clock
50
2014-19 2022 2023 2024 2025 STABILISATION 2021 EXPANSION
35  Price  Price

565 566  Sales  Sales

Housing sales 428 650 586 2017

Housing sales change (%)

(Thousand) 20 2016 2022
(=) (=) 2015 2018 2005
2006
5 2014 2025
115 125 2013
New building permits 73 109 109 2019 2024
(Thousand)
(=) (=) -10 2012
2023 2007
4.4 2.8 2020
House price (appraisal, MIVAU) CONTRACTION SLOWDOWN
1.6 5.0 3.9 -25
Year-on-year (%) (4.0) (=)  Price 2009  Price
2008
-40  Sales  Sales
5.0 2.8
House price (transaction, INE) -20 -15 -10 -5 0 5 10 15 20
4.4 7.4 4.0
Year-on-year (%)
(4.0) (=) Housing price change (%)
Note: Previous forecast in parenthesis (Feb. 2024). Note: The period 2010-2011 is excluded due to the impact of fiscal incentives.
Source: CaixaBank Research, based on data from INE and MIVAU.

 Housing price growth picked up in Q2 2024: 7.8% YoY according to INE price index (transaction price) and 9.4% YoY according to Registrars (repeated sales). Q2 data still not available for
MIVAU (appraisal value). The introduction of this data, above expectations, will lead to a new upward revision of the housing prices forecast for 2024 and 2025.
 The number of housing sales has decreased by 4.5% YoY in Jan.-June 2024. Despite this slight decline, housing sales continue to be at elevated levels from an historical perspective
(570k cum. 12 months) due to strong demand factors, especially population growth.
 Housing supply continues to be very limited and well below net household creation, which is pushing up housing prices. New building permits increased by 14.8% YoY in Jan.-May
2024 and we expect them to continue to gradually increase but it would be insufficient to close the gap with demand.
 Outlook: The supply-demand imbalance in the real estate market, the improvement in the economic outlook and the gradual decrease in interest rates suggest that the real estate market
will gain traction in the coming quarters. The factors that have supported the real estate market will continue to be present (positive net job creation supporting growth in households’
labor income, dynamic migration flows, resilience of foreign demand, favorable financial situation of households) and a relaxation in financial conditions will further support the demand for
housing. We highlight a risk of faster house price increase than expected in our central scenario if the supply of housing does not pick up as projected.
p. 11
 Dynamic fiscal revenue growth in 2024 and gradual path of public deficit
reduction in the medium term
Public balance Tax revenues: consolidated general government taxes*
In % of GDP Year-on-year change in the cumulative figure for the year to May in all years (%)
-1 20
18
-1.5
16

-2 14
12
-2.5 10
8
-3
6
-3.5 4
2
-4
0
2023 2024 2025 2026 2027
Direct taxes Social contribution Production taxes
CaixaBank Research Government*
2015-2019 2022 2023 2024
Note: Deficit targets for 2025-2027 approved by the Council of Ministers, but subsequently rejected by Congress. Note: *excluded Local Corporations.
Source: CaixaBank Research. Source: CaixaBank Research, with data from IGAE.

 Direct taxes and social security contributions are growing at a good pace. While public revenues grew at a year-on-year rate of 5.8% through May, expenditures grew by 4.8%, favoring a
slight reduction in the deficit. Our forecasts are consistent with this data and point to a 3% deficit in 2024, in line with the government.
 In the medium term, dynamic revenues and relatively moderate expenditure growth (somewhat above inflation) in line with the new European fiscal rules should facilitate a gradual
reduction in the deficit.
 Expenditure ceiling and PGE25: The ceiling in 2025 will be $195.4bn (excl. European funds), an increase of 3.2% over 2024 and which contrasts with the more than 9% increase in the 2024
ceiling over 2023 (although in the end there was no budget in 2024). Congress' rejection of the deficit target path for 2024-2027 increases the uncertainty as to whether the government
will be able to approve a Budget for 2025.
p. 12
NGEU: The Recovery Plan keeps being deployed
Execution of PRTR Resolved calls by area
Phase 1 (Million euros) % over the total resolved
69528 Culture and Sport

Education and Formation

29524 Public Administrations modernization

Energy transition

Employment and Care

1S 2024 5599
Science and Health
2023 17309 Sustainable Infrastructures
57.5%
Industrial Fabric Modernization
2021-2022 17096 Urban and Rural Agenda

0 5 10 15 20 25
Note: Execution is defined as the awarding of tenders and grants. Source: CaixaBank Research, based on data from the ELISA portal, Government of Spain.
Source: CaixaBank Research, based on data from the ELISA portal, Government of Spain.

 As of June 30, tenders and grants  Spain received in July from the European Comission the fourth  The agreement between the MIVAU and the ICO has been
have been resolved for €40 billion, disbursement of 9.9 billion, 100 million less than the total. The signed to mobilize the €4bn in loans of the Addendum to
57.5% of the first phase of the Commission has satisfactorily evaluated 60 of the 61 milestones of the ICO Housing Line for the construction of social and
original Plan. In 1H24, €5.6 billion the fourth disbursement, including the reform of unemployment affordable housing. It is expected that the ICO will
have been executed compared to benefits, the housing law and the second part of the pension reform. mobilize €2bn and the financial entities adhered to the
€7.2 billion in the first half of 2023. loan line will mobilize the remaining €2bn.
 The Government has activated the €22 billion of the ICO Verde and
the €8.15 billion of the ICO de Empresas y Emprendedores lines of
loans of the Addendum.
p. 13
 Banking system: improved credit dynamics for all segments
Bank credit to the private sector Private domestic credit New lending activity by sector
% GDP Year-on-year (%) YTD, €Bn

180 Dec-23 Jul-24 (latest) 2024 (forecast)

% yoy % yoy % yoy 117
160
Total credit -3.4% -1.1% -0.2% 107
Households and 99
corporations Spain Households -2.5% -0.7% 0.4% 92
140
Housing
-3.2% -1.0% -0.1%
mortgages
120
Other purposes -0.5% 0.3% 1.6%
Of which 36
100 2.8% 5.7% 4.1%
consumption 31
Households and
corporations euro area 80.9 Businesses -4.7% -1.7% -1.1% 18 22
80
77.2 Non-real estate
-3.2% -3.2% -
developers1
60
Real estate Jan-Jul 23 Jan-Jul 24
-5.8% -5.8% -
developers1 Households – mortgages (M€) Households – consumption (M€)
40
2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 SMEs (loan <1M€) (M€) Corporates (loan >1M€) (M€)

Note: latest data available as of Mar-24. Note: (1) latest data available Mar-24. Source: Caixabank Research with data from Bank of Spain.
Source: Caixabank Research with data from ECB, Eurostat. Source: Caixabank Research with data from Bank of Spain.

 Households and corporate debt levels (including debt securities) remain below euro area averages in 1Q24. Both sectors have deleveraged in terms of GDP, reaching levels below of pre-pandemic.
 New mortgage production shows notable dynamics in 2024 with the change in interest rate expectations.
 New lending for consumption increases favored by improvements of consumer confidence, and credit for consumer durables, exceeding pre-COVID-19 levels.
 New lending to corporates grows both in loans under 1M€ and in larger ones.
 Consequently, the stock of credit to the Spanish resident private sector is moderating its fall rate. We expect credit levels to stabilize in absolute terms during 2024 and start growing next year, albeit
at a rate below nominal GDP growth.
p. 14
 Banking system: solid financials
NPLs and coverage ratios1 HHs & NFCs loan to deposit ratio Banks’ profitability
NPL ratio Coverage ratio Percentage (%) ROE % (Q1 24; annualised)
In % of gross loans In % of NPLs 20
230
15% 50%
47% 210
15
Spain 12.4
12% 45% 190

170 10 10.6
9% 40%
150 Euro area
5
6% 35% 130
3.4%
110 0
3% 30%
Dec-11
Dec-12
Dec-13
Dec-14
Dec-15
Dec-16
Dec-17
Dec-18
Dec-19
Dec-20
Dec-21
Dec-22
Dec-23
90
-5
70
Cost of risk2 50 -10
0.4% in Q1 2024

2005

2007

2009

2011

2013

2015

2017

2019

2021

2023

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023
0.4% in Q2 2024
Note: (1) latest available data Jun-24 and Mar-24, respectively. (2) Spanish Note: loans and deposits to residents in Spain, on a non-consolidated Source: CaixaBank Research with data from EBA (Dashboard-Q1 24).
business. Accumulated 12 months based on the average of the 6 largest basis. Latest data available Jul-24.
institutions. Source: CaixaBank Research with data from Bank of Spain.
Source: CaixaBank Research with data from BoS and Bank's financial
statements.

 NPLs remain below 4%, despite substantially higher interest rates. The share of stage 2 loans on a group level remained unchanged at 7.2% in 1Q24, remaining below EU level. At the end of 2022,
the Government and the banks agreed to expand the scope of the Code of Good Practice (CGP) to protect households under financial strain due to surging Euribor.
 Households and non-financial corporation (NFCs) deposits exceed the peak levels previously attained in August 2022. Deposits declined between 2H22-1H23 due to higher remuneration of other
investment alternatives. Since then, seasonally adjusted data shows a positive trend (+4.3% yoy in Jul’24). Loan to deposit ratio remains stable at very comfortable levels (c. 90%)
 Profitability is recovering (ROE stood at 12.4% in 1Q24) thanks to the widening of the net interest margin and despite inflationary pressures and the extraordinary and temporary banking tax (4.8%
on domestic net interest and fee income, where such income exceeds €800 million).
 The capital position of Spanish banks remains comfortable with a 12.6% CET1 ratio in 1Q24. Under the adverse scenario considered, the Bank of Spain’s stress test1 for 2023-2025 shows that the
CET1 ratio for the Spanish banks as a whole would fall by 3.3 pp but would remain above the regulatory minimum. The Bank of Spain has initiated the procedure to revise the framework for setting
the CCyB and to establish the buffer rate from 4Q24 at 0.5% (to be applicable from Oct’25). It will foreseeably raise to 1% from 4Q25 Q4 (to be applicable from Oct’26).
Note: (1) Forward-Looking Exercise on Spanish Banks (FLESB). Additional adverse shocks are applied to credit risk under the FLESB framework compared with the EBA exercise. Financial Stability Report Autumn, 2023. Bank of Spain. p. 15