Spanish mid-sized lenders Bankia and Banco Popular both reported falls in lending income on Friday, as they face the challenge of increasing profits at a time of historically low interest rates. However, both managed to improve the quality of their loan books by selling off non-performing assets as Spain's housing market recovers from its 2008 crash and the demand for mortgages starts to pick up.
The non-performing loan ratio at Bankia fell to 10.5 percent by the end of March from 10.8 percent the year before, while at Popular it was down to 12.7 percent from 12.9 percent. Echoing trends at other chiefly domestic banks such as Caixabank, both banks suffered declines in net interest income compared with the same period in 2015 and the previous quarter.
Net interest income at Bankia, which has been majority owned by the Spanish state since 2012, fell 16.7 percent from the same period last year, in line with analysts' forecasts according to a Reuters poll, and fell 13.2 percent compared with the previous quarter. For Popular, Spain's sixth biggest bank by total assets and the most exposed to the property sector, lending income declined 1.9 percent from the same period last year, slightly better than forecasts, and 2.5 percent from the previous quarter.
Faced with shrinking margins, Bankia is trying to shift more of its lending to small businesses and away from mortgages. Popular is expanding a less costly customer base with its acquisition on Thursday of Barclays' consumer payments business in Portugal and Spain.