Profitability does not compensate for risk

Mortgage War Heats Up in Spain: Santander & BBVA Step Back as Rivals Battle for Market Share

Madrid, Spain – The Spanish mortgage market is experiencing a dramatic shakeup, with a fierce competition driving down rates and forcing major players to reassess their strategies. While demand is recovering thanks to a recent drop in the Euribor, two of the country’s banking giants, Santander and BBVA, are deliberately choosing to cede market share, a move that’s sending ripples through the financial sector. This is a breaking news development with significant implications for homeowners and prospective buyers alike.

Santander & BBVA: A Strategic Retreat

In a surprising turn, Santander and BBVA are openly admitting they’re unwilling to participate in the escalating “commercial war” over mortgage rates. Both CEOs, Héctor Grisoli of Santander and Onur Young of BBVA, have stated they won’t chase loans offered at prices they deem unsustainable. “Loans are being given at prices to which we do not want to participate,” they’ve reportedly said, signaling a shift towards prioritizing profitability over volume. This isn’t simply a temporary pause; it’s a calculated decision to refocus their efforts.

Falling Rates, Shrinking Margins

The impact of the Euribor’s decline is undeniable. Average mortgage rates in June fell to 2.68%, down from 2.9% in December and 3.37% a year prior. However, this price reduction is squeezing bank margins. Financial sources indicate that some fixed-rate mortgages are now approaching the Euribor itself, dipping below 2.5%, making them increasingly difficult for banks to offer profitably, considering capital consumption requirements. This is a critical point for understanding the current market dynamics.

The Loyalty Play: Beyond the Mortgage

Many banks are now betting on a long-term strategy: attracting customers they can retain for years to come. The idea is that while mortgage profits may be slim, these customers will generate revenue through other financial products – consumption loans, investment funds, insurance, and, for high-net-worth individuals (those with over €500,000), private banking services. New technologies are playing a key role, allowing banks to analyze customer data and tailor offers for these additional products with increasing precision. This is a move towards relationship banking, a trend we’re seeing globally.

Who’s Winning the Mortgage War?

While Santander and BBVA are stepping back, other banks are aggressively pursuing market share. CaixaBank currently leads the pack with a 24.5% share, achieving a 44% year-on-year increase in new mortgage production. Sabadell is also making significant gains, with a similar 44% increase. Bankinter has seen a 30% portfolio increase (including the integration of Evo Banco), and even mid-sized banks like Ibercaja and Kutxabank are scratching out quota with production increases of 50% and 2.6% respectively.

Here’s a quick snapshot of recent performance:

• CaixaBank: 24.5% market share, +44% new mortgage production YOY
• Sabadell: +44% new mortgage production YOY
• Bankinter: +30% mortgage portfolio increase
• Santander: +1% mortgage portfolio increase
• BBVA: +0.4% mortgage portfolio increase

A Shifting Landscape & Future Outlook

The Spanish mortgage market is undergoing a fundamental shift. The focus is moving away from simply offering the lowest rate and towards building long-term customer relationships and maximizing profitability through cross-selling. Banks like Santander and BBVA are strategically pivoting towards areas where they have a competitive advantage – Investment Banking and Private Banking for Santander, and SMEs for BBVA. This isn’t just about today’s rates; it’s about positioning themselves for sustained success in a rapidly evolving financial landscape. For consumers, this means shopping around is more crucial than ever, but also considering the overall value proposition offered by each bank, not just the initial mortgage rate. Keep checking back with Archyde for the latest updates on this developing story and expert analysis on navigating the Spanish property market.