Spanish Domestic Banks: Risks of summer overheating?

Research evidence excerpt

Spanish Domestic Banks: Risks of summer overheating?

Global Research

6 July 2026ab

Spanish Domestic Banks Equities

Europe including UKRisks of summer overheating?

Banks, Ex-S&L

Ignacio Cerezo

Risks of summer overheating? Analyst

Although only CABK is outperforming YTD, all Spanish banks have appreciated through ignacio.cerezo@ubs.com

2Q, directionally aligned with the sector's cyclical profile and solid fundamentals, +44-20-7568 4409

allowing shares to bounce back on less uncertain geopolitics. While their defensiveness Alvaro Fernandez-Garayzabal

and compounding capacity is validated for now, we see those positives increasingly Analyst

reflected in valuations, with limited upside for SAB/BKT, and CABK/UNI actually showing alvaro.fernandez-garayzabal@ubs.com

small downside for the first time despite our estimates fully recurring positive revenue/ +34-91-436 9622

COR trends over the forecast period. With shares recently rallying despite more

competitive deposit pricing and undershooting inflation, we perceive signs of inertia

that leave us unwilling to adopt a more positive stance on domestics at this stage.

Solid base case, two main risk scenarios

With moderate EPS changes into 2Q, operating conditions (good macro/volumes, stable

rates/CoR, pricing discipline) remain supportive in our base case and allow EPS to grow

at a 9-15% CAGR over 26-27E, with two main risks lingering in our view. Top down,

with UBS economists seeing reduced confidence on a second 25bp September hike, a

dovish ECB turn would have negative implications in P&L (c2-4% EPS for every 50bp)

and especially in narrative terms as it could make investors reconsider sustainable returns

and valuations. Bottom up, with extensive work on this note disaggregating deposit