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POSTCARD FROM MADRID: BANKS' MOOD IS "POSITIVE"

Citi has been on an investor trip in Madrid to meet all listed banks there with the main takeaway being that lenders are still positive about the outlook.

"The mood remains positive, bolstered by the strong momentum of the Spanish economy and relatively low private sector leverage by Western standards," says Citi analyst Marta Sanchez Romero in a note.

Spanish banks have been on a roll, rising by 49% on average YTD and quickly recovering from the Liberation Day selloff.

"We remain buyers of CABK, BKT and BBVA and we rate SAB and UNI Neutral," Romero adds, referring to Caixabank, Bankinter, BBVA, Sabadell and UniCaja.

Here are some more takeaways:

• The sector is on track to achieve nearly mid-single digit loan growth in 2025 except for Santander and UniCaja.

• U.S. trade policy uncertainty has had little effect on lending demand.

• Current macro trends favour deposit growth. If the labour market remains strong, deposits should expand.

• On M&A, executives and investors generally agree the BBVA-Sabadell deal review won't lead to "game changing" remedies.

(Danilo Masoni)

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