The analysis firm anticipates an improvement in the profitability of the Iberian banking sector, exceeding 21% by 2028, with an annual growth in earnings per share of 12%. Bankinter and Sabadell are its main bets, while BBVA remains the least preferred.
The third quarter earnings campaign of 2026 will again act as a positive catalyst for Spanish and Portuguese banking, according to the preliminary report from the analysis firm JB Capital, which identifies Bankinter and Banco Sabadell as its favourite stocks. The firm expects the sector's accounts to meet or even exceed estimates for the entire year, as reported by valenciaplaza.com.
JB Capital has revised its projections for the sector upwards: it estimates that the return on tangible equity (RoTE) will rise from the estimated 19% for 2026 to exceed 21% by 2028. In parallel, it forecasts an earnings per share (EPS) growth for Iberian banks of around 12% in both 2027 and 2028, a figure that comfortably exceeds the average of 9% expected for entities in the Stoxx Europe 600.
This earnings profile, along with an estimated total dividend yield of approximately 7%, supports the firm's positive outlook on the financial sector of the peninsula. The report notes that data already points to a recovery in margins with clients, although the benefits of higher rates should be transmitted with some delay due to the non-parallel evolution of the yield curve.
"Although the benefits of higher rates should be transmitted with some delay, given the non-parallel evolution of the yield curve, sector data already points to a recovery in margins with clients"
In the credit section, JB Capital predicts that the portfolio will advance in line with 4% annually for the period 2026-2028, with possibilities of exceeding that mark in the Portuguese market. Nationally, the mortgage portfolio grew 3.9% year-on-year in July, although new production fell 1% compared to the same month last year, and the average interest rate of new production rose by one basis point to 2.89%, following the push from the Euribor, which stood at 3.247% in September.
The rise in rates does not guarantee an improvement in business figures on its own. The increase in rates, combined with high housing prices, could weigh down financing volumes. The CEO of Caixabank, Gonzalo Gortázar, has already indicated that the entity expects a decline in mortgage credit growth in the coming months. JB Capital points out that increased competition is concentrated in the mortgage market, where some banks continue to cite unattractive prices as the main obstacle to increasing market share.
Spanish entities identify the corporate segment as the most competitive in terms of profitability. The top executives of Banco Sabadell, Marc Armengol, and Unicaja, Isidro Rubiales, recently agreed to prioritise growth in the corporate business, an area where the firm anticipates an improvement in volumes in the coming quarters. The report also highlights a relatively benign macroeconomic environment in the Iberian Peninsula and the strength of the private sector, factors that should keep delinquency risks contained despite the current context of rates and inflation.
In the medium-term stock selection, JB Capital reiterates its recommendation to Buy Bankinter, with a target price of 22.5 euros, considering that it deserves a premium over its competitors due to the resilience of its business model. For Banco Sabadell, it also maintains the Buy recommendation and a target price of 4.50 euros, equivalent to a potential of 23%, although it is cautious about the third-quarter results due to the low sensitivity of its interest margin and predicts a profit 5% below consensus.
On the opposite side, BBVA is the least preferred option. The firm believes that the stock is trading at a premium compared to the earnings-weighted valuation of its main geographic subsidiaries, suggesting that the strong operational execution in Spain and Mexico is already reflected in the price. JB Capital sees downside risks in the consensus estimates for 2028 earnings, particularly in Turkey and Argentina, and believes that the impact on EPS from new share buybacks is diminishing. It assigns a target price of 24 dollars and recommends Underweight.
For Unicaja, the report states that the interest margin hit bottom in the second quarter of 2026 and that repricing will move into positive territory in the second half, as previously indicated by the entity's management. However, analysts predict that, overall, the entity will grow slightly below the market in the coming years.
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