In a new report, published today, Scope Ratings looks at the distribution network of the main banks operating in Spain. According to Scope, there is still some room for consolidation in the country, with only a handful of banks having complete coverage of the national territory.

Scope notes that the real estate crisis in the past decade has already sparked a wave of consolidation. ‘Mergers happened out of necessity in Spain, and largely with the support of the state resolution fund’, says Marco Troiano, author of the report. ‘There is a good chance that the next mergers will take place in a stronger economic environment, and involve overall healthier institutions’, he added.

Scope sees regional banks as attractive franchises due to their dominant market shares in retail banking, especially in the wealthy northern regions. They could be targeted by larger banking groups aiming to enlarge their domestic franchises.

According to the agency, such mergers may not necessarily produce cost savings in terms of branch overlaps, but would still lead to cost savings in IT investment, especially in view of the increasingly rapid customer shift towards digital channels.

That said, branch numbers may have to be reduced irrespective of M&A activity. Scope’s report observes that despite bank branches having fallen by a third since 2008, the density of branches compared to the population remains among the highest in Europe.

The number of bank branches is still falling however, and the rating agency calculates that, at the current pace of decline, the number of branch outlets will have halved by 2025, a scenario which Scope considers realistic.

Download the report HERE.