Barclays has moved to a more cautious posture on Spain's banking sector in advance of first-quarter results, upgrading CaixaBank to Overweight while lowering BBVA to Equal Weight. The changes reflect the investment bank's reassessment of macro risks after a recent escalation in the Middle East that it says pushes inflation higher and clouds growth prospects.
BBVA shares fell 1.6% in Madrid trading following the rating adjustment.
Barclays' analysts described a strategic shift in their positioning: the current macro backdrop, they say, now favors banks offering earnings visibility and downside protection rather than those whose stories rely on a benign economic environment to deliver peak returns.
On rates, Barclays has updated its assumptions. It now expects the European Central Bank to lift its deposit rate by a further 50 basis points to 2.5%, and it projects that rate will remain in place through the end of 2027. The bank's models also incorporate materially higher rates in Turkey.
"The escalation in the Middle East shifts the balance of risks towards a higher inflation, higher rates and lower growth environment," analysts Cecilia Romero Reyes and Paola Sabbione said.
CaixaBank earned an upgrade on what Barclays describes as a strong domestic franchise, a conservative risk profile and favourable sensitivity to rising rates. A key element in the positive case is the anticipated effect of bond portfolio roll-offs: Barclays estimates that reinvesting those proceeds at higher yields could lift CaixaBank's net interest income to about 13 billion in 2027, exceeding the bank's own target of 12.5 billion.
Barclays' earnings-per-share estimates for CaixaBank are positioned roughly 6% above consensus for both 2026 and 2027. "Investors will likely be increasingly willing to pay for visibility rather than peak returns, which should support CaixaBank's premium valuation," the analysts added.
By contrast, Barclays trimmed BBVA's earnings outlook by about 3% per year for 2026 and 2027. The downgrade is driven primarily by negative rate sensitivity in Turkey under the updated policy-rate assumptions of approximately 300 basis points, and by an estimated annual headwind of about 100 million from partial non-deductibility of IPAB contributions in Mexico.
The analysts also raised their assumed CET1 distributable threshold to 12.5%, which reduces projected dividend capacity. As a result of these adjustments, Barclays lowered its price target on BBVA to 20.50 from 21.80.
Barclays maintained Banco Santander at Overweight, citing the bank's diversification and visible self-help levers. Banco Sabadell remains at Underweight because of limited rate support and higher exposure to small and medium-sized enterprises. Bankinter and Unicaja were left at Equal Weight.
Looking ahead to first-quarter results, Barclays expects generally solid reports across the Spanish banking sector. It anticipates BBVA to be a likely standout, supported by foreign-exchange tailwinds and a sizable synthetic risk transfer transaction. CaixaBank's Q1 performance, however, is viewed as more timing-driven, and Barclays does not expect a new buyback until the second quarter.
Despite these quarterly expectations, Barclays' analysts warned that first-quarter prints are "unlikely to be decisive for positioning given the current evolving macro backdrop."
Contextual implications
- Sector focus: The repositioning highlights a preference for banks with stable domestic franchises and clear rate-sensitivity benefits.
- Rate environment: Higher assumed ECB rates and materially higher rates in Turkey are central to the revised earnings and capital assumptions.
- Capital and distribution: Raising the CET1 distributable threshold to 12.5% reduces projected dividends and affects investor return expectations.