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Profitability across the euro zone bank sector is low and
weakening economic growth in the region is expected to further
dampen the banks' prospects.
Last month, the ECB cut rates deeper into negative territory and
promised bond purchases with no end-date, in a bid to reverse
the renewed slowdown in the euro zone's economy nearly a decade
after the bloc's debt crisis.
Banks have long complained that negative rates weigh on their
profits.
"Low profitability in the end leads to low valuation, making the
inevitable consolidation of the sector very difficult," De
Guindos said at a finance industry event in Madrid on Monday.
De Guindos also said the low profitability of euro zone banks
was also related to costly structures and excess capacity.
At the same event, ECB policymaker Pablo Hernandez de Cos said
that in the current macroeconomic environment, it was likely
interest rates would stay lower for longer, squeezing financial
margins further. De Cos called for a strengthening of banks'
balance sheets and greater levels of efficiency.
Banks in Spain are still suffering from the after effects of
reducing toxic legacy assets left on their balance sheets after
the country's real estate bubble burst in 2007, while households
are still cutting outstanding debts.
But De Cos, the current governor of the Bank of Spain, said that
a recent reduction in toxic real estate assets had allowed
Spanish banks to perform more favorably in this year's domestic
stress tests than last year.
(Reporting By Jesús Aguado and Clara-Laeila Laudette; editing by
Jane Merriman)
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