Spain's battered banks predicted Thursday they will turn a profit this year after a "horrific" 2012 in which the overall industry recorded losses for the first time in its history.
The Spanish Banking Association, which groups almost all significant deposit banks operating in the country, said its members reported a net loss of 1.65 billion euros ($2.1 billion) in 2012.
Banks' bottom lines were weighed down by nearly 43 billion euros in write-downs on the value of their exposure to the Spanish property sector, still suffering after a decade-long boom collapsed in 2008.
"I don't think we run the risk of making further losses," excluding possible takeovers of troubled competitors, the chairman of the banking association, Miguel Martin Fernandez, told a news conference on the industry's outlook for this year.
Spanish banks should not need to repeat the large provisions they set aside last year, he said.
"2012 was a horrific year but we don't think it was without purpose," the association chief said, stressing the "great progress" made by banks in ridding their balance sheets of bad loans and raising levels of high-quality capital.
Spanish banks have set aside a total of about 147 billion euros in provisions and depreciation since 2007 without state aid, he said.
The banks boosted their rock-solid core capital to 10.5 percent of total assets in 2012 from 9.8 percent a year earlier and just 6.1 percent at the end of 2007.
Miguel Martin Fernandez said interest rate margins and gross margins had improved, which he saw as a sign of financial health.
He said banks should now work to reduce their dependence on the European Central Bank for short-term financing and turn to the markets instead while recovering profitability by generating returns that were higher than the cost of capital.
He stressed the relative health of Spanish Banking Association members compared to other financial institutions, some of which had to be bailed out by the state.
The Spanish Banking Association groups domestic and foreign deposit banks operating in the country.
But savings banks, including former savings banks since turned into commercial deposit banks, such as Bankia, belong to a separate organisation, the Spanish Confederation of Savings Banks.
The euro zone has extended more than 41 billion euros to boost the capital of eight troubled banks and to create a so-called bad bank to absorb the banks' impaired assets.
One of those banks, Banco de Valencia, was sold for a symbolic one euro to CaixaBank.
But the state-backed Fund for Orderly Bank Restructuring, or FROB, this month suspended the sale of another nationalised entity, CatalunyaCaixa, for lack of interest from buyers.
"We are ready to help CatalunyaCaixa, but what we said is that it is not worth what they were asking," Miguel Martin Fernandez said, describing its business model as unviable.