Investing.com -- Analysts at RBC Capital Markets have initiated coverage on two Spanish banks, Bankinter (BME:BKT) and CaixaBank (BME:CABK), flagging their prospects in a challenging European economic environment.

Both institutions benefit from exposure to resilient economies such as Spain and Portugal, which are projected to grow at double the pace of the Euro Area.

However, the analysts express a clear preference for Bankinter due to its growth-driven earnings potential, which they believe is underappreciated by the market.

Bankinter is seen as a standout performer among Spanish banks, with its loan and fee income growth expected to outpace peers.

RBC anticipates a compound annual growth rate of 6% in Bankinter's loan portfolio from 2025 to 2027, surpassing market expectations.

The bank’s diversification, with operations in Portugal and Ireland contributing significantly to growth, bolsters its resilience.

Additionally, Bankinter’s fee income from non-banking activities is projected to grow at a faster rate than that of CaixaBank, underpinned by its strong asset management momentum.

CaixaBank, in contrast, is perceived as a more stable but less dynamic player. While its targets outlined in a November 2024 investor day are viewed as achievable, analysts find limited incremental catalysts for the bank’s valuation.

CaixaBank’s focus on non-banking revenue streams, such as asset management, positions it as a leader in Spain.

However, its reliance on domestic operations, which contribute 90% of its loans, may limit its growth potential compared to Bankinter.

RBC flags the differing sensitivities of the two banks to falling interest rates, with Bankinter appearing less vulnerable.

This lower sensitivity, coupled with stronger projected growth in loans and margins, leads analysts to identify an 8.5% upside in Bankinter's net interest income relative to consensus expectations for the period 2025-2027.

Bankinter's foreign operations, especially in Portugal, are expected to deliver robust growth and boost profitability, as per the analysts. Contrary to this, CaixaBank's international operations in Portugal are seen as less impactful, potentially dragging on its overall performance.

Both banks trade at discounts relative to their historical price-to-earnings multiples, but analysts argue that Bankinter’s consistent earnings growth and superior book value expansion justify a premium valuation.

RBC rates Bankinter as "outperform" with a price target of €9.75, representing an upside, while CaixaBank is rated as "sector perform" with a price target of €5.65.

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