Bankia SA expects its net interest income to continue to decline in 2020 amid the prolonged negative interest rate environment. However, the bank expects to exceed some of the targets set under its three-year strategy in 2018.
The Spanish lender booked synergies from its merger with Banco Mare Nostrum SA of €220 million in 2019, against an initial target of €155 million and a revised guidance of €190 million for 2020.
Bankia also achieved 94% of its nonperforming asset reduction target, with NPAs standing at €8.4 billion at the end of December 2019, compared to €10.9 billion at the end of 2018. The bank's gross and net NPA ratios were 6.4% and 3.3%, respectively, at 2019-end, against projections of less than 6.0% and less than 3.0% for 2020-end.
The bank, meanwhile, expects negative interest rates to continue to hamper its net interest income, with CEO José Sevilla telling analysts and investors at the presentation of the Spanish lender's fourth-quarter and full-year 2019 results that NII is expected to decline in 2020.
The group's NII amounted to €503 million for the final quarter of 2019 and €2.02 billion for the full year, both down year over year from €504 million and €2.04 billion, respectively.
However, Sevilla said the decline in NII will be offset by a projected double-digit increase in fees and commissions and an estimated 2% decline in expenses.
Banking on mutual funds
As a result of its new commercial positioning, Bankia expects to see a strong growth in its mutual funds business in 2020, along with the credit cards and insurance businesses.
Net inflows from mutual funds totaled €1.54 billion in 2019, up 74% from €885 million in 2018, while AUM stood at €22.3 billion at the end of December 2019, compared to €20.7 billion at the end of June 2019 and €19.1 billion at the end of 2018.
Bankia's market share in the mutual funds business rose 50 basis points on a yearly basis to 7.05% at 2019-end, against a target of 7.20% under its strategic plan.
"I think the good performance we've had in investment funds in 2019 is due to commercial discipline ... and that's where we're happy because we think that our network is highly focused on our customers and our business," Sevilla told analysts.
The CEO added that while it is true that the bank's mutual funds business is below those of its peers, it has grown a lot. "For 2020, we still see this good performance," he said.
No M&A in sight
When asked whether the bank intends to use its excess capital for M&A, Bankia's executives said they are not considering any transactions at present.
Bankia noted that its organic capital generation rose in 2019, with its fully loaded common equity Tier 1 ratio standing at 13.02% at the end of 2019, compared to 12.39% at the end of 2018.
On a phased-in basis, the CET1 ratio was 14.33% and the total capital ratio was 18.10% at 2019-end, representing surpluses of 508 basis points and 535 basis points, respectively, over and above the minimum capital requirements under the ECB's Supervisory Review and Evaluation Process.