CaixaBank ups 2024 lending income outlook as loans increase, deposits surge

CaixaBank SA, Spain's largest domestic lender, expects higher lending income for 2024 than it previously guided for due to a surprise pickup in loan origination and a surge in deposits.

The bank had expected net interest income (NII) — the difference between what banks earn from loans and pay for deposits — to increase by mid-single digits in 2024 when it reported first-quarter earnings in April. It now forecasts an annual increase in NII in the high single digits from the €10.1 billion it earned in 2023.

After several quarters of contraction, lending growth is expected to drive the increase in NII. CaixaBank, which had expected limited loan growth in 2024, recorded a more than 10% increase in new loan origination in the first half of 2024 to €34.3 billion compared to the same period in 2023.

"Activity levels are very good to the extent that they suggest that we've reached an inflection point in terms of activity," CEO Gonzalo Gortázar said during the bank's second-quarter earnings call. "[This is] creating a good sense of what is in store for us in terms of business volumes in the next quarters and years."

CaixaBank and its Spanish peers had seen their domestic loan books shrink in recent quarters as higher interest rates depressed demand for new lending.

Still, the banks have been among Europe's biggest beneficiaries of the sharp rise in interest rates since 2022. The lenders' retail banking-focused business models and predominantly variable-rate loan books have helped the Spanish banks generate massive increases in revenues.

CaixaBank recorded a 0.4% quarterly increase in NII to €2.79 billion, beating analysts' expectations by 1.3%, S&P Global Market Intelligence estimates data shows. A more than 66% quarterly increase in profits to €1.67 billion beat analysts' expectations by 8.5%.

Mortgages

A surge in mortgage lending drove the increase in CaixaBank's loan origination in the first half of the year. New residential mortgages increased almost 43% annually to €6.7 billion in the six-month period.

New consumer lending grew 15.4% in the first half of the year to €6.1 billion from the same period in 2023. New business lending grew 2.3% in the first half to €21.5 billion compared to the same period in 2023.

CaixaBank recorded a sequential increase in deposits in the second quarter of 4.9% to €667 billion. The increase in customer funds improves the bank's liquidity, providing it with more funds to lend to borrowers while reducing the need to offer higher rates on deposits to attract savers.

"These are [deposit] figures that we haven't seen for very, very long," Gortázar said. "I would say this is certainly the most remarkable part of the second quarter."