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CaixaBank expects 4% rise in 2018 core revenues on strong new lending

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CaixaBank expects 4% rise in 2018 core revenues on strong new lending

CaixaBank SA is expecting core revenues to increase by 4% in 2018 as it benefits from increasing demand for lending in a highly competitive market, the bank's CEO said July 27.

In the second quarter, the bank's core revenues, which include net interest income, fees and insurance income, all rose.

NII increased by 2.8% to €1.23 billion, while net fees and commissions were up 0.4% and insurance income increased by 17.6%. CaixaBank's second-quarter net profit soared 36.1% to €594 million.

The booming Spanish economy is expected to slow slightly in 2018, and the country's high concentration of banks make the sector highly competitive. But CEO Gonzalo Gortázar said CaixaBank was looking to position itself to beat the rest of the market.

"Market circumstances are making it a bit more difficult, but our results are showing that, even if it is more difficult, we can actually get there," CEO Gonzalo Gortázar told analysts on an earnings call.

"In terms of lending activity, the segment that is most promising based on the second-quarter figures is the residential mortgages area," he said. New mortgage lending in the first half of the year grew to €3.3 billion from €3.1 billion in the first half of 2017.

New consumer lending was up 16% in the first half to €4.4 billion, while new lending to businesses rose 2% to €10.6 billion.

Gortázar also said the bank was concentrating on cost savings and said a recently announced deal to sell the bulk of its real estate business to Lone Star Funds would cut costs by €550 million.

The CEO said he was against the implementation of a banking tax, something that Spain's new government is considering. He said it was impossible to say how much a potential new tax would affect CaixaBank, given that a specific tax plan has not been put forward.

"We do not think it is appropriate to have a specific tax on banks. We don't think there is a specific reason for doing that," he told analysts.

The Socialist Workers' Party ousted the Spanish government of Mariano Rajoy on June 1 following a no-confidence vote in parliament. In January, the party had put forward a proposal to tax banks to help finance Spain's pension system, and since it took power, concerns about a potential tax have risen.

The group's fully loaded common equity Tier 1 ratio — a key measure of financial strength — stood at 11.4% at the end of June, compared to 11.7% at Dec. 31, 2017, and Gortázar said the bank's 2018 CET1 ratio would be "close to" 12% by year end. On a pro forma basis taking into account the Lone Star deal, the CET1 ratio was 11.7%.

He said the bank had previously indicated it would return capital to shareholders once it reached the 12% capital level and would give an update to investors at an investor day on Nov. 27, when the bank presents its new three-year strategic plan.

Whether the bank decides to return capital to shareholders will depend on its profitability and future planning for new regulatory requirements such as minimum capital requirements announced by the Basel Committee on Dec. 7.