Bankia SA plans to increase its revenues and profits over the next three years by targeting business and consumer lending and high-fee businesses such as mutual funds and payments services, the Spanish lender's CEO said during a presentation of its 2020 strategic plan.
The recent acquisition of smaller peer Banco Mare Nostrum SA will help Bankia to expand business lending throughout Spain, José Sevilla said, adding: "BMN will allow us to grow in new regions. We will be closer to company groups in new regions in which we weren't working before."
Spain's government owns a majority stake in both lenders after they were rescued with some €24 billion of EU funds, Bankia's bailout coming after an ill-fated 2011 IPO and amid a €19 billion loss in 2012. The state has until 2019 to reprivatize the bank — a deadline that was extended from end-2016 — and is expected to do so through sales of packets of shares on the market.
Sevilla also said Bankia would target syndicated lending now that EU restrictions on how it could lend had been lifted, noting that despite the imposed limits, the bank had fourth place in syndicated lending in Spain, with €77.4 billion in loans between 2014 and 2017.
"Over the last years, we had to work with one of our hands tied," he told analysts. "This market is now open to us and is the source of possible growth for the next years."
Bankia will also increase funding for real estate developers and project and acquisition finance as it seeks to boost fees, the CEO said.
Cost-cutting target increased
The bank is eyeing €1.3 billion in profits by end-2020, 62% higher than the €816 million profit in 2017, as it reduces costs across the business. By cutting jobs and branches, the group said it would reduce costs by a further 2.5%, allowing it to raise the estimated synergies from the BMN deal to €190 million from €155 million by 2020. BMN branches will adopt the Bankia brand from the third quarter.
Return on equity for 2020 is projected at 10.8%, and the return on tangible equity — a key profitability ratio — at 11%.
Market share for business lending is estimated to grow to 7.7% in 2020 from 6.9% at the end of 2017, while for consumer loans, the bank is targeting a rise in market share to 6.6% from 5.5% over the same period. It is also seeking to increase fee growth in mutual funds, payment services such as credit cards and in insurance through its newly created bancassurance model.
The bank is aiming for a common equity Tier 1 ratio — a key measure of a bank's financial strength — of 12% by 2020 and plans to return any capital in excess of that amount. Over the next three years, it will distribute more than €2.5 billion in dividends to shareholders, or 45% to 50% of its profits.
Chairman José Ignacio Goirigolzarri said the bank had "no appetite" for further acquisitions over the next three years.
CFO Leopoldo Alvear said Bankia would issue €7.3 billion in senior nonpreferred debt and covered bonds over the next three years to be in line with the minimum requirement for own funds and eligible liabilities, or MREL, which requires banks to hold enough debt to absorb losses if they run into trouble. The bank will have a buffer of 20% of risk-weighted assets by 2020, he said.