's net interestincome will improve over the course of 2016, while fee income is stronglylinked to market developments, executives told analysts at its first-quarterresults presentation.
CaixaBank'snet interest income fell to €1.02 billion from €1.14 billion in the firstquarter of 2015, while its net fees and commissions dropped to €465 million from€513 million a year earlier and €489 million in the fourth quarter of 2015. Netinterest income was in line with consensus estimates, but fee income was weakerthan expected, according to Haitong Research.
"Wehave clearly felt the impact of market turmoil on fee income," CFO JavierPano said, adding that the 5.0% sequential decline was "100% related tothe situation on the markets. […] We expect that as markets stabilize we canresume the upward trend on fees."
CEOGonzalo Gortázar said the decrease in net interest income was in line withexpectations and that the situation was likely to gradually improve on aquarterly basis over the course of the year. "Therefore I want to confirmour guidance of a mid-single-digit decline [in net interest income] for theyear," he added.
Therewas better news for CaixaBank with regard to costs, nonperforming loans andrisk provisions.
Excludingwhat Pano said were "seasonal taxes," operating costs fell 0.1% fromthe fourth quarter of 2015 to €996 million. "We are envisioning[full-year] operating costs to be down by at least 1%, and we think that we arefully on track to reach that target," the CFO added.
Healso noted that the bank has put in place an early-retirement plan for 370employees that will result in restructuring costs of €160 million butultimately lead to annual cost savings of €40 million.
CaixaBank'snonperforming loan ratio was 7.6% at the end of the first quarter, down from9.7% a year earlier. Pano noted that the NPL stock was €16.42 billion at theend of the first quarter, down by €675 million from the 2015-end figure. Thecoverage ratio stood at 55%, down 1 percentage point from three months earlier.
Panonoted that in the first quarter, the bank made a 3% profit by selling its realestate assets, compared with a loss on disposals of 18% a year earlier.
"Weexpect that trend to continue in the coming quarters due to the underlyingstrength of the real estate market in Spain," he said.
Thefirst-quarter cost of risk was 58 basis points, down by 33 points year overyear, and CaixaBank is confident in its target of reducing that figure toaround 50 basis points for the year.
"Infact, if you annualize the cost of risk of recent months," Pano said,"you'll see that we are on 40 basis points." He added that assetquality is expected to continue to improve.
Gortázarhighlighted strong growth in new consumer lending and new lending forresidential mortgages, up 44% and 45% year over year, respectively, as well asthe performance of CaixaBank's insurance business, with life insurance unitVidaCaixa growing its market share 6.8% year over year.
"Atleast half of our profitability in the quarter — half of our return on tangibleequity — is coming from businesses that are doing pretty well despite zerointerest rates," he said. "This is a critical reason why we feelconfident that we can achieve our profitability ratios even if rates continueto stay at zero."
Regardingrecent rumors thatCaixaBank has resumed negotiations with Isabel dos Santos in relation to herBanco BPI SA stake,he said: "Let's be clear: the offer for BPI is an offer that is notsubject to negotiations."
CaixaBank'sfirst-quarter profit attributable to the group came in at €273 million, downfrom €375 million a year ago and 9% below the consensus of €300 million,according to Haitong Research.
Thebank's phased-in common equity Tier 1 ratio stood at 12.8% as of March 31,compared with 12.9% at the end of 2015. The fully loaded CET1 ratio stood at11.6% at March-end, 9 basis points up from the ratio at 2015-end but ostensiblyunchanged because of rounding to one decimal point, Pano said.