CaixaBank SA is planning to increase its real estate sales in 2018 as it continues to sell off legacy loans from the financial crisis and is considering selling a large portfolio in 2019 depending on the state of the real estate market, the bank's CEO said Feb. 2.
Gonzalo Gortázar said CaixaBank planned to sell €2.3 billion in real estate assets in 2018, up from €1.6 billion in 2017. The bank reduced its overall nonperforming real estate exposure to €6.9 billion at the end of 2017 from €7.7 billion a year earlier.
It also booked a small net profit within its real estate business in 2017, with €248 million of gains from sales just offsetting €242 million in other losses, including a "conservative" provision of €149 million in the fourth quarter. In 2016, the bank made a loss of €1.03 billion on real estate, including an €833 million fourth-quarter provision.
"We will look at the remainder of the portfolio and see if there are opportunities, depending on the evolution of the real estate market," Gortázar told an analyst call. "We will have opportunities to do, in due course, not in 2018, probably to finalize this," he said, adding that the bank would give more details at an investor day planned for the fourth quarter and that such a sale would likely take place in 2019.
Spanish banks were saddled with large portfolios of real estate assets, most of them bad, after a bubble burst in 2008. Most are still struggling to sell many of them off a decade later, and some are choosing to off-load them to specialist funds. For example, in November Banco Bilbao Vizcaya Argentaria SA agreed to sell most of its Spanish real estate business to U.S. fund Cerberus Capital Management LP for €4 billion.
The real estate market is starting to pick up in Spain, making potential sales more attractive.
Gortázar's comments came after the bank reported fourth-quarter 2017 profit of €196 million, compared to €77 million in the year-ago period. Net interest income amounted to €1.20 billion, compared to €1.08 billion in the fourth quarter of 2016, while net fee and commission income increased to €632 million from €544 million.
The bank forecast 2018 net interest income growth of between 2% to 3%, lower than the 5.1% rise in 2017, and CFO Javier Pano said loan growth would be "flattish" as the lender continues to deleverage its mortgage book. Fees are expected to grow by 3% to 4%, compared to 6.3% in 2017, while costs are slated to increase by 3% after rising 1% in 2017.
Customer funds declined 0.2% on a quarterly basis, and Gortázar said the bank had endured a "difficult situation" in October when customers withdrew funds following an illegal independence referendum in Catalonia. The ensuing turmoil after the vote led CaixaBank to move its headquarters to Valencia from the Catalan capital Barcelona.
CaixaBank has been looking beyond Spain for growth amid a challenging low interest rate environment, and it took majority control of Portugal's Banco BPI SA in 2017. Through the purchase, it acquired a 48.1% stake in Banco de Fomento Angola SA, which Gortázar said CaixaBank still intended to reduce in line with a nonbinding recommendation from the ECB.
CaixaBank took a €119 million charge in the fourth quarter related to BFA, including €76 million to account for inflation in Angola.
"This is the plan — how and when we do it remains to be seen," Gortázar said, adding that BFA was highly profitable with a 35% return on equity in 2017. He said CaixaBank will discuss ways of decreasing its stake with BFA's controlling shareholder, telecoms group Unitel.
CaixaBank shares fell nearly 5% in morning trading but later recovered some of those losses and were off 2.5% as of shortly after 3 p.m. Madrid time. Shares in the bank had risen more than 12% since the start of 2018.
