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Bankia strategic plan offers up to €2.5B in dividends over next 3 years

Spanish lender Bankia SA plans to distribute more than €2.5 billion in dividends to shareholders, or 45% to 50% of its profits, and return capital over and above a common equity Tier 1 ratio of 12%, over the next three years, it said Feb. 27.

Unveiling a new three-year strategy, Bankia CEO José Sevilla said the plan is distributed around four main themes: Integration with Banco Mare Nostrum SA efficiency and cost control; revenue growth through increased sales of high-value products; and rapid reduction of nonperforming assets.

Under the plan, projected EPS for 2020 is 43 cents compared to 26 cents in 2017. The bank is eyeing €1.3 billion in profits by end-2020, 62% higher than the €816 million profit in 2017, while ROE for 2020 is projected at 10.8% and the return on tangible equity at 11%, based on an adjusted capital level of 12%.

The bank aims to expand its retail customer base by 5%, or 400,000, and its business customers by 20%, or 12,500. Lending to business is expected to rise 7.9% per year to €41.5 billion in 2020, while consumer finance is expected to grow at a 16.2% rate to €6.8 billion in 2020.

The interest margin is expected to rise 29% by 2020, and the bank will look to trim costs by a further 2.5%, allowing it to raise the estimated synergies from the BMN deal to €190 million from €155 million. Its projected €2.5 billion in dividends would be more than twice the €1.16 billion distributed over the past four years.

It also said it aims to reduce its balance of troubled assets, i.e. nonperforming loans and foreclosed assets, by €8.8 billion, leaving the overall balance of €8.4 billion. That would amount to less than 6% of gross loans, compared to 12.5% in 2017, and less than 3% on a net basis.

The bank expects to have an NPL ratio of 3.9%, a coverage ratio of 56% and a cost of risk of 24 basis points.

Bankia has budgeted €1 billion for technology expenditure, about half of which will be dedicated to digital transformation, and it plans to have women in 40% of managerial roles by 2020. Bankia also plans to advance cybersecurity and customer data privacy, prepare an eco-efficiency and climate change plan and encourage vocational education and internships.

Bankia reported a fourth-quarter 2017 loss of €235 million, compared to a profit of €73 million a year earlier, on the back of €312 million in net costs from the integration of BMN. Excluding BMN, Bankia's fourth-quarter 2017 profit amounted to €77 million.