April 25, 2013 10:08 am

Caixabank reports surge in earnings

Caixabank, Spain’s largest domestic lender by branches and clients, reported a surge in earnings for the first quarter because of extraordinary gains from recent acquisitions.

The Catalan savings bank, which listed its banking assets in 2011, said that extraordinary gains and accounting impacts from its acquisitions of smaller rivals Banca Cívica and Banco de Valencia helped it to increase net profit 700 per cent year-on-year to €335m.

The bank also said it was completing provisions against real estate loans ordered by the Spanish government. As part of the deal for Banco de Valencia, Spain’s state bank bailout fund, the Frob, provided a €4.5bn injection into the small, eastern coast based lender.

The €2.22bn of exceptional gains from the deals helped to offset a jump in loan-loss provisions from €960m to €1.95bn, with the lender completing its provisioning requirements against troubled real estate developer loans ordered by the Spanish government to clean up banks last year.

Non-performing loans, meanwhile, rose 9.4 per cent, up from 8.62 per cent at the end of the last quarter – a level below the Spanish sector average after the transfer of assets from lenders to Sareb, the state-organised bad bank, which stands at 10.39 per cent.

Meanwhile, Caixabank’s net interest income over the period, which measures the money it makes from the difference between the prices the bank borrows and lends at, rose 12 per cent to €992m compared with the same period last year.

While Caixabank’s total assets grew 5.6 per cent over the period to €367.9bn, its risk-weighted assets, used to calculate its solvency ratios, fell €982m, with its core tier 1 ratio, a measure of capital strength, falling 0.4 percentage points to 10.6 per cent over the year.

Caixabank, unlike BBVA and Santander, has maintained its domestically focused strategy alongside a portfolio of industrial holdings in some of Spain’s largest companies, including Telefónica, Repsol and Gas Natural, which have provided it with a relatively steady flow of dividend payments during the crisis.

The Catalan lender said that as a result of the acquisitions, its domestic market share of loans rose to 15.3 per cent while its share of deposits rose to 14.2 per cent.

Spanish banks have been forced into an extensive round of consolidation after a decade-long property bubble burst, tearing holes through the balance sheets of lenders and forcing several savings banks, most notably Bankia, into the arms of the state.

Caixabank, which has been on a drive to reduce its number of branches and cut costs, said year-on-year it increased its number of employees by 1,709 and branches by 58 as a result of the acquisitions.

Caixabank, which is the result of the savings bank La Caixa listing its banking business on the Madrid exchange in 2011, is alongside Santander and BBVA considered one of Spain’s “big three” lenders, but unlike its larger rivals does not have any significant operations outside of its home country.

Caixabank shares fell 0.2 per cent to €2.80 in late Madrid trading.

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