Release Date: October 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- CaixaBank SA (CAIXY, Financial) reported a 20% increase in new lending, indicating strong customer activity and growth potential.
- The bank achieved a 9% increase in off-balance sheet wealth management balances and a 5.5% rise in on-balance sheet deposits, showcasing robust growth in customer funds.
- Net interest income (NII) stabilized quarter-on-quarter, defying expectations of negative growth, and is projected to exceed EUR 11 billion for the fiscal year 2024.
- CaixaBank SA (CAIXY) announced an interim dividend at the top end of its range and received approval for a fifth share buyback, reflecting strong capital generation and shareholder returns.
- The bank's asset quality remains strong, with a non-performing loan (NPL) ratio of 2.69%, well below the industry average in Spain, and a comfortable NPL coverage of 71%.
Negative Points
- Despite strong new lending, the overall loan book growth remains limited due to a low growth environment and significant amortization processes.
- The competitive landscape in Spain remains intense, particularly in the mortgage and business lending sectors, which could pressure margins.
- The bank faces potential challenges from the proposed extension of the special banking tax in Spain, which could impact future profitability.
- CaixaBank SA (CAIXY) has a high proportion of interest-bearing deposits indexed to overnight rates, which may lead to volatility in funding costs as rates change.
- The recent floods in Valencia could have an impact on the bank's operations and potentially increase costs related to insurance claims and customer support.
Q & A Highlights
Q: Can you explain the impact of ECB rates on your liquidity strategy and at what level this strategy might not be beneficial?
A: Javier Pano Riera, CFO, explained that the bank's liquidity strategy involves maintaining a positive margin by indexing large deposits to the overnight rate, ensuring a positive carry against ECB rates. This strategy remains beneficial as long as the cost of liquidity is lower than the ECB rate, and adjustments will be made if rates change.
Q: What is the outlook for wealth management inflows and their impact on fee growth?
A: Javier Pano Riera, CFO, noted that wealth management has seen strong inflows, with a shift from annuities to money market funds. Despite this shift, management fees have remained stable, and the bank expects continued growth as clients move within the mutual fund ecosystem.
Q: How is CaixaBank managing competition in the loan market, and what are the expectations for loan growth?
A: Gonzalo Gortazar Rotaeche, CEO, acknowledged strong competition in mortgages and business lending. The bank focuses on protecting margins while adapting to market conditions. Loan books are stabilizing, and the bank expects continued competition but aims to maintain profitability.
Q: What is the rationale behind the recent Chairman change at CaixaBank?
A: Gonzalo Gortazar Rotaeche, CEO, explained that the change was due to personal decisions by the outgoing Chairman. The new Chairman, Tomas Muniesa, has extensive experience with CaixaBank, ensuring continuity and alignment with the bank's strategy.
Q: How does CaixaBank plan to manage capital allocation, particularly regarding share buybacks and potential growth opportunities?
A: Gonzalo Gortazar Rotaeche, CEO, stated that share buybacks are a good use of capital when there are no better growth opportunities. The bank prioritizes organic growth and maintains a disciplined approach to capital allocation, focusing on profitable growth.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
