Release Date: July 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 strong operating momentum with significant growth in loan and mortgage production.
- Net income for the second quarter of 2024 increased by over 30% compared to the same period last year.
- Customer funds grew by 5.9% in the first half of the year, with net inflows into wealth products up 25%.
- The bank upgraded its expectation for return on tangible equity to be above 17% by the end of the second quarter.
- CaixaBank SA (CAIXY) exceeded its 3-year target for sustainable finance, reaching €67 billion by June 2024, ahead of the December target.
Negative Points
- Despite strong financial performance, the bank faces intense competition in the mortgage market, impacting margins.
- The cost of risk remains a concern, with the bank reiterating its guidance of circa 30 basis points for the year.
- There is uncertainty regarding the impact of Basel IV on capital, although the bank expects it to be non-material.
- The bank's CET1 ratio of 12.22% may face pressure due to planned shareholder remuneration and potential regulatory changes.
- The increase in interest-bearing deposits, particularly from the public sector, could impact the bank's deposit beta assumptions.
Q & A Highlights
Q: How much of your profitability can you defer to next year across your key P&L line items? What appetite do you have to frontload charges, top up more coverage, or even consider cost savings to protect future profitability?
A: We see no need to manage profitability between years. We are confident about the future and see plenty of opportunities. (Gonzalo Gortazar Rotaeche, CEO)
Q: Can you talk about the key assumptions behind your new NII guidance?
A: The improvement in guidance is based more on volumes than on rates. The driver is deposits, with strong inflows and a higher savings ratio in Spain. (Javier Pano Riera, CFO)
Q: Could you elaborate on the lending rate compression going forward and the key drivers?
A: The decline in lending rates is due to repricing and lower market rates. The increase in new mortgage production at fixed rates also impacts the average yield. (Javier Pano Riera, CFO)
Q: Do you still target €3.3 billion of additional shareholder remuneration? How do you ensure you have enough core equity Tier 1 to pay this?
A: The €3.3 billion includes a large part dividend, which we are accruing at 60%. We are generating core equity Tier 1 at a pace beyond the consumption from these sources. (Gonzalo Gortazar Rotaeche, CEO)
Q: Could you give more detail on the corporate loan book and the new production? Is it mostly short-term financing, or do you also see longer-term financing demand?
A: There is more demand for long-term funding. We do not expect any cliff effect from the phase-out of ICO loans. (Gonzalo Gortazar Rotaeche, CEO)
Q: Could you share more detail on the one-offs from BPI mentioned during the presentation?
A: The one-off is related to a legacy life risk portfolio in BPI, resulting in a €16 million positive impact this quarter. (Javier Pano Riera, CFO)
Q: How do you see the profitability levels of new business in the context of stronger lending demand?
A: We see growth as accretive to current profitability levels. We expect the next 3-year period to be very different, with growth incorporated, making it a more attractive proposition. (Gonzalo Gortazar Rotaeche, CEO)
Q: How should we think about wholesale funding costs in the context of lower rates?
A: Our wholesale funding is fully swapped into floating rates, so costs will trend down according to the yield curve. (Javier Pano Riera, CFO)
Q: What are your expectations for the finalization of the ECB's work on overlay provisions and levered loans?
A: We have a very strong position with high coverage levels and low non-performing loan ratios. We are well-prepared for any ECB concerns. (Gonzalo Gortazar Rotaeche, CEO)
Q: What kind of visibility or evidence do you have that the pickup in mortgage demand has traction?
A: The structural demand for housing is there, driven by household creation and immigration. We expect the current positive trend to continue. (Gonzalo Gortazar Rotaeche, CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
