CaixaBank's Q3 2023 earnings call revealed a significant surge in profitability, with net income up 48% YoY, reaching €1.5 billion. CEO Gonzalo Gortazar emphasised the sustainable nature of this increase, stating that the bank has surpassed its 2024 targets and plans to update these for the next year. The bank's balance sheet has been strengthened and its capital distribution capacity increased, with a reported €4 billion already distributed to shareholders.
Key takeaways from the call include:
- The return on tangible equity is 14%, and the cost-income ratio is 42.6%.
- The bank expects its net interest income to be at or above €10 million in 2023, aiming to maintain this level into 2024.
- The macro environment in Spain and Portugal is positive, with expected growth rates of 0.5% and 2.4% respectively.
- Market share gains have been seen in deposits and long-term savings.
- The loan book has experienced a slowdown in demand, but new loans are still being produced at a faster pace than in 2021.
- CaixaBank's BPI subsidiary is performing well, with market share gains and improved profitability.
- The bank is committed to financial inclusion and has set decarbonization targets for multiple sectors.
The bank reported strong revenues, particularly in net interest income (NII), insurance revenues, and asset management fees. It has made progress in cost reduction and provisions, with a coverage ratio of 76%. The loan book is expected to have modest growth, with mortgages decreasing and consumption remaining resilient. The bank does not expect any material impact from the proposed reduction in working hours by the Spanish government.
The bank's CET1 ratio at the end of the quarter was 12.16%, and the tangible book value per share reached €4. The bank plans to use capital for organic growth in the financial services market in Spain and Portugal, particularly in insurance and payments, as they expect limited lending growth. They do not anticipate any impact from Basel IV.
In terms of M&A, CEO Gortazar stated that it is unlikely and that they do not see any opportunities that make sense for them. Regarding the digital euro, Gortazar mentioned that they view it as both a threat and an opportunity and are focused on making sure it becomes an opportunity for the industry.
On asset quality, Gortazar noted some deterioration in the mortgage portfolio due to higher rates but stated that the impact has been moderate. As for their exposure to the renewable energy sector, Gortazar did not provide specific details but reassured that they have measures in place to manage any potential risks.
In terms of capital generation, the CFO explained that the loan book has decreased due to deleveraging in low-density segments, but there is no cause for concern. They expect net income to flow into organic capital generation and mention the possibility of dividends and buybacks. The CEO states that there is no new information regarding the company's stake in Angola.
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