Caixabank's profit weathers Catalan storm

Updated / Tuesday, 24 Oct 2017 09:49

Caixabank decided to move its legal headquarters out of Catalonia earlier this month

Barcelona-based Caixabank Spain's third largest lender, beat third-quarter profit forecasts despite uncertainty about the future of Catalonia, thanks largely to its integration of Portugal's BPI. 

Catalonia's independence drive and its potential fallout on financial markets were expected to overshadow Caixabank's results.

However the bank did not provide any detail today about the consequences for its balance sheet. 

Caixabank decided to move its legal headquarters out of Catalonia, where it is based, early in October in an attempt to calm investors and deposit holders. 

Spain's economic environment remained positive despite the uncertainty surrounding the domestic political situation, Caixabank said today. 

However, brokers expect the ongoing Catalan uncertainty, with the government in Madrid enforcing direct rule on the region, to result in client losses and deposit outflows for Caixabank in the fourth quarter. 

Madrid has urged Catalans to accept its decision to dismiss their secessionist leadership and to take control of the region, which accounts for a fifth of Spain's economy, as the nation's biggest political crisis in decades enters a decisive week. 

Spain has cut its 2018 economic growth forecast from 2.6% to 2.3% due to the political turmoil and has delayed approving next year's budget. 

Banco Sabadell, Caixabank and BBVA are the most exposed to Catalonia among Spanish lenders, with around one-third of their total deposits coming from the region.

The banks' shares have underperformed their Spanish and European peers. 

Caixabank shares have lost around 10% of their value since the trading day before the banned Catalan referendum on independence on October 1.

The bank lifted its net profit in the third quarter to a record €649m, an almost 49% rise on a year ago, thanks to a contribution of €103m from BPI, whose acquisition was successfully completed in February. 

Ultra-low interest rates and competition for a lacklustre loan market have pressured bank margins in Spain, steadily trimming income from lending and forcing them to focus on other revenue sources and new markets.

The bank said its net interest income, a measure of earnings on loans minus deposit costs, was €1.2 billion in the third quarter, up 15.6% from a year ago but just 0.4% higher compared to the previous quarter.