Caixabank plans to cut almost a fifth of its branches in Spain over the next three years in a drive to boost profitability while pursuing its digital transformation.
As part of its 2019-2021 strategic plan, the Spanish lender said today it expected to cut the number of branches in its main market by 821 to 3,640 by 2021.
The bank, which employs around 32,600 people in Spain and also has operations in Portugal, said the plan would lead to job losses, but did not elaborate.
Caixabank said it aimed to increase its return on tangible equity ratio (ROTE) to above 12% by 2021 from 9.4% at the end of September, buoyed by a more profitable insurance and consumer lending business.
Spanish banks are struggling to lift earnings from mortgage loans as interest rates hover at historic lows and are battling over more profitable household lending.
Caixabank cut its original 2018 profitability target of 12-14% at the beginning of 2017 to 9-11%. At that time, it forecast ROTE at just above 10% by 2021.
Caixabank has relied heavily in the past on hefty dividends and income from its holdings, but changed strategy after it announced in September it was selling its 9.4% stake in oil major Repsol.
The lender has been one of the most acquisitive in a consolidating Spanish banking industry, taking over BPI in February 2017 in a bid to boost revenue.
It forecast BPI would achieve accumulated annual revenue growth of 7% under its plan.
Underpinned by around 2% economic growth in both Spain and Portugal, Caixabank said it was aiming for compound annual revenue growth (CAGR) of around 5% or more over the next three years, outpacing a roughly 3% forecast increase in recurring expenses.
The bank said revenues would be driven by an increase of around 5% or more in net interest income (NII) - the difference between what banks earn on loans and pays on deposits - after just 0.7% growth in the third quarter.
It also sees higher commission and fees, and its insurance income growing at an accumulated annual rate of 9-10%.
The bank aims to reduce non-performing assets by around €5 billion from the end of September to €7 billion by 2021, and non-performing loans to below 3% of the total from 5.1% now.
It plans to end 2021 with a core-tier 1 fully-loaded ratio, the strictest measure of capital, of around 12% compared to 11.4% at the end of September.
The bank also aims to continue paying out more than 50% of profits in cash dividends.
