Caixabank forecasts strong growth in credit revenues in 2023 after improving its profit

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Spain’s Caixabank expects rising interest rates to boost its borrowing income by about 30 percent this year, it said on Friday after posting better-than-expected quarterly and annual results, sending its shares up about 3 percent.

Spain’s largest national bank said its net profit last year rose 29.7% on a like-for-like basis to 3.150 billion euros ($3.430 billion) from 2021, excluding accounting gains stemming from the acquisition of former competitor Bankia (BME:BKIA).

Analysts had expected the largest bank in the Spanish domestic market to record a net profit of 3,050 million euros.

If the gain of €4.300 billion from negative goodwill or “bad will” – a profit on paper obtained when an asset is purchased below its book value – from the acquisition of Bankia in 2021 is taken into account, net profit fell by 39.8%.

In the fourth quarter, net profit increased by 62% to 688 million euros, beating forecasts of 620 million.

Earnings were driven by a higher-than-expected net interest margin and lower costs. However, the bank forecast that recurring costs would rise to 6.400 billion euros in 2023 from 6 billion euros in 000 in a scenario of high inflation.

At 0934 GMT, Caixabank shares were up 2.8%, beating the index’s rise. Ibex-35.

While talking to analysts after the results, Caixabank’s chief financial officer, Javier Pano, had to leave the room when he felt unwell. The company later reported that it was feeling much better.

European banks are starting to benefit from rising interest rates, but some are providing more provisions for insolvencies due to the uncertain economic environment.

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The cost of risk for Caixabank, which manages credit risks and potential losses, rose to 25 basis points from 23 basis points at the end of September. The bank said it expects its cost of risk to rise to less than 40 basis points this year.

Provisions for insolvencies increased by 26% year-on-year in the quarter.

Net interest income, or profit on loans minus deposit costs, rose 33% year-on-year to €2.070 billion in the fourth quarter, beating forecasts of €1.880 billion.

In 2022, loan income was 16% higher than in 2021, at €6.920 billion, and the bank expects it to rise by around 30% to €9 billion this year, supported by higher loan profitability.

Caixabank proposed to shareholders a gross cash dividend of 0.2306 euros per share against 2022 results, 58% more than in 2021 and equivalent to 55% of consolidated net profit.

It aims to maintain its cash dividend distribution policy of 50-60% by 2023, and said it was on track to reach its target of distributing up to 9 billion euros in 000-2022.

(1 dollar = 0.9182 euros)

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