Net Income: Up 46% year-on-year; adjusted growth of 6.9% considering banking tax changes. Revenue from Services: Increased by 7% year-on-year. Loan Growth: 2.9% year-on-year; new lending production up 15%. Customer Funds: Grew by 8.5% year-on-year. Protection Insurance Growth: 12% increase year-on-year. Return on Tangible Equity: Close to 20%. Cost Income Ratio: Below 38%. Non-Performing Loans (NPL): Ratio at 2.54%, a record low. Liquidity Ratio: Hovering around 200%. Capital Ratio (CET1): 12.46%, with a positive impact from Basel 4. Operating Expenses: Increased by 4.8% year-on-year. Net Interest Income (NII): Down 3.5% quarter-on-quarter. Cost of Risk: Annualized at 20 basis points.

Warning! GuruFocus has detected 6 Warning Sign with CAIXY.

Release Date: April 30, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

CaixaBank SA (CAIXY) reported a strong start to 2025 with net income up 46% year-on-year, driven by better-than-expected asset quality and lower cost of risk. The bank achieved a net gain of 340,000 clients and saw a 30% increase in performing loans, indicating strong business growth. Customer funds grew by 8.5% year-on-year, with significant contributions from non-interest-bearing deposits, reflecting a positive trend in client acquisition and retention. CaixaBank SA (CAIXY) reported a 7% increase in service revenues, supported by strong performance in wealth management and protection insurance. The bank's liquidity and capital positions remain robust, with a CET1 ratio of 12.46%, providing a solid foundation for future growth and potential shareholder distributions.

Negative Points

Net interest income (NII) decreased by 3.5% quarter-on-quarter, impacted by a higher day count and lower index resets on floating loans. The Spanish mortgage market remains highly competitive, with returns on mortgages not meeting the cost of capital, although cross-selling opportunities help offset this. There is uncertainty regarding the impact of tariffs and macroeconomic conditions, which could affect future growth and asset quality. The cost of risk guidance remains cautious, with the bank not yet revising its below 30 basis points target despite current positive trends. The execution of the planned $500 million share buyback has been delayed, raising questions about the timing and potential reasons for the postponement.

Q & A Highlights

Q: Can you provide insights on the Net Interest Income (NII) outlook and volume growth for loans and deposits? Also, any guidance for 2026 and beyond? A: We are reiterating our guidance for 2025 and maintaining our previous messages from the Capital Market Day. The yield curve is slightly lower in the short term but higher in the long term, which is positive as we lend long and borrow short. We expect deposit costs to be in the mid to high 50s, and loan volumes to grow by 3-4%. For 2026, we anticipate NII to be at or above 2025 levels, with further improvement in 2027.

Story Continues

Q: How do you view the current mortgage competition in Spain, and are you participating in this price competition? A: Mortgage competition in Spain is indeed intense. We are the largest player and must compete in the market. While the mortgage itself may not beat the cost of capital, the overall client relationship, including cross-selling opportunities, provides positive returns. Our market share in new mortgage production is aligned with our back book.

Q: Could you elaborate on the trends in corporate lending and any signs of cautiousness due to macroeconomic uncertainty? A: We are seeing good dynamics across the board, particularly with SMEs. Despite some uncertainty related to tariffs, investment in equipment is accelerating in Spain. We expect loan demand to continue growing, and the defense sector presents potential upside.

Q: Why not become more positive on the cost of risk given the current performance? A: While our cost of risk is better than expected, we maintain a conservative approach due to global uncertainties. Our guidance remains below 30 basis points, and we see clear upside potential. However, we prefer to wait for more clarity before revising our guidance.

Q: Can you provide an update on capital optimization efforts and expectations for 2025? A: We are actively working on capital optimization projects, though there was no positive impact in the first quarter. We plan to optimize 34 billion of risk-weighted assets over the next three years, with some impacts expected in coming quarters.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

View Comments