Caixabank sets out plan to maintain profitability as interest rates fall
Sees sustainable ROTE of above 15% in 2025-2027
ROTE would be above 16% by end 2027
Raises threshold to remunerate shareholders to above 12.5%
Sees net interest income at end 2027 similar to 2024 levels
To invest 5 bln euros in IT over horizon
Recasts to focus on bank's strategy to maintain profitability, adds share performance, details on costs, asset management growth, IT investments
By Jesús Aguado
MADRID, Nov 19 (Reuters) -Spain's Caixabank CABK.MC set out a three-year plan on Tuesday to retain profitability as interest rates fall, aiming to boost loan growth and customer funds on the back of economic growth and expand its asset management business volume.
The 2025-2027 strategic plan comes as Europe's banks seek to book higher income from non-core banking revenue, with Spanish banks having already seen a peak in lending income.
Spain's biggest domestic lender by assets said it aims for return on tangible equity ratio (ROTE) to average 15% in the next three years as it expects solid economic growth to boost revenue and offset the impact of lower interest rates.
While that is down from 16.9% at the end of the third quarter, it expects ROTE - a measure of profitability - at the end of 2027 to climb back to above 16%.
Shares in Caixabank were down 4% on Tuesday on some disappointment about its capital distribution targets, but have risen almost 50% this year as the bank benefited from higher interest rates and as Spain's economy outperformed big European peers. The European Central Bank has now started cutting interest rates, squeezing banks' margins.
Caixabank said it planned to grow business volumes by around 4% between 2025 and 2027, driven by loan growth and customer funds on expected economic growth of around 2% a year over the three-year horizon in Spain and Portugal.
Costs in the period would rise by around 4% with the cost-to-income ratio seen at low 40s, up from 39.2% at the end of the third quarter of 2024.
As it expects the 12-month Euribor rates curve to fall to around 2% through the period, the bank expects net interest income - earnings on loans minus deposit costs - above 11 billion euros ($11.6 billion) by the end of 2027, similar to its target for the end of 2024.
HIGHER NON-BANKING REVENUE
To boost income, Caixabank aims to grow its asset management business volumes by 6% over the horizon while targeting 2% compound growth in its mortgage portfolio.
It also said it plans to raise its threshold for shareholder returns to up to 12.5%, from its earlier target of 12%.
Though Caixabank targeted a sustainable cash payout of 50-60%, "no firm target was given for the total distribution unlike in the previous plan," Keefe, Bruyette & Woods said in a note.
The bank also said it would invest more than 5 billion euros over the coming years as part of its digitalization plan, as it plans to strength its commercial and service capabilities through generative artificial intelligence.
Caixabank expects the cost of risk, which measures the cost of managing credit risks and potential losses for the bank, to be lower than 30 basis points by 2027, compared to 28 basis points at the end of the third quarter.
The bank said its Portuguese subsidiary BPI expects to grow customer funds and loans by close to 4% over 2025-2027.
Reporting by Jesús Aguado; additional reporting by Emma Pinedo; editing by Inti Landauro, Edwina Gibbs and Susan Fenton
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