MADRID, November 19 (EUROPE PRESS) –
Jefferies praised CaixaBank’s new strategy for the three-year period 2025-2027 as a “realistic” proposal and believes shareholder rewards over this period could be around €11.5 billion.
In their report on the new plan, analysts believe this lower growth over the three-year period will be combined with the bank’s commitment to invest in business growth, likely leading to lower returns on equity for shareholders from 2025 onwards. 2027 compared to the three-year period 2022-2024, where the total amount of awards will be 12 billion euros.
However, Jeffries said the figures CaixaBank cited on Tuesday when presenting its new 2025-2027 plan meant shareholder payouts remained at a “very healthy” level. Taking into account an average yield of 15% and average annual growth of risk-weighted assets of 3%, analysts say the bank will have around €11.5 billion of capital available to pay dividends or repay AT1 bonds over the next three years.
“If asset growth is lower than expected (4%), payouts may be higher,” he adds.
As for the operational and financial goals, Jeffries believes they are “robust and realistic.” The strategy is based on positive asset growth, but by reducing profitability to 15% in the first two years, it is planned to reach 16% again in 2027.
It is worth remembering that the bank plans to close with a yield of 17% in 2024. “We see this as the only possible path to achieving more sustainable future profitability,” the firm explains in this regard.
Experts explain that the bank will have to endure “some difficulties” in the short term to be able to adjust to the new rate environment and take advantage of the growth that will come as the economies of Spain and Portugal begin to use leverage again.
As such, Jeffries predicts there will be “negative operating jaws” in 2025 and 2026 due to a fall in net interest margins as a result of the planned rate cuts, as well as “insufficient” growth to offset those margin declines. since the increase in activity will occur mainly in the last part of the strategic plan.
However, revenues from services, including asset management and insurance, partially offset the pressure on net interest margins. At the same time, there will be an increase in costs, although this will also happen at the beginning of the year.
Consequently, Jeffries says CaixaBank’s profits will be lower next year, although he views this as a “necessary adjustment” to the new interest rate environment.
RISK ASSOCIATED WITH THE TARIFF ENVIRONMENT
The analysis shows that the expected average loan growth of 4% is a “realistic” target. However, the greatest risk comes from interest rates adjusting below 2%. “This will put non-linear pressure on CaixaBank’s (and any bank’s) earnings,” they argue in this regard.
However, analysts believe that even in this worst-case scenario, CaixaBank will continue to stand out from competitors thanks to its diversified income (30% comes from non-investments) and its “solid” insurance and asset management business.