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A new agreement with the unions cut CaixaBank profits by 14% in 2019

CaixaBank recorded a disappointing profit of just $1,8 million (€1,7 million) in 2019, which is 14.1% lower than the previous year. The result was largely due to a new agreement with workers which cost the company $1.07 billion (€ 978 million). CaxiaBank ended the year with a 3.6% NPL compared to 4.7% at the end of 2018. Can the bank’s dividend promises mollify shareholders?

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CaixaBank generated a profit of $1,8 million (€1,7 million) in 2019. This was 14.1% lower than the previous year and largely due to the cost of a new employment agreement with the unions. The agreement affected roughly 2,000 employees and represented a gross expenditure of $1,07 billion (€978 million) for the entity.

According to the information sent to the National Securities Market Commission (CNMV), the labor agreement cost approximetly $755 million (€685 million) net. Without this agreement CaixaBank would have earned $2,6 million (€2,3 million). This represents a profit growth of 20.4% year on year.

The banking and insurance business was the main contributor of CaixaBank’s profit, generating $1,1 million (€1,06 million). BPI, Portuguese bank, contributed $366 million (€332 million) and the companies various holdings another $345 million (€313 million).

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Revenues from core businesses

Core revenues increased by 1.2% in 2019, to $9,1 million (€8,3 million). More specifically, net interest income stood at $5,4 million (€4,9 million), an overall rise of 0.9%; $2,8 million (€2,5 million) and an increase of 0.6% in 2018. Insurance business revenues rose 5.5% compared to other core revenues which amounted to $318 million (€289 million).

The gross margin amounted to $9,4 million (€8,6 million), and went down to 1.8%, due to the reduction in the results of entities accounted for using the equity method as a result of the non-attribution of Repsol (it left the oil company’s capital in July) and BFA.

The company also set aside $266 million (€242 million) for the Deposit Guarantee Fund and amade a contribution to the Single Resolution Fund of $113 million (€103 million). CaixaBank’s business volume grew by 4.7% in 2019 to $677 million (€611 million), driven in particular by customer resources, which amounted to $423 million (€384 million), up 6.9%, while gross customer credit stood at $250 million (€227 million), up 1.2%.

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Specifically, consumer credit increased by 13.7% and business credit by 8.9%, while mortgage credit fell by 3.1% and public sector credit by 0.5%.

Assets

Assets under management increased by nearly 9% to $112 million (€102 million), including a 14.7% growth in pension plans. CaixaBank’s net “available-for-sale” portfolio in Spain amounted to $1,1 billion (€958 million), $240 million (€218 million) more than in 2018. The rental portfolio totaled $2,3 million (€2 million) net of provisions, $424 million (€385 million) less than the previous year.

Total property sales by CaixaBank reached $640 million (€581 million) in 2019 and doubtful balances fell by more than $2,6 million (€2,4 million) during the year to $9,5 million (€8,7 million).

CaixaBank closed the year with an NPL ratio of 3.6%, compared to 4.7% at the end of 2018, and a Common Equity Tier 1 (CET1) ratio of 12%. Liquid assets totaled $98 million (€89 million), with the growth of $10,8 million (€9,8 million) in the year, due to the positive evolution of commercial activities and a volume of new issues in excess of maturities.

CaixaBank’s staff now consists of 35,736 employees, 1,704 less, and a network of 4,595 branches, half a thousand less than in 2018.

Dividend

In addition to its accounts, CaixaBank announced this Friday, January 31st, that it will propose to the shareholders’ meeting to be convened in February the distribution of a cash dividend of $0.17 (€0.15) gross per share, to be charged to the profit for 2019, to be paid during April.

With the payment of this dividend, the amount of shareholder remuneration for 2019 will be equivalent to 52.6% of the consolidated net profit, as reported by the company to the National Securities Market Commission (CNMV).

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CaixaBank has reiterated its intention to remunerate shareholders by distributing a cash amount in excess of 50% of profit, setting the maximum amount to be distributed against 2020 at 60% of net profit.

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(Featured image by Antoine Dautry via Unsplash)

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First published in elEconomista.es, a third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.

Although we made reasonable efforts to provide accurate translations, some parts may be incorrect. Born2Invest assumes no responsibility for errors, omissions or ambiguities in the translations provided on this website. Any person or entity relying on translated content does so at their own risk. Born2Invest is not responsible for losses caused by such reliance on the accuracy or reliability of translated information. If you wish to report an error or inaccuracy in the translation, we encourage you to contact us.

J. Frank Sigerson is a business and financial journalist primarily covering crypto, cannabis, crowdfunding, technology, and marketing. He also writes about the movers and shakers in the stock market, especially in biotech, healthcare, mining, and blockchain. In the past, he has shared his thoughts on IT and design, social media, pop culture, food and wine, TV, film, and music. His works have been published in Investing.com, Equities.com, Seeking Alpha, Mogul, Small Cap Network, CNN, Technology.org, among others.