Axesor Rating assigns Bankia a stable BBB rating for the appropriate ability to meet its obligations to third parties, continuous improvement in asset quality metrics and solid capital levels above the national average.
Madrid, 24 July 2019
Axesor Rating assigns Bankia an unsolicited BBB+ rating with stable trend. Bankia, with a consolidated asset of 208.7 billion euros at the end of March 2019, focuses its activity on commercial banking, where the retail, SME and business businesses stand out. The acquisition of BMN reinforced the entity's presence in the southeast of the country.
Bankia stands out for its strong presence in the mortgage segment, although it contemplates a rebalancing of this portfolio in favor of business and consumer business. Changing the business model to the most profitable segments (SMEs and consumption) can nevertheless make it more vulnerable in the future to recessionary phases. His management team shows a high degree of professionalism and effectiveness in completing the restructuring plan agreed with the European authorities in 2012.
Bankia has continued to reduce unproductive assets with adequate levels of coverage that have remained stable over time. The entity shows an adequate income-generating capacity, which has been under pressure by maintaining the context of low interest rates, accentuated in Bankia by the weight of its mortgage portfolio. Axesor Rating expects the trend of stabilizing operating margins during 2019 with a continuous improvement in asset quality.
Bankia shows strong capital ratios, above the national average, with an adequate liquidity profile and in line with its national peers. Its strong deposit base is the main source of funding. It has more than adequate ability to meet its obligations to third parties. Axesor Rating expects future capital levels to continue to a rebound in returns, as the end of the European Central Bank's (ECB) unconventional policies is felt in the market.
Analysis by Axesor Rating
"The Spanish banking sector is facing a downward profitability scenario because of high competition, regulatory pressures and the elongation of low rates at the European Central Bank's insistence on achieving its inflation target. Therefore, efficiencies and results generation strategies will be focused, among others, on cost savings," says Vicente Bustos Izquierdo, Head of Financial Institutions of Axesor Rating. "The main problem is the soil to which the financial costs have reached, which has highlighted the inability to follow the path of savings in terms of intermediation margin. This situation puts the focus on the efficiency of personnel costs as the main challenge of the entities to achieve their profitability objectives. In this vein, we see reasonable an eventual second round of mergers, mainly national, aimed at scale gains, mainly in those smaller entities with no market leadership position."