Axesor Rating assigns CaixaBank a rating A with stable trend due to the stability of its income, supported by its high business diversification; improving the quality of its assets and reducing its exposure to market risks.
Madrid, 24 July 2019
Axesor Rating assigns CaixaBank an unsolicited rating of A with stable trend. CaixaBank is the leading retail bank in Spain by branch network size (5,103 offices). The group's balance sheet was 362,564 million at the end of 2018. Its business model is highly diversified, with business in banking activity - in which its positioning is solid-, insurance activity and wealth management.
In the latter two it is one of the leading entities in the provision of services. Its geographical positioning is mainly national, with a relevant pricing power in the Spanish market. It also has a presence in Portugal through Banco BPI, the fifth Portuguese entity by size, which allows it to achieve economies of scale in a context in which efficiency in the market in which it operates is being key to differentiate itself from its main Competitors.
CaixaBank has a highly professionalised management team, which carries out effective risk control. The sales of the real estate business and the sale agreement of Repsol's stake lead Axesor Rating to positively value the degree of achievement of the strategic objectives of the entity.
The favorable conditions of the Spanish economy have supported the growth of the bank's business. CaixaBank has improved its risk profile through the mobilization of unproductive assets and the adequate reduction of its exposure to non-financial equities. Its profitability has continued to improve by the strength of its commercial network and the diversification of the business, to which the insurance activity and the management of the assets made high contributions. Their revenues are stable and are framed in a context of new concession business growth and continued decline in impairment.
Capital levels are adequate and according to the risk profile of the entity, being above the minimum regulatory requirements. The entity demonstrates proven effectiveness in accessing capital markets through the issuance of debt instruments. Its main source of funding is a solid deposit base. Maintains a robust ability to meet its obligations to third parties. Potential changes in your rating may come from the performance of the quality of your assets and the ability to generate returns in a context of low interest rates.
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 limits 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."