Spain’s Bankia to pay back €2.5bn to share­hold­ers over next 3 years

Arab News - - BUSINESS -

MADRID: Spain’s state-owned lender Bankia plans to re­turn €2.5 bil­lion ($3.1 bil­lion) of ex­cess cap­i­tal to share­hold­ers over the next three years as part of its new strate­gic plan, it said on Tues­day.

Bankia, given a €22.4 bil­lion bailout in 2012 af­ter losses on prop­erty loans at the height of Spain’s fi­nan­cial cri­sis, said it aimed for a profit of €1.3 bil­lion in 2020.

As part of its 2018-2020 strate­gic plan, Bankia is shift­ing away from mort­gage lend­ing and in­creas­ing vol­ume growth by seg­ments, such as con­sumer lend­ing, prop­erty de­vel­op­ment and cor­po­rate ac­tiv­i­ties, af­ter the EU lifted some re­stric­tions.

On Tues­day, Spain’s fourth largest bank said it would raise its div­i­dend pay-out ra­tio to be­tween 45-50 per­cent in 2018-2020 from a cur­rent 41.7 per­cent.

Fur­ther cash re­turns would take the to­tal pay­out to €2.5 bil­lion.

Bankia said it would fin­ish 2020 with a core-tier 1 fully loaded cap­i­tal ra­tio, the strictest term of sol­vency, of above 12 per­cent. All cap­i­tal above this thresh­hold would be paid back to share­hold­ers.

In an ef­fort to boost earn­ings, Bankia agreed in June to ac­quire smaller lender BMN to cre­ate Spain’s fourth largest. It said last month that it had swung into the red in the fourth quar­ter of 2017, blam­ing one-off costs.

Bankia ex­pected it was aim­ing to in­crease its re­turn-on-eq­uity to an ad­justed 10.8 per­cent in 2020 from 6.6 per­cent at end-2017, un­der­pinned by higher in­ter­est rates and higher bank­ing fees and com­mis­sions.

Span­ish banks have been strug­gling to lift earn­ings from loans as in­ter­est rates hover at his­toric lows and in­creas­ing com­pe­ti­tion erodes mar­gins.

To off­set pres­sure on fi­nan­cial mar­gins, Bankia said it would also main­tain its fo­cus on cut­ting costs and was aim­ing for a cost-toin­come ra­tio of be­low 47 per­cent from 51.6 per­cent. —

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