Caixa, Sabadell Sink After Cutting Income Guidance

   By Pietro Lombardi 
 

Shares in CaixaBank SA (CABK.MC) and Banco de Sabadell SA (SAB.MC) plunged Friday after the banks cut their income guidance for the year due to the low interest rates environment.

The Spanish banks revised their guidance only a day after the European Central Bank signaled that it is ready to restart its huge bond-buying program and cut short-term interest rates for the first time since 2016.

Caixa said it now expects core revenue--which includes net interest income, fees and income from insurance--to grow by around 1% this year, down from a previous estimate of about 3%.

"Core revenues improve but not enough to meet FY guidance in the lower rate environment," it said in a presentation of the second-quarter results.

Sabadell cut its guidance for the year for net interest income--the difference between what lenders earn from loans and pay for deposits, and a key profit driver for retail banks--to between 0% and -1%, having previously guided for a growth of between 1% and 2%.

Shares in Caixa fell 6.7% at 0747 GMT, while Sabadell was down 5.3%.

Caixa's results show how difficult it is to manage margins in the current low-rates environment, Renta 4 Banco analyst Nuria Alvarez said.

Caixa's second-quarter net profit fell sharply due to hefty restructuring costs. The bank posted a profit of 89 million euros ($99.2 million) compared with EUR594 million a year earlier. It had EUR978 million in expenses in the quarter related to its restructuring program. In May, the bank reached an agreement with unions over a redundancy program potentially affecting more than 2,000 employees.

Sabadell reported a net profit of EUR273 million for the period compared with a EUR139 million loss in the year-earlier period, when costs at its U.K. subsidiary TSB Bank following its technology-platform migration weighed on the results.

The bank posted a EUR135 million capital gain on the sale of 80% of Solvia Servicios Inmobiliarios.

Sabadell's results seem to confirm a downward trend in profitability, Ms. Alvarez said.

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(END) Dow Jones Newswires

July 26, 2019 04:35 ET (08:35 GMT)

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