CaixaBank shoots its profit up to 4,786 million after the extraordinary ones of the merger with Bankia

The bank generated negative goodwill of € 4.3 billion. Discounting this effect and the expenses of the merger, the group earned 514 million.

Is such an adjustment of employment in Spanish banking necessary?

The benefit of CaixaBank soared in the first quarter of the year due to the positive impact of the Bankia integration. Earnings stood at 4.786 million after accounting for the negative goodwill (badwill) generated after the merger and, therefore, it was 4,300 million euros.

It is badwill is generated when the book value of a company is higher than the acquisition price that has been set by it. It’s about a accounting note, as the entity’s managers have already explained on occasion. Gonzalo Gortazar, CEO, has already explained that this amount “is not a treasure”.

Not even a euro will enter with it badwill, so let’s not think we have a treasure with which to do things. It gives the feeling that there is a result that is not real, you cannot pay anything with it, “he explained a few months ago. The bank’s unions, which are negotiating with the management these days on Record of employment regulation (ERE) for 7,791 employees, however, they have asked the entity that the layoffs be paid for with this goodwill.

In this case, this goodwill arises after discounting from Bankia’s equity (13,088 million euros) the acquisition price paid by CaixaBank (5,314 million euros) and a series of accounting adjustments when putting different assets and liabilities at fair value (3,474 million euros) of euros).

Discounting this extraordinary point (4,300 million) and the expenses of the merger (40 million), the new CaixaBank, which presents its first accounts this Thursday after the integration, won €514 million, compared to the 90 million it earned on the same dates last year (then its result fell after making provisions for 400 million).

Back to normal

A figure that, according to Gonzalo Gortázar, CEO of the bank, implies “a clear advance towards normality.” Of the total, 444 million correspond to banking and insurance activities, 58 million come from its Portuguese subsidiary, BPI, and 12 million are generated by participations.

The CaixaBank accounts for this first quarter include this incorporation of Bankia’s assets and liabilities at fair value, which generates this goodwill, although do not include the results generated by your activity, given that the operation was closed on March 26, practically at the end of the quarter.

José Ignacio Goirigolzarri and Gonzalo Gortázar.  EE

José Ignacio Goirigolzarri and Gonzalo Gortázar. EE

The income from the main activity of CaixaBank reached 2,066 million, 1% more than a year ago, although they were offset by income from insurance contracts (+9.3%), the results associated with insurance investees (+39.2 %) and the growth of commissions (+0.2%). Thus, the interest margin it fell 0.7%, to 1,191 million.

The gross margin stood at 2,063 million euros, 4% more, thanks to the improvement in the results of financial operations, which reached 42 million euros, an evolution mainly marked by the negative impact in 2020 of the assessment of the credit risk of financial derivatives.

The income of the investee portfolio they grew by 34.4% compared to the same period of the previous year, to 77 million euros, thanks to the improvement in the attributable result of SegurCaixa Adeslas, impacted in the same quarter of the previous year by the valuation of assets.

The administration and amortization expenses recurring losses fell 3.3% compared to the first quarter of last year, to 1,149 million euros, a fall that is due to the savings associated with early retirement of 2020, to the management of the cost base and to lower expenses incurred in the context of Covid-19.

However, the integration of Bankia generated extraordinary expenses of 40 million euros.

Without taking into account the impact of the extraordinary integration, the group’s efficiency ratio stood at 54% (53.5% without taking into account Bankia) and the return on equity (ROE) reached 6.6%.

Bankia accounts

All in all, CaixaBank has carried out the exercise of incorporate Bankia accounts to know what the result would be taking into account the bank’s activity despite the fact that its integration took place at the end of the quarter.

Taking them into account, the proforma result without extraordinary associated with the merger would be €580 million, compared to 184 million in the first quarter of last year.

Net interest income would stand at 1,639 million euros, which is 1.3% less than in the same period of the previous year, thanks to an increase of 0.7% in the entity’s main income, to 2,808 million of euros.

This is what the new CaixaBank looks like in the old Bankia headquarters in Madrid and Valencia

This is what the new CaixaBank looks like in the old Bankia headquarters in Madrid and Valencia
Ruben Escudero

More specifically, revenue from commissions would reach 941 million, with an increase of 1.6%. For its part, the gross margin would stand at 2,774 million euros (+ 0.5%) and recurring administration and amortization expenses would be reduced by 2.6%, to 1,593 million.

Once the Bankia business has been integrated into the CaixaBank perimeter, the entity includes some assets totals of 663,569 million euros (+47%) and net worth, to 35,552 million (+40.6%).

Bankia, separately, earned 54 million euros, 42% less than the 94 million it earned in the same quarter of the previous year, with a 2.9% drop in interest margin.

increase credit

Managed customer funds increased by 39.6%, to 579,934 million and, without considering Bankia’s contribution, customer funds grew by 0.9%, to 419,335 million. As for the customer credit gross, stood at 363,821 million (+49.2% but -0.5% without considering Bankia’s contribution).

The balance to individuals grew by 58.6% in the first quarter, to 191,315 million. The mortgages grew by 0.7% and credit to Business it increased by 40.3% as a result of the integration, to 149,358 million, although organically it remained stable.

Meanwhile, resources in investment funds rose 6.1% organically and pension plans rose 3.3% (41.2% and 28%, respectively, once Bankia was integrated).

After the merger, the bank has a market share of 25.3% in loans and 25.2% in deposits to households and companies, as well as 24.9% in mutual funds.