Bankia Shares Climb After Quarterly Profit Beats Estimates

  • Spanish Lender reduces bad loans, shores up capital ratio
  • Bank publishes earnings after saying it will boost dividend

Bankia SA reversed a year-ago loss to book a quarterly profit that exceeded analyst estimates as the Spanish bank shored up its balance sheet by increasing capital and reducing non-performing loans. Shares jumped.

Fourth-quarter net income was 185 million euros ($200 million) compared with a 50 million-euro loss in the same period a year earlier, the Valencia, Spain-based lender said in filing to regulators Monday. Shares rose by as much as 9.4 percent, their biggest gain since September, as the results beat the 134.2 million-euro average estimate in a Bloomberg survey of nine analysts.

Chairman Jose Ignacio Goirigolzarri is working to return the 22 billion euros of state aid Bankia received in 2012 by increasing dividends and making the lender more profitable as the government plans to sell its stake to investors. The bank shed 3.6 billion euros of soured assets last year as Goirigolzarri continues the task of repairing the lender’s balance sheet.

“It’s a combination of them generating good capital and reducing non-performing loans that adds up to a picture of balance sheet strength,” said Daragh Quinn, an analyst at Keefe Bruyette & Woods, by phone.

Bankia shares rose 5.7 percent to trade at 97 euro cents as of 11.15 a.m. in Madrid. Shares are down about 11 percent this year.

“The performance of the Spanish banks in the first three weeks of the year was pretty shocking but the results we’ve seen so far don’t show any new negatives,” Quinn said.

The bank said Jan. 29 it plans to pay out 302.3 million euros as a dividend for 2015, more than the 202 million euros it paid a year earlier. Including the dividend, Bankia will have paid back 1.63 billion euros of aid.

The lender provisioned 78 million euros in the fourth quarter, less than the 189 million euros it provisioned in the same quarter a year earlier. Bankia’s bad-loan ratio declined to 10.8 percent from 11.4 percent in September, the lender said. The bank’s fully-loaded core equity tier one ratio jumped to 12.3 percent from 10.6 percent a year earlier.

Net interest income, or revenue generated from the difference between what banks charge for loans and pay for funding, dropped to 665 million euros from 765 million euros a year earlier.

Bankia’s quarterly earnings included 184 million euros of charges for provisions to cover claims relating to its 2011 initial public offering. The Spanish Supreme Court on Jan. 27 rejected two appeals by Bankia and said the IPO’s filings contained “serious inaccuracies.” The lender and it’s state-owned parent BFA made provisions of 1.06 billion euros in 2015 for possible claims.

Bankia restated its results for 2014 to include a charge related to a Spanish guarantee fund payment. The bank recorded a 117 million-euro capital gain in the fourth quarter from the sale of City National Bank in Florida.

“These are a very positive set of results for Bankia,” Nuria Alvarez, a bank analyst at Renta 4 Banco SA in Madrid, said by phone. “Bad loans provisions in the quarter have been lower than expected, compensating part of the provisions the bank has made for the IPO, and the improvement of the capital ratio also comes as a positive surprise.”

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