CaixaBank: Good risk management comes at a price
One of the big recent hits to net interest income at CaixaBank has come from the removal of interest-rate floors, which had been inserted into mortgage loan contracts to protect lenders from falling rates but not fully explained to Spanish borrowers.
Even before regulators and courts forced banks to re-set rates to borrowers, CaixaBank did this voluntarily, saying that the tension the floors had created among customers – mainly those of other savings banks it had acquired in recent years – and the goodwill generated by voluntary removal, was a worthwhile long-term investment in the brand, even at short-term financial cost.
It typifies the kind of thinking still prevalent at a savings bank only just getting used to life as a publicly quoted company answerable to external shareholders, who might prefer a more adversarial stance towards customers. “At least when we have bad news we get out in front of it, lower guidance when appropriate and explain it,” says chief financial officer Javier Pano. “By the same token, when we say we will deliver a target, such as cost synergies on acquisitions, I hope that the new external shareholders see that we tend to achieve it.”
Pano runs Euromoney through some of the drivers that will determine whether CaixaBank can deliver its biggest promise yet: to return 12% to 14% on tangible common equity to those shareholders by 2018.