October 24, 2017 / 1:59 PM / 25 days ago

Caixabank makes HQ move permanent, says deposits return

MADRID (Reuters) - Caixabank’s move of its legal headquarters out of Catalonia is permanent, its CEO said on Tuesday, adding that the ongoing crisis between Spain and the north-eastern region had prompted some deposit outflows.

A partial view of CaixaBank's new headquarters in Valencia is pictured after the entity announced during the presentation of the 2017 third quarter results that it will stay definitely in Valencia, Spain, October 24, 2017. REUTERS/Heino Kalis

Catalonia’s independence drive and its potential fallout on financial markets partially overshadowed a solid set of third-quarter results from Caixabank, which beat analysts’ forecasts after its acquisition of Portugal’s BPI.

Spain’s third-largest lender decided to move its legal headquarters to Valencia earlier this month in an attempt to calm deposit holders following a banned Oct. 1 vote for independence in the region.

Madrid has urged Catalans to accept its decision to dismiss their secessionist leadership and to take control of the region, which accounts for a fifth of Spain’s economy.

Caixabank’s chief executive Gonzalo Gortazar said on Tuesday that the row between Madrid and Catalonia has had “a moderate negative” impact on deposits, but this had since reversed. He declined to give specific figures or a time frame.

As well as unsettling depositors, more than 1,300 companies have transferred their legal headquarters out of Catalonia due to the uncertainty, according to the companies registry.

Banco Sabadell, the country’s fifth largest bank, has moved its legal headquarters out of Catalonia and is also considering moving its top management to Madrid.

However, Gortazar said Caixabank did not plan to transfer staff or business units out of the restive region for now.

“From October 1, we could detect nerves in our clients ... as a result of the uneasiness, the board decided to move the headquarters to leave no doubt that we will always be under the umbrella of the euro area and the supervision of the European Central Bank”, Gortazar said.

CaixaBank's new headquarters in Valencia are pictured after the entity announced during the presentation of the 2017 third quarter results that it will stay definitely in Valencia, Spain, October 24, 2017. REUTERS/Heino Kalis

The bank had not contemplated a scenario where an independent Catalonia would raise doubts over any legal contracts with clients, Gortazar told an analyst call.

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Spain cut its 2018 economic growth forecast from 2.6 percent to 2.3 percent due to the political turmoil and has delayed approving next year’s budget until the situation is resolved.

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Banco Sabadell, Caixabank and BBVA are the most exposed Spanish lenders to Catalonia, with around one-third of their total deposits coming from the region. Their shares have underperformed their Spanish and European peers.

Caixabank shares, which have lost around 10 percent of their value since the trading day before the Catalan independence ballot, were up 0.6 percent at 1254 GMT, compared to a 0.4 percent gain on the European STOXX banking index.

The bank said on Tuesday third quarter net profit was a record 649 million euros, an almost 49 percent increase against the previous quarter, thanks to a contribution of 103 million euros from BPI, whose acquisition was completed in February, and on lower loan loss provisions.

Ultra-low interest rates and competition for a lacklustre loan market have pressured bank margins in Spain, steadily trimming income from lending and forcing them to focus on other revenue sources and new markets.

Net interest income, a measure of earnings on loans minus deposit costs, was 1.2 billion euros in the third quarter, up 15.6 percent from a year ago but just 0.4 percent higher against the previous quarter, the lender said.

($1 = 0.8506 euros)

Reporting by Jesús Aguado; Editing by Edmund Blair and Alexander Smith

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