October 24, 2017 / 8:24 AM / 8 months ago

CORRECTED-UPDATE 1-Caixabank profit weathers Catalan storm, boosted by Portugal's BPI

(Corrects paragraph 10 to show rise was on quarter not year)

By Jesús Aguado

MADRID, Oct 24 (Reuters) - Barcelona-based Caixabank , Spain’s third largest lender, beat third-quarter profit forecasts despite uncertainty about the future of Catalonia, thanks largely to its integration of Portugal’s BPI .

Catalonia’s independence drive and its potential fallout on financial markets were expected to overshadow Caixabank’s results, although the bank did not provide any detail on Tuesday about the consequences for its balance sheet.

Caixabank decided to move its legal headquarters out of Catalonia, where it is based, early in October in an attempt to calm investors and deposit holders.

Spain’s economic environment remained positive despite the uncertainty surrounding the domestic political situation, Caixabank said on Tuesday.

However, brokers expect the ongoing Catalan uncertainty, with the government in Madrid enforcing direct rule on the region, to result in client losses and deposit outflows for Caixabank in the fourth quarter.

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, as the nation’s biggest political crisis in decades enters a decisive week.

Spain has 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.

Banco Sabadell, Caixabank and BBVA are the most exposed to Catalonia among Spanish lenders, with around one-third of their total deposits coming from the region, and 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 banned Catalan referendum on independence on Oct. 1, were up 0.8 percent at 0801 GMT, compared to a 0.04 percent gain on the European STOXX banking index.

The bank lifted its net profit in the third quarter to a record 649 million euros, an almost 49 percent rise on a quarter ago, thanks to a contribution of 103 million euros from BPI, whose acquisition was successfully completed in February.

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. ($1 = 0.8506 euros) (Reporting by Jesús Aguado; editing by Alexander Smith and David Evans)

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