Caixabank quarterly profits rise points to Spanish sector's rally

Caixabank gave fresh evidence of the upswing in Spain's banking market on Friday, unveiling a rise in quarterly profits and the second consecutive drop in the group's bad loan ratio.

Investors sent Caixabank's shares up sharply in response, with the stock gaining almost 4 per cent to €4.56 in midday trading.

Like its main rivals, Banco Santander and BBVA, Caixabank has emerged as one of the main beneficiaries of the broader turnround in the Spanish economy, which is bouncing back from recession faster than expected.

The recovery means banks are setting aside fewer provisions for their crisis-scarred loan portfolios and can once again focus on their core lending business.

Caixabank reported second-quarter net interest income, the profit a bank makes on its lending operations, of €1.01bn, up from €967m in the same period last year. Net income more than doubled, from €73m in the second quarter of 2013 to €153m this year.

The group's bad loan ratio fell from 11.36 per cent at the end of March to 10.78 per cent at the end of June. Caixabank's progress towards a full clean-up of its loan portfolio also showed up in the sharp fall in impairment losses, which declined 54 per cent in the first six months of the year, to €1.31bn.

Analysts at Citibank described the results as "solid", and argued that consensus estimates for the Barcelona-based lender's full-year results should be lifted by 1-2 per cent.

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