By Jesús Aguado
MADRID (Reuters) -Spain's Caixabank on Friday forecast lending income to stabilise this year on expectations of lower interest rates after margins slowed down in the fourth quarter against the previous quarter, sending its shares lower.
The country's biggest lender by domestic assets said it expected net interest income - earnings on loans minus deposit costs - to be in line with the 10.1 billion euros ($10.99 billion) achieved in 2023, when it grew 54%.
Spreads between lending and deposit rates tend to rise when interest are higher, and Spanish retail lenders have benefited from rising borrowing costs.
Caixabank reported a 40% year-on-year rise in its net interest income in the fourth quarter to 2.75 billion euros, in line with analysts' expectations.
But it grew only 0.4% from the previous quarter as deposits costs are gradually picking up and also starting to pressure margins and clients' spreads, with borrowing rates widely expected to have peaked.
The bank's shares fell 1.5% following its more cautious outlook, trailing European banking index, which was up 0.9%.
Lower provisions against the same quarter last year and a solid performance at its insurance services business helped net profit rise 76% year on year to 1.16 billion euros in the quarter. Analysts expected a profit of 1.21 billion euros.
For the whole of 2023, net profit rose 54% to 4.82 billion euros as it also benefited from higher revenues.
This helped the bank lift its return on tangible equity ratio (ROTE), a measure of profitability, to 15.6% at end of 2023 up from 9.8% in 2022. For this year, the bank said it expected its ROTE to be above 15%.
It also announced a new buyback programme for the first half of the year without disclosing its amount but aiming for a core capital ratio of 12% after the plan from the current 12.4%.
CEO Gonzalo Gortazar told analysts that Caixabank would implement buybacks "more frequently" with "lower amounts."
The lender bought back 1.8 billion euros in shares in 2022 and announced another one of 500 million euros last year.
It said it would pay a total gross cash dividend of 0.3919 euros per share against 2023 earnings, equivalent to a 60% payout, at the upper range of its 50% to 60% pay-out policy, which it expects to maintain for 2024.
($1 = 0.9198 euros)