June 19, 2019 / 11:40 AM / 4 months ago

UPDATE 1-Spain's Bankia expects 2019 core profit growth on stable loan book

(Adds details, comments)

MADRID, June 19 (Reuters) - Spain’s state-owned Bankia said on Wednesday it expects significant core profit growth this year, as it stuck to a net profit target of 1.3 billion euros ($1.46 billion) for 2020 despite ultra-low interest rates.

This growth will come as a result of a stabilisation or a small amount of growth in its lending book, Bankia Chairman Jose Ignacio Goirigolzarri told the Spanish bank’s shareholders.

Spanish lenders are struggling to book earnings from loans with interest rates at ultra-low levels and Bankia is shifting its focus from its mostly-mortgage-loan book towards a more profitable consumer and enterprise business.

“2019 is going to be the year in which we manage to stabilize the credit book (...) and this credit book will already have some kind of growth, even if it is discrete,” Goirigolzarri said.

As a result, Goirigolzarri said, Bankia’s net interest income (NII), a measure of earnings on loans minus deposit costs, to fall at a lower rate than in previous years.

In the first quarter, NII fell 4.7% from a year earlier but was just 1% down on the previous quarter.

Goirigolzarri said that, for now, he would not change Bankia’s net profit target of 1.3 billion euros ($1.46 billion) for 2020, despite continued low interest rates.

Responding to a question on a potential merger with Banco Sabadell, Goirigolzarri said that nothing was on the table, but he could not predict what would happen in the future in Spain, where banks face pressure to merge from regulators.

Given the low rate environment, Goirigolzarri said that “it was not the right moment to sell further stakes in Bankia”.

Spain has been trying gradually to sell its 61.4 percent stake in Bankia after pumping 22.4 billion euros into a rescue package for the bank in 2012. ($1 = 0.8926 euros) (Reporting by Jesus Aguado; Writing by Paul Day; Editing by Alexander Smith)

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