Caixabank’s move to transfer HQ is permanent, sees deposit loss

CEO of Caixabank Gonzalo Cortazar (R) speaks during Caixabank's 3Q 2017 results presentation in Valencia, eastern Spain, on 24 October 2017. [Manuel Bruque/EPA/EFE]

Caixabank’s decision to move its legal headquarters out of Catalonia to calm investors was permanent, the lender’s CEO said on Tuesday (24 October), saying the crisis between Spain and Catalonia had prompted some deposit outflows.

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

Caixabank, Spain’s third-largest lender, decided to move its legal headquarters to Valencia early in October in an attempt to calm deposit holders.

CEO of Barcelona-based Caixabank, Gonzalo Gortazar, said on Tuesday that the row between Madrid and Catalonia has had “a moderate negative” impact on deposits since a banned 1 October vote for independence in the region.

The outflow of deposits had since reversed, Gortazar added, although he would not give specific figures or a timeframe.

“From 1 October, 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.

The political situation was not good for Spain’s economy and the situation could worsen if the political crisis was not solved, he said.

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

Rising nervousness among businesses and financial institutions also prompted Banco Sabadell, the country’s fifth largest bank, to transfer its legal headquarters out of Catalonia. It 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.

More than 1,300 companies have transferred their legal headquarters out of Catalonia due to the current uncertainty, according to the national companies registry.

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.

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% of their value since the trading day before the Catalan independence ballot, were up 0.5% at 1054 GMT, compared to a 0.3% gain on the European STOXX banking index.

The bank said on Tuesday third quarter net profit was a record €649 million, an almost 49% increase against the previous quarter, thanks to a contribution of €103 million from BPI, whose acquisition was 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 in the third quarter, up 15.6% from a year ago but just 0.4% higher against the previous quarter, the lender said.

Timeline

The European Commission is preparing a new directive on the cross-border transfer of company headquarters, a move that could have far-reaching implications for other areas of corporate governance, including tax planning and cross-border mergers.

Companies already have options to transfer their seats, for example by forming a subsidiary in their host member state and merging it to create a new company elsewhere. Since 2003, they can also create a European cooperative society and transfer the headquarters to another EU country.

But the system is riddled with loopholes. Large multinational companies in particular routinely shop around Europe for the sweetest tax deals and labour conditions, using legal arrangements such as the dual location of company headquarters.

At worse, they can form “letterbox companies” that take advantage of the parent–subsidiary relationship offered in countries like Luxembourg and the Netherlands to pay no taxes on dividends or capital gains made from the sale of shares.

EU eyes corporate rules shake-up with law on seat transfer

The European Commission is preparing a new directive on the cross-border transfer of company seats, a move that could have far-reaching implications for other areas of corporate governance, including tax planning and cross-border mergers, EURACTIV has learned.

 

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