CaixaBank, S.A.

Despite CaixaBank having to absorb the windfall banking tax in 2023 and 2024, we forecast an improvement in return on equity (ROE) to 13.5%-14.5% in 2023, reaching above 13% by end-2024 (compared to 9% at end-2022 and with 9.2% forecast for its peers; see chart 1). These profitability levels should allow the bank to achieve its €9 billion distribution target set for 2022-2024. We therefore include in our forecasts a payout ratio close to 60%, and assume some additional share buybacks in 2024, following the €2.4 billion already announced in 2022 and 2023. Overall, compared to its closest domestic peers, CaixaBank's portfolio of equity investments (primarily in African bank BFA indirectly through its subsidiary Banco BPI, and a stake in

... and insurance franchise in Spain, and solid performance support the bank's creditworthiness. CaixaBank's prominent franchise across Spain and dominant domestic market position, with market shares in loans and deposits of about 25%, significantly benefit its credit profile. Additionally, Caixabank owns large and expanding insurance operations (100% owned VidaCaixa S.A. and 49.9% owned SegurCaixa Adeslas), which are leading providers in life and property/casualty (P/C) insurance, respectively. The bank benefits from solid earnings generation capacity, and we believe that it will broadly achieve management's targets set out in its 2022-2024 business plan....

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