Grupo Cooperativo Cajamar

The positive outlook signifies that we could raise our long- and short-term ratings on Banco de Crédito Social Cooperativo and Cajamar Cajar Rural by one notch over the next 12-18 months. We could raise our ratings if: Our view of industry risk in the Spanish banking industry improves, so that we raise the anchor for banks operating primarily in Spain; and We forecast that GCC's underlying profitability will not diverge significantly from industry trends and that of higher-rated peers. We could also raise the ratings if GCC's capitalization improves further, so that we expect its RAC ratio to remain comfortably above 10%. We could revise the outlook back to stable if we see no chance of any of the above

...Grupo Cooperativo Cajamar's (GCC) operating performance will improve further. GCC's operating profitability has improved significantly in recent quarters on the back of rising interest rates. Its still-high-cost base and significant provisioning efforts continue to weigh on its bottom-line results, however. From 2024 onward, bottom-line profits should benefit further from cost savings related to the group's recent early retirement programs and more-normalized credit losses. In particular, we anticipate that the group's return on equity (ROE) will increase to about 6%-7.5% in 2024-2025, compared with an average of 2% over 2020-2023, and its cost-to-income ratio will improve to 52%-58%, versus 63% on average over 2020-2023. That said, we continue to see GCC's earnings generation as comparatively weaker than other domestic peers'....

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