Spanish lender CaixaBank has posted a 85% drop in second-quarter net profits to €89m due to one-off restructuring costs of €685m.
The €685m costs are related to the bank's lay-off deal reached with its unions during the second quarter of the year, which has affected 2,023 employees. The lay-off, or state-sponsored redundancy schemes in Spain ((Expediente de Regulación de Empleo, ERE), enables companies to collaborate with the trade unions to regulate working hours, close for short periods and carry out collective dismissals.
"The Group's net profit is essentially impacted by the lay-off agreement reached in the second quarter, which has meant a cost of €978m (net costs of €685m), and which will enable 2,023 voluntary terminations of voluntary sign up," CaixaBank said in a note.
The Group’s net profit is essentially impacted by the lay-off agreement reached in the second quarter, which has meant a cost of €978m (net costs of €685m)"
Through a statement released in May, the bank said that 60% of the affected employees would leave the bank during the second half of 2019, while the rest would be leaving during the second half of 2020.
It also explained that the cost of laying off workers would be €890m (€685m net costs), but that in exchange the bank would save up to €190m per year.
The Spanish lender has also cut its income forecasts for 2019 from 3% to around 1% after the European Central Bank (ECB) announced last Thursday that interest rates in the eurozone would be lower for longer than expected.
The ECB said last week that interest rates could remain at present or lower levels through mid-2020 in a move that changed drastically its previous pledge of keeping rates unchanged until next June.
Net interest income at CaixaBank rose 0.9% in the second quarter to €1.24bn. This measures earnings on loans minus deposit costs.
CaixaBank's CET1 ratio stands at 11.6% as of the end of the quarter, remaining unchanged when compared with the previous one.