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Quarterly results presentation 1Q 2014 28 April 2014


Disclaimer This document has been prepared by Bankia, S.A. (“Bankia�) and is presented exclusively for information purposes. It is not a prospectus and does not constitute an offer or recommendation to invest. This document does not constitute a commitment to subscribe, or an offer to finance, or an offer to sell, or a solicitation of offers to buy securities of Bankia, all of which are subject to internal approval by Bankia. Bankia does not guarantee the accuracy or completeness of the information contained in this document. The information contained herein has been obtained from sources that Bankia considers reliable, but Bankia does not represent or warrant that the information is complete or accurate, in particular with respect to data provided by third parties. This document may contain abridged or unaudited information and recipients are invited to consult the public documents and information submitted by Bankia to the financial market supervisory authorities. All opinions and estimates are given as of the date stated in the document and so may be subject to change. The value of any investment may fluctuate as a result of changes in the market. The information in this document is not intended to predict future results and no guarantee is given in that respect. Distribution of this document in other jurisdictions may be prohibited, and therefore recipients of this document or any persons who may eventually obtain a copy of it are responsible for being aware of and complying with said restrictions. By accepting this document you accept the foregoing restrictions and warnings. This document does not reveal all the risks or other material factors relating to investments in the securities/transactions of Bankia. Before entering into any transaction, potential investors must ensure that they fully understand the terms of the securities/transactions and the risks inherent in them. This document is not a prospectus for the securities described in it. Potential investors should only subscribe for securities of Bankia on the basis of the information published in the appropriate Bankia prospectus, not on the basis of the information contained in this document.

2 of 27 / April 2014


Contents 1. Highlights of the quarter 2. 1Q 2014 Results 3. Asset quality and risk management 4. Liquidity and solvency 5. Conclusions

3 of 27 / April 2014


Highlights of the quarter

1 COMMERCIAL ACTIVITY DYNAMIZATION

COMMERCIAL ACTIVITY AND PLAN DEVELOPMENTS

MAJOR PROGRESS IN DIVESTMENT PLAN MARKET CONFIDENCE RESTORED

2

CONTINUED IMPROVEMENT IN CORE BANKING BUSINESS

FINANCIAL PERFORMANCE

EFFICIENCY RATIO IMPROVEMENT NPL RATIO REDUCTION AND INCREASED COVERAGE SIGNIFICANT LIQUIDITY AND CAPITAL GENERATION

4 of 27 / April 2014


Highlights of the quarter COMMERCIAL ACTIVITY DYNAMIZATION

1

LENDING MARKET SHARES INCREASED

NEW LOANS 1Q 2014 €Mn

New lending

Feb 13

Feb 14

CONSUMER

6.28%

9.61%

+333 bps

Businesses < €1m

3.45%

11.05%

+760 bps

Businesses > €1m

1.62%

11.35%

+973 bps

Mar 13

Mar 14

2.30%

11.99%

647,7 221,3 1.930,9

Source: BdE

ICO financing

+969 bps

Source: ICO

Market shares of new loans in main segments increase sharply

5 of 27 / April 2014

Businesses

Retail Mortgages

Consumer

New loans in 1Q 2014 totalled more than €2,800m, 26% more than in the same period of 2013


Highlights of the quarter COMMERCIAL ACTIVITY DYNAMIZATION

1 €Bn

DEC 13

MAR 14

Priv. sector deposits mkt. share

Var. %

ON-BALANCE-SHEET CUSTOMER FUNDS

OFF-BALANCE-SHEET CUSTOMER FUNDS

8.66%

136.7

137.5

+9 bps

+ 0.8

FEB 14

DEC 13

20.8

21.7

8.75%

+ 0.9

Source: BdE

Mutual Funds market share %

4.82%

TOTAL CUSTOMER FUNDS

157.5

159.2

+10 bps

4.92%

+ 1.7

DEC 13

MAR 14

Source: BdE

Total customer funds grew by €1.7 bn compared to year-end 2013, in an environment in which the cost of term deposits fell 46 bps compared to 4Q 2013 6 of 27 / April 2014


Highlights of the quarter MAJOR PROGRESS IN DIVESTMENT PLAN

1

MAIN DIVESTMENTS Sale of equity stake in NH Hoteles for €123 million

FEB 14

Restructuring of the life and non-life bancassurance business with Mapfre (includes sale of 51% of Aseval) Sale of three portfolios of doubtful and bad loans totalling €713 million

MAR 14

Sale of 70.2% of the capital of Bancofar, S.A. to Banco Caminos, S.A.

LIQUIDITY GENERATED IN BANKIA GROUP

DEC 2013 -

7 of 27 / April 2014

€197 million

TO DATE PENDING REGULATORY APPROVAL *

€791 million

* Pending approval: CNB, Bancofar and Aseval

TOTAL More than 50 divestments in participated companies since the beginning of the year

€1,272 million

TO DEC 2013

€2,260 million

More than €2,200 million of liquidity generated to date


Highlights of the quarter MARKET CONFIDENCE RESTORED

1

SENIOR DEBT ISSUANCE

Issued volume

SALE OF 7.5% OF BANKIA BY BFA No. of shares sold

863,799,641

% of Bankia’s capital

7.50%

Selling price (€)

€1.51

€1,000 million

Maturity

17/01/2019

Spread

MS + 235 bps

Total amount

€1,304 million

Oversubscription

3.5x

Discount on prev. day’s price

4.4%

# Orders

> 250 orders

Oversubscription

≈ 2.0x

Financial markets believe in Bankia’s project

8 of 27 / April 2014


Highlights of the quarter 2

INCREASE IN CORE BANKING INCOME AND IMPROVEMENT IN THE EFFICIENCY RATIO PRE-PROVISION PROFIT EX NET TRADING INCOME

EFFICIENCY RATIO EX TRADING INCOME (1) %

â&#x201A;ŹMn

+ 57.6%

297

338

397

62.1%

468

419

60.1%

+ 11.7%

54.2% 52.6%

53 89

1Q13 (1) Figures

49.3%

2Q13

3Q13

4Q13

1Q14

adjusted for the financing cost associated with the subordinated loan from BFA to Bankia, which was cancelled on 23 May 2013.

1Q 2013 (1) Efficiency

2Q 2013

3Q 2013

1Q 2014

ratio excluding net trading income and exchange differences

Efficiency ratio ex net trading income is already around 49%

9 of 27 / April 2014

4Q 2013


Highlights of the quarter 2

NPL RATIO REDUCTION AND INCREASED COVERAGE NPL

NPL COVERAGE

NPL RATIO

€Bn

%

%

- 0.8 bn

+ 92 bps

- 34 bps

20.0

19.2

14.7%

14.3%

56.5%

57.4%

DEC 13

MAR 14

DEC 13

MAR 14

DEC 13

MAR 14

Cost of risk capped at 69 bps

10 of 27 / April 2014


Highlights of the quarter SIGNIFICANT LIQUIDITY AND CAPITAL GENERATION

2

EBA CORE TIER 1 RATIO

LOANS TO DEPOSITS %

%

+25 bps

-3.5 p.p.

115.4%

111.9%

11.71%

11.96%

DEC 13

MAR 14

DEC 13

MAR 14

LTD ratio: (Net credit / (retail commercial paper + strict customer deposits + ICO/EIB deposits + single-certificate covered bonds)

Liquidity ratios improve significantly

11 of 27 / April 2014

Solid capital generation


Contents 1. Highlights of the quarter 2. 1Q 2014 Results 3. Asset quality and risk management 4. Liquidity and solvency 5. Conclusions

12 of 27 / April 2014


1Q 2014 Results Pro forma income statement – Bankia Group 1Q 2013

1Q 2014

Var. €

Var. %

Net interest income

601

698

97

16.1%

Fee and commission income

225

231

6

2.7%

Gross income

957

930

(27)

(2.8%)

Gross income ex net trading income

791

909

118

14.9%

Operating expenses

(494)

(441)

(53)

(10.7%)

Pre-provision profit

463

489

26

5.6%

Pre-provision profit ex net trading income

297

468

171

57.6%

Provisions and others

(272)

(221)

(51)

(18.8%)

Taxes

(57)

(82)

(25)

43.9%

Profit after tax

134

186

52

38.5%

€Mn

A

B C D

E

The pro forma income statement for 1Q 2013 excludes the cost of the subordinated loan by BFA to Bankia in the amount of €89m in Q1 2013, which was cancelled on 23 May 2013.

13 of 27 / April 2014


1Q 2014 Results A

Core banking business: Net interest income

Consolidation of the positive trend in net interest income Loan yield vs. cost of deposits (1)

Quarterly performance of net interest income â&#x201A;ŹMn

2.70%

+ 16.1%

601

(1)

89

633

(1)

643

690

698

1.89%

53

0.81%

2.55%

2.38%

1.74%

1.70%

0.81% 0.68%

1Q2013

1Q13

2Q13

3Q13

4Q13

2Q2013

3Q2013

Cost of customer deposits Loan yield

1Q14

2.39%

1.57%

0.82%

4Q2013

2.44%

1.33% 1.12%

1Q2014

Gross customer spread

(1) Figures adjusted for the financing cost associated with the subordinated loan from BFA to Bankia, which was cancelled on 23 May 2013.

Net interest income up 16.1% in 1Q 2014 vs. 1Q 2013 Significant reduction in cost of deposits

14 of 27 / April 2014

(1)

The series exclude the effect of City National Bank, the sale of which is expected to be approved during 2Q 2014

Gross customer spread reached 1.12%, up 30 bps on 4Q 2013


1Q 2014 Results A

Core banking business: Fees and commissions

Higher fee and commission income compared to same period previous year Quarterly performance of fee and commission income â&#x201A;ŹMn

Performance of core banking business â&#x201A;ŹMn

+ 2.7%

+12.5%

225

225

237

249

231

825

928

1Q13

2Q13

3Q13

4Q13

1Q14

1Q13

1Q14

Core banking business = net interest income + fee and commission income

Stable capacity to generate fee and commission income and steady improvement in core banking business: +12.5% compared to 1Q 2013

15 of 27 / April 2014


1Q 2014 Results B

Gross income

Gross income evolves positively Quarterly performance of gross income â&#x201A;ŹMn

Gross income ex net trading income â&#x201A;ŹMn

+ 1.9%

957

(1)

166

958

(1)

132

945

912

84

34

Net trading income

+14.9%

930

791

21

909

+ 3.5%

89

53

791

826

861

1Q13

2Q13

3Q13

878

4Q13

Gross income ex net trading income

89

909

1Q14

1Q13

1Q14

(1) Figures adjusted for the financing cost associated with the subordinated loan from BFA to Bankia, which was cancelled on 23 May 2013.

Positive trend in gross income continues in first quarter of 2014

16 of 27 / April 2014

Gross income excluding net trading income improves 14.9%


1Q 2014 Results C

Operating expenses

Sustained reduction of operating expenses Quarterly performance of operating expenses â&#x201A;ŹMn

Efficiency ratio ex net trading income %

- 10.7%

494

488

464

62.1%

441

459

- 12.8 p.p.

60.1%

- 3.9%

54.2% 52.6% 49.3%

1Q13

2Q13

3Q13

4Q13

1Q14

1Q 2013 (1) Efficiency

Proven capacity to continually reduce operating expenses

17 of 27 / April 2014

2Q 2013

3Q 2013

4Q 2013

1Q 2014

ratio excluding net trading income and exchange differences

Efficiency ratio ex net trading income already at 49.3%


1Q 2014 Results Pre-provision profit

D

Solid trend of pre-provision profit Pre-provision profit

Pre-provision profit ex net trading income â&#x201A;ŹMn

â&#x201A;ŹMn

+ 5.6%

463

+ 57.6%

489

297

338

397

468

419 + 11.7%

89 53 89

1Q13 1Q13

1Q14

2Q13

3Q13

4Q13

1Q14

(1) Figures adjusted for the financing cost associated with the subordinated loan from BFA to Bankia, which was cancelled on 23 May 2013.

Strong performance in core banking business, combined with continued decline in costs, drives pre-provision profit growth: +58% 1Q13 vs 1Q14

18 of 27 / April 2014


1Q 2014 Results E

Profit after tax

Profit generation capacity in line with Plan estimates â&#x201A;ŹMn

1Q 2013 (1)

1Q 2014

Pre-provision profit

463

489

Provisions

(272)

(303)

Profit from sales and others

0

62

Profit on discontinued operations

0

21

Profit after tax

134

186

(1) Figures adjusted for the financing cost associated with the subordinated loan from BFA to Bankia, which was cancelled on 23 May 2013..

RECURRING COST OF RISK 1Q 2014

+38.5% 69 bps

Net profit rises to â&#x201A;Ź186 million, up 38.5% compared with same period previous year

19 of 27 / April 2014


Contents 1. Highlights of the quarter 2. 1Q 2014 Results 3. Asset quality and risk management 4. Liquidity and solvency 5. Conclusions

20 of 27 / April 2014


Asset quality and risk management Credit quality Decrease in NPL and reduction of NPL ratio Trend of NPL, NPL ratio and NPL coverage

Trend of NPL

€Bn

€Bn

NPL

20.0

Total risk assets

136.7

NPL ratio

NPL coverage (1) (1)

Loan loss provisions / NPL

€0.8 bn

19.2 134.0

14.7%

34 bps

14.3%

- 62 bps

+28 bps

NPL formation

Denominator effect

56.5% DEC 2013

92 bps Organic reduction / sale of portfolios

57.4% MAR 2014

NPL - Dec 2013 + Gross additions

+ 0.9

- Recoveries

- 1.4

Net additions

- 0.5

- Write-offs

- 0.1

- Sales

- 0.3

NPL - Mar 2014

NPL’s down €0.8 bn (€0.5 bn through organic reduction, €0.3 bn through portfolio sales); NPL ratio down 34 bps to 14.3%; and NPL coverage ratio up 92 bps reaching 57.4%

21 of 27 / April 2014

20.0

19.2


Asset quality and risk management Credit quality Prudent provisioning allows for steady increase in coverage ratios Balance of credit exposure and coverage ratios COVERAGE RATIOS 3.5%

3.5%

16.2%

16.4%

42.7%

44.7%

8.2%

8.2%

7.2%

7.2%

GROSS EXPOSURE €Bn

82.2

81.1

37.8

36.8

3.9

3.5

129.8

127.6

126.0

124.1

DEC 13

MAR 14

DEC 13

MAR 14

DEC 13

MAR 14

DEC 13

MAR 14

DEC 13

MAR 14

Retail customers

Businesses

Real Estate developers

Total portfolio

Total portfolio (ex-RE developers)

Increase in Businesses and RE developers coverage ratios, with Total portfolio (ex-RE developers) coverage ratio standing at 7.2% Bankia Group data. €Mn

22 of 27 / April 2014


Contents 1. Highlights of the quarter 2. 1Q 2014 Results 3. Asset quality and risk management 4. Liquidity and solvency 5. Conclusions

23 of 27 / April 2014


Liquidity and solvency Liquidity indicators Main liquidity indicators show a positive trend LTD ratio (%) %

Commercial GAP €Bnn

- 9 p.p

120.9

118.2

116.7

115.4

111.9

- 34.1%

32.8

29.6

27.6

25.1

- 3.5 p.p

1Q13

2Q13

3Q13

4Q13

1Q14

- 13.9%

1Q13

2Q13

3Q13

4Q13

LTD ratio: (Net credit / (retail commercial paper + strict customer deposits + ICO/EIB deposits + single-certificate covered bonds)

LTD ratio reached 111.9%, while Commercial GAP descends to €21.6 Bn Bankia Group data. €Bnn

24 of 27 / April 2014

21.6

1Q14


Liquidity and solvency Capital generated organically Strong capital generation in the quarter EBA CET1 ratio

11.71%

BIS III phase-in CET1 ratio

11.96%

10.69%

10.91% +22 bps

+25 bps

DEC 2013

Organic capital generation

MAR 14

EBA Core Tier 1 capital ratio c. 12%

25 of 27 / April 2014

DEC 2013

Organic capital generation

MAR 14

BIS III fully loaded ratio increases to 9.12%


Contents 1. Highlights of the quarter 2. 1Q 2014 results 3. Asset quality and risk management 4. Liquidity and solvency 5. Conclusions

26 of 27 / April 2014


Conclusions We continue to make progress in the accomplishment of the goals of our Strategic Plan Positive performance in customers deposits, following completion of branch network restructuring

Back to normality for Bankia in the financial markets (fixed income and equity) Core banking revenues growing again, with continued reductions in operating expenses Efficiency ratio already below 50% NPL ratio reduction with increased coverage Capital ratio improves during one more quarter 27 of 27 / April 2014


Investor Relations ir@bankia.com


Quarterly results presentation 1Q 2014