High solvency and comfortable liquidity position. The CET1 ratio improves by 1.5 bps in 12 months, to 15.6%, one of the highest in the sector. This involves a surplus of €1,744 million over the EBC requirements within the SREP framework and reflects the institution’s high capitalization. Available liquid assets account for a quarter of the total balance sheet.
Growth in the commercial activity. New lending to SMEs and to individuals rose by 23.8%, whereas retail customer funds increase by 1.8% year-on-year, driven by off-balance sheet instruments and insurances.
Decrease in NPAs. The company accelerates the reduction of NPAs, down by 21.3% year-on-year, while maintaining one of the highest coverage ratios in the sector.
Completion of the merger by absorption of EspañaDuero. Unicaja Banco has completed the integration of EspañaDuero in September, achieving one more milestone in its roadmap, what allows to continue advancing in the implementation of its Business Plan, based on a model of proximity banking.
Grupo Unicaja Banco reports, as of the end of 3Q 2018, a net profit of €142 million, an 18.4% increase over the same period of the previous year. The improvement in the result is driven by an increase in the net interest income of 4.6% (€20 million), by a decrease of 2.5% in operating expenses and by an important and recurring reduction of the needs for impairments.
Some of the highlights of this period are: i) the improvement in solvency positions; ii) the decrease in NPAs, while maintaining high coverage ratios; iii) the rise in new lending to SMEs and to individuals; iv) the growth in managed customer funds; and v) the high and comfortable liquidity position.
High results generation capacity
In the first nine months of the year, Grupo Unicaja Banco maintained high results generation capacity, which has enabled to reach a net profit of €142 million, resulting in a RoE (Return on Equity) of 5.0%.
The key drivers behind those high levels of result generation are the improvement in the net interest income, the decrease in operating expenses, and the decrease in the needs for provisioning, due to both the fall in NPAs volume and to the high coverage levels achieved.
The net interest income is up 4.6% over September 2017, due to the momentum from new lending, which contributes to stabilize income, to the contribution of the debt portfolio and to the decrease in funding costs. The aggregate of net interest income and net fees rose to €615 million (+3.2%), and posts a higher growth (+4.1%) on a like-for-like basis (that is, excluding the integration of the insurance companies carried out in the first quarter of 2018). On those terms, the fee income rose by 2.6% in the mentioned period.
The strict policy of cost rationalization applied by the company has resulted in operating expenses decreasing by 2.5%.
Finally, in the first nine months of 2018, Grupo Unicaja Banco reduced its needs for impairments. The company allocated to this section in the mentioned period €77 million, 63% less than in September 2017. Additionally, the high coverage levels and the ongoing decrease in NPLs have enabled to obtain net recoveries of credit impairment in the year.
Growth of the commercial activity: lending boost and growth in funds
The commercial dynamics has enabled, on the one hand, to continue to increase the lending transactions in the segment of individuals and SMEs, and, on the other hand, to continue to increase managed customer funds, especially through off-balance sheet instruments and insurances.
As for the growth in new lending transactions, production reached €2,525 million. In SMEs, a growth of 27% over the first nine months of 2017 has been recorded, whereas in individuals, the new lending grew by 21%, 20% in mortgages and 22% in consumer and other loans. This increase in lending is accompanied by an increase in its yield. Finally, as of the end of September 2018, new lending to corporates amounts to €641 million.
On the other hand, the company has also fostered the growth in managed customer funds, especially those with higher value for its customers and those with reduced impact in the financial cost. The volume of customer funds managed by the Group (without valuation adjustments) reached €56,529 million. Retail customer funds stand at €50,696 million, with a year-on-year growth of €897 million (up 1.8%). The funds managed through off-balance sheet instruments and insurances (mutual funds, pension plans and savings insurance) rose by 4.8% year-on-year up to €12,945 million and now represent 25.5% of the Group’s retail customer funds. Sight accounts of the private sector increased by 10.5% to €27,023 million.
Fall in NPAs and high coverage
It is important to remark the persistent and accelerated decline in NPAs (NPLs plus foreclosed real estate assets), which have fallen by €1,054 million (21.3%) over the last 12 months, with net decreases of €612 million in NPLs (-21.6%) and €442 million in foreclosed assets (-21.0%). The balance of the Group’s NPLs as of the end of 3Q fell to €2,221 million, and that of foreclosed assets, to €1,668 million. The evolution has been positive too year-to-date, with a decrease in NPLs of €489 million, reducing the NPL ratio by 1.2 p.p., to 7.5%.
Likewise, Grupo Unicaja Banco’s coverage ratios are among the highest in the sector. NPA coverage stood at 59.0% as at the end of September 2018; non-performing loans coverage, at 55.0% and foreclosed assets coverage, at 64.3%.
So, the balance of NPAs, net of provisions, stood at €1,594 million, what represents 2.8% of the Group’s total assets as at the end of September 2018, vis-à-vis the 3.9% of the end of September 2017, involving a 1.1 p.p. decrease.
Strong solvency and comfortable liquidity position
In terms of solvency, as at the end of 3Q 2018, Grupo Unicaja Banco had a CET1 ratio of 15.6%, and a total capital ratio of 15.8%, among the highest in the sector and with a year-on-year increase of 1.5 p.p. and 1.2 p.p. respectively, and of 1.1 p.p. and 0.8 p.p. year-to-date.
In fully loaded terms (once the transitional period of the solvency regulations has expired), Unicaja Banco has a CET1 ratio of 13.7% and a total capital ratio of 13.9%. This represents a year-on-year increase of 1.1 p.p. in the CET1 ratio and of 0.8 p.p. in the total capital ratio, and a year-to-date increase of 0.9 p.p. and of 0.6 p.p. respectively.
These ratios are well in excess of the requirements set by the ECB within the SREP for 2018, which places the CET1 ratio for Unicaja Banco in 8.125% and the total capital in 11.625%. Therefore, the Group has a surplus of 750 bps over the CET1 requirements, equivalent to €1,744 million, and of 420 bps over the total capital requirements, equivalent to €978 million, what shows the high capitalization of the company.
The positive coverage, solvency and balance sheet quality positions are also reflected in a new improvement of the Texas ratio (percentage of NPLs and foreclosed assets over the aggregate of capital and NPL and foreclosed assets provisions). The ratio improved to 63.3% with a year-to-date decrease of 9.1 p.p. and a 13.3 p.p. year-on-year reduction.
Unicaja Banco maintains solid and excellent liquidity positions, as well as a high degree of financial autonomy.
The available liquid assets (public debt mainly) and discountable at the ECB, net of the used assets, amount to €14,456 million as at the end of 3Q 2018, representing 25.4% of the Group’s total balance sheet. Likewise, customer funds with which the company finances itself exceed largely its lending, as reflected by the loan to deposit (LTD) ratio, which stands at 74%.
Within the framework of the Digitalization Plan in force, the Bank has developed and implemented a new public website for customers, with a better and more customized attention from the point of view of the wide range of financial products and services.
Other actions include the start of a plan to improve navigation in ATMs for a faster and more customized operating, as well as projects for new systems to improve customer experience when subscribing products.
Integration of EspañaDuero
The third quarter of the year has seen Grupo Unicaja Banco to end the merger by absorption of its subsidiary EspañaDuero, complying with one more milestone in its roadmap and allowing the company to move forward in the direction set by its Strategic Plan 2017-2020, linked to its home regions -mainly Andalusia and Castilla y León- where it is the market leader. In September, following the legal merger, EspañaDuero’s IT platform was integrated into Unicaja Banco’s system, so that all customers and internal processes are now managed under the same operating environment.
Unicaja Banco has continued to develop actions in the exercise of its Corporate Social Responsibility (CSR), such as:
(i) The agreement entered into in September 2018 with UN’s UNITAR, to provide economic suppor to the International Training Center for Authorities and Leaders (CIFAL, Centro Internacional de Formación de Autoridades y Líderes), to contribute to the launch of actions to promote social inclusion and sustainable development.
(ii) The participation in the agenda of the International Congress on Financial Education ‘Realities and Challenges’, organized by Edufinet, financial education programme promoted by Unicaja Banco and Fundación Unicaja, to be held in Malaga on 22 and 23 November 2018.
(iii) The ongoing support given to entrepreneurs and business owners, not only through the competitive offer of financial products adapted to their needs, but also within the framework of Edufinet’s activities, giving training workshops specifically addressed to these groups.