Growth of the commercial activity. New loan production rose by 26% (29% in individual customers and 10% in SMEs), and the balance of performing loans to private sector (excluding repos) shows a positive evolution. Retail customer funds grow by 1.8%, driven by the increase in sight deposits (10.5%), savings insurances (16.3%) and pension funds (4.8%).
High solvency levels and comfortable liquidity position. The CET1 ratio reaches 14.9%, and remains as one of the highest in the sector. This involves a surplus of €1,430 million over the EBC requirements within the SREP framework and reflects the institution’s high capitalization. Available liquid assets account for nearly a quarter of the total assets.
Decrease in NPAs. The company maintains the path of NPA reduction, down 20.1% year-on-year, while the coverage ratio (56.6%) remains one of the highest in the sector.
Grupo Unicaja Banco posts a net profit of €63 million in 1Q 2019, a 10.2% year-on-year increase. The improvement in the result is underpinned by an increase in the gross margin of 3.3% -driven by fee income-, by a decrease of 3.4% in operating expenses and by reduced needs for provisions.
Some of the highlights of this period are: i) the maintenance of high solvency levels; ii) the decrease in NPAs, while maintaining high coverage ratios; iii) the rise in lending and in new loans to businesses and to individuals; and iv) the high and comfortable liquidity position.
Results generation capacity
In 1Q 2019, Grupo Unicaja Banco maintained high levels of results generation, which has enabled to reach a net profit of €63 million, a 10.2% year-on-year growth, resulting in a Return on Equity (ROE) of 6.6%. The key drivers behind that high capacity to generate results are the improvement in the gross income, the decrease in operating expenses –within the framework of a policy to improve efficiency-, and the reduced needs for provisioning, due to both the fall in NPAs’ volume and to the existing high coverage levels.
The gross income is up 3.3% on March 2018, due to the boost of net fee income (+5.1%), dividends and gains on financial operations. The net interest margin remains stable at 1.03% over total average assets.
Other significant factor in the evolution of profit is the strict policy of cost control applied by the company and which has resulted in a new decrease in operating expenses, down 3.4% year-on-year. This allows the pre-provision profit to be up 14.4%, reaching €108 million as at the end of March.
Finally, in 1Q 2019, Grupo Unicaja Banco has maintained reduced needs for impairments. The company has allocated to this section €23 million during the quarter, maintaining low levels in cost of risks, given the high coverage levels and the ongoing decrease in NPLs.
Boost to the commercial activity: growth in lending and in customer funds
The Group’s commercial activity has enabled, on the one hand, to continue to increase the volume of loans, boosted by the ongoing growth of new lending, and, on the other hand, to continue to increase customer funds.
As for lending, new loan production grew by 26% year-on-year in 1Q 2019, and stood at €1,157 million. In SMEs, a year-on-year growth of 10% has been recorded, whereas in individuals, the new lending grew by 29%, 20% in mortgages and 55% in consumer and other loans. This improvement in the volume of lending to individuals is accompanied by an increase in yield. Furthermore, in 1Q 2019, new lending transactions to public administrations have reached €228 million, and to corporates, €253 million.
All the above has resulted in a year-on-year growth of 0.3% in performing loans (excluding repos) to the private sector. Additionally, the quarter-on-quarter evolution has also been positive, with an increase of 1.2% in total performing loans (excluding repos) and in performing loans (ex-repos) to the private sector (0.9%).
The volume of customer funds managed by the Group (without valuation adjustments) reached €55,485 million, of which €51,002 correspond to retail customer funds. These have increased by 1.8% year-on-year, driven by the growth in sight deposits (10.5%), savings insurances (16.3%) and pension funds (4.8%). Such retail customer funds rose by 1.2% during the first quarter, with remarkable growth, on-balance sheet funds, in sight deposits, growing by 2.7% in the period. Off-balance sheet funds are up 1.5%, recovering the growth path after the evolution of those funds in 2018 due to the negative evolution of financial markets.
Fall in NPAs and high coverage
It is important to remark the persistent reduction of NPAs (NPLs plus foreclosed real estate assets), which have fallen by €872 million (-20.1%) over the last 12 months, with decreases of €737 million in NPLs (-28.7%) and of €135 million in foreclosed assets (-7.6%). The balance of the Group’s NPLs at the end 1Q 2019 decreased to €1,833 million, and that of foreclosed assets, to €1,640 million. The fall in NPLs results in a decrease of 2.0 p.p. in the NPL ratio over the last 12 months, down to 6.3%.
Likewise, Grupo Unicaja Banco’s coverage ratios are among the highest in the sector. NPA coverage stood at 56.6% as at the end of March 2019; NPL coverage, at 52.0% and foreclosed assets coverage, at 61.7%.
So, the balance of NPAs, net of provisions, stood at €1,509 million, which represents 2.7% of the Group’s total assets as at the end of March 2019, compared to 3.1% at the end of March 2018, involving a 0.4 p.p. decrease.
Strong solvency and comfortable liquidity position
In terms of solvency, as at the end of March 2019, Grupo Unicaja Banco had a CET1 ratio of 14.9%, and a total capital ratio of 15.1%, among the highest in the sector.
In fully loaded terms (once the transitional period of the solvency regulations has expired), Unicaja Banco has a CET1 ratio of 13.3% and a total capital ratio of 13.5%.
These ratios are well in excess of the requirements set by the ECB within the SREP framework for 2019, which places the CET1 ratio for Unicaja Banco in 8.75%, and the total capital in 12.25%. Therefore, the Group has a surplus of 617 bps above the CET1 requirements, equivalent to €1,430 million, and of 287 bps above the overall capital requirements, equivalent to €667 million, what reflects the high capitalization of the company.
The positive coverage levels, solvency and balance sheet quality are also reflected in a new improvement of the Texas ratio (indicator measuring the percentage of NPAs and foreclosed assets over TBV plus NPL and foreclosed assets provisions). The ratio improved to 60.8%, with a year-on-year reduction of 6.7 p.p. and 0.4 p.p. quarter-on-quarter.
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 €13,653 million as at the end of March 2019, representing 24.2% 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 73%.
Digitalization and commercial dynamism plans
During 1Q 2019 Unicaja Banco has continued with the development and implementation of its Business Plan 2017-2020, which includes, among others, digital transformation plans and plans for the boost of the commercial activity, designed with focus on the customer.
Within the framework of the digital transformation plan in force, the first quarter of 2019 has seen an ongoing increase in the number of digital customers, which represent 30% of the total. Currently, 66% of the total of financial transactions and customer consults are made through e-banking channels, 24% at branches and 10% in ATMs. The company is completing the renewal of its ATMs, with a significant increase of their functionalities.
Among the main developments of these first months of 2019, we should mention the agreement reached between Unicaja Banco and the personal finance platform Fintonic for the marketing of the bank’s consumer loans through this free app, both to customers and non-customers.
Likewise, Unicaja Banco continues advancing in its digitalization process with the boost to functionalities of online channels, developed with advanced technologies, like the incorporation of Apple Pay, the mobile payment system which allows users to make purchases with Apple mobile devices (iPhone or Apple Watch). This service supplements the existing Unipay App, Unicaja Banco’s app through which Apple and Android users have access to Bizum, the interbank solution to make immediate payments between smartphones of individual users, as well as mobile payments in physical shops with Android devices. This way, Unicaja Banco covers mobile payments, immediate and in shops, for users of both operating systems.
With regard to the commercial dynamism plan, the launch of the Plan Uni Seguro should be mentioned. This plan allows customers to group all the family insurances into one single account, and to split the payment over monthly installments, at zero cost and with bonuses.
Unicaja Banco has incorporated several technical upgrades in the process of management of loan transactions, and it has expanded its mortgages and consumer loans, offering competitive financial conditions adapted to different profiles and situations.
Other actions in 2019
The Annual General Meeting of Shareholders of Unicaja Banco, held on 25 April, approved the Board’s management and the annual accounts for 2018, the first full year as a listed company, as well as an increase in the dividend allocation The bank received a majority support of shareholders, who endorsed the management in a year marked by the completion of the integration of EspañaDuero and by the advances in the achievement of the Business Plan 2017-2020, in digital transformation and commercial dynamism, among other aspects, having achieved in 2018 some of the goals set for the whole period.
The Institution’s balance sheet quality and solvency make it to be two years ahead, in 2018, in the percentage of net profit allocated to the payment of dividends forecast in the IPO (40% for 2020). This means a dividend of 3.8 euro cents per share, vis-à-vis the 2.1 euro cents paid against the results of the previous year, a 76% increase. Unicaja Banco shareholders also approved the proposal to adapt the number of members of the Board of Directors, now composed by 12 directors.
The Institution has continued to develop actions in the exercise of its Corporate Social Responsibility (CSR) during 1Q 2019, such as:
i) The preparation of the CSR report corresponding to the year 2018 (Consolidated Non-financial information Statement, of the Consolidated Management Report), which includes the contribution of Grupo Unicaja Banco to the achievement of the 10 Principles of the Global Compact and of the 17 Sustainable Development Goals (SDG). This Report, available on Unicaja Banco’s corporate website, includes the Group’s main actions and indicators in the economic and financial, social and environmental areas.
ii) From the point of view of sustainability and environmental protection, the signature of a collaboration agreement with the Science and Technology Park of Almería (Parque Científico-Tecnológico de Almería, PITA), to promote the use of electric vehicles.
iii) Actions related to the productive fabric and entrepreneurs and business owners through the offer of competitive financial products adapted to their needs, alliances with organizations which gather businesses and professionals, and the implementation, within the financial education project Edufinet, of training sessions specially designed for these groups.
iv) Within the actions related to financial education, the launch of a new line of training line, EdufiAgro, focused on the agricultural sector, circular economy and sustainable finances. Also, the ‘X Conferences on Financial Education for Young People’ have concluded, with the participation of more than 19,000 high school students from educational centres in Andalusia, Castilla y León, Castilla-La Mancha, Melilla and Madrid. In total, this initiative has had so far more than 108,000 participants.