Grupo Unicaja Banco posts in the first quarter of 2022 a net profit of €60 million. The Group’s results stand on the 14.3% increase in net fee income, the 8.5% decrease in operating expenses and the 34.2% reduction in loan loss provision, increasing profitability (ROTE, Return on Tangible Equity) by 1.5 p.p. up to 3.8%, compared with 2.3% at the end of the financial year 2021. These results are accompanied and strengthened by an improvement in the key indicators of business activity, balance sheet quality and coverages and a reinforcement in solvency.
Unicaja Banco, on the one hand, has continued to strengthen its commercial momentum both in assets (increase of 1.6% in the performing loan book, reaching €53,560 million) and funds (retail funds growth of 1.5% up to €90,745 million) and, on the other hand, it has consolidated the positive evolution of improvement in the balance sheet quality, both in terms of NPAs decrease (5.5% decrease in NPLs and foreclosed assets) and of coverage increase, reaching 68.3% in NPLs and 65.5% for all NPAs, among the highest in the sector.
In the first quarter of 2022, Unicaja Banco business volume recorded a solid y-o-y growth, with remarkable growth in mutual funds, up 16.9% y-o-y, and in mortgages, with a 14.3% increase in new lending and a rise of 3.2% in the loan book, reaching a domestic share in new mortgages of more than 9%, twice Unicaja Banco’s natural share.
Unicaja Banco maintains a strong solvency position (the CET 1 fully loaded stood at 12.6%), with an excess of capital over regulatory requirements of €1,575 million, with a diversified risk portfolio.
The integration process keeps advancing at a good pace, with the technological integration process underway, as well as the implementation of the first efficiency measures (obtention of the first synergies), such as the staff restructuring plan, agreed with the labour representatives on 3 December and which allows the voluntary leave of 1,513 employees and the reorganization of commercial distribution channels. Likewise, advances are being made in the development of the different initiatives of the 2022-2024 Strategic Plan, focused on boosting commercial growth as a profitable and sustainable bank, with improved digital capabilities together with other channels, and with a low risk profile.
Balance sheet
1.5% increase in customer funds
The main items of the balance sheet have maintained after the merger the positive trends of recent quarters, both in liabilities, with increasing customer funds, and in assets, especially in the mortgage portfolio. It is noteworthy the growth in off-balance sheet products, namely mutual funds.
Retail customer funds, which account for 89% of funds, at the end of the first quarter of the year stood at €90,745 million, 1.5% more than one year earlier on a like-for-like basis. In the current interest rate scenario, demand deposits maintained the trend of previous quarters, increasing by 2.4% y-o-y to €56,715 million, whereas term deposits continued to decrease, falling to €5,741 million.
Mutual funds grow by 16.9% year-on-year
The increase in off-balance sheet funds responds mainly to mutual funds, which posted a y-o-y growth of 16.9%, reaching €12,353 million. Savings investment products recorded net subscription of €837 million in the quarter.
Total performing loan book grows 1.6%, boosted by mortgages
Lending maintained its trend of relevant growth in terms of loan book, driven mainly by the sustained increase in mortgage lending and loans to the public sector.
The performing loan book reached at the end of the first quarter €53,560 million, a 1.6% y-o-y increase. New lending maintained its strong pace, with a total of €2,771 million, of which €1,282 million correspond to mortgages, which post a 14.3% y-o-y increase. New mortgage lending represents a domestic market share of 9%, twice Unicaja Banco’s natural share in the Spanish banking sector.
This positive evolution makes the performing mortgage book to increase by 3.2% to €31,467 million. This sustained growth is achieved following a strategy of utmost prudence in risk management, with a Loan-to-Value (LTV) not exceeding 80% in 91% of cases. The mortgage book is composed of transactions to fund the acquisition of first residences (92% of the total book) and with a low NPL rate (3%), and new lending gathers in areas with a high economic and commercial dynamism, such as Comunidad de Madrid and Barcelona province, with nearly 45% of new transactions, as well as Andalusia, with 28% of new transactions.
As for consumer lending, the first quarter of the year saw the subscription of new loans for a total amount of €171 million, up 13.6% y-o-y, with the book reaching €2,814 million, a 3.8% increase y-o-y.
Highly diversified loan book
A slight increase in the 1Q 2022 has been seen in the corporate sector, with a y-o-y increase of the loan book, which stands at €13,665 euros, up 0.1% compared with the same period in 2021. New lending reached €843, down 34.6% y-o-y, due to the expansive effect in 1Q 2021 of ICO lending as a consequence of the COVID-19 pandemic.
Unicaja Banco’s performing loan book is highly diversified: 58.7% corresponds to mortgage loans, 24% to corporate loans, 10.5% to loans to the public sector, 5.3% to consumer loans and 1.5% to real estate developers.
The corporate loan book is highly diversified by activity sectors.
Improved balance sheet quality and increased coverages
Unicaja Banco has maintained its strategy of maximum solvency and ongoing improvement of the balance sheet quality. At the end of 1Q, the NPL ratio stood at 3.5%, among the best in the Spanish banking sector, with a reduction of 0.1 p.p. y-o-y. The total volume of non-performing assets decreased by 1.3% in the last twelve months.
In parallel, the foreclosed assets portfolio continued to decrease, with a 9.2% y-o-y reduction, thanks to the outflow of non-current assets in sales, for a gross amount of €151 million, mostly finished housing (50%), land (32%) and tertiary assets and work in progress (18%). All of the above has resulted in an improvement in the NPA ratio of 0.5 p.p. in the last twelve months, standing at 7%.
At the same time, Unicaja Banco has maintained its high coverage ratios, both for NPL and for foreclosed assets, reaching a 68.3% NPL coverage ratio (up 3.6 p.p. y-o-y) and a 62.9% foreclosed assets coverage ratio (up 7.1 p.p. y-o-y), among the highest in the Spanish listed banks. The total NPA coverage (NPL and foreclosed assets) grew 5.6 p.p. y-o-y to 65.5%, among the best in class.
P&L account
Commercial momentum
Unicaja Banco posts in 1Q 2022 a consolidated net profit of €60 million, underpinned by key factors such as the 14.3% increase in the net fee income, the 8.5% decrease in operating expenses, and the 34.2% reduction in loan loss provisions, while increasing profitability (ROTE) by 1.5 p.p. to 3.8%, compared to 2.3% at the end of 2021. Another important factor has been the reduced cost of risk, standing at 36 bps, involving a 34.2% reduction in loan loss provisions and meeting the forecasts.
The net interest income reached €235 million and remained stable compared to 4Q 2021. Customer spread remained stable in recent quarters, at around 1.4%. Including the wholesale margin, the net interest income fell by 15.2% y-o-y due to low interest rates.
The net fee income posts a significant increase, reaching €133, up 14.3% y-o-y, due mainly to the boost in savings, insurance and mutual funds. This increase offset, to a large extent, the decrease in the net interest income, so that the core margin (net interest income plus fee income) reached in 1Q €368 million, €25 million less than the figure of the same period one year earlier. With the result recorded in the line Other revenues/expenses (net), the gross margin reached €382, 8.7% less than in 2021.
Continuing with the cost optimization strategy and with the application of the labour agreement reached on 2 December 2021, the operating expenses fell by 8.5%, standing at €196 million, with an 11.1% decrease in personnel expenses following the materialization of the first synergies arising from the staff restructuring. This way, the pre provision profit reached €164 million, and the operating activity margin was €86 million. Loan loss provisions fell by 34.2% tp €51 million. The cost of risk stood at 36 bps, involving a year-on-year decrease of 34.2% in provisions and meeting the expected reduction. The consolidated profit before tax was €84 million, and the net profit reached €60 million.
Solvency and liquidity
CET 1 ratio of 13.3% and strong liquidity position
After the merger, Unicaja Banco maintains strong solvency levels. As at the end of 1Q 2022, it had a phase in CET 1 ratio of 13.3%, a Tier 1 capital ratio of 14.9% and a Total Capital ratio of 16.6%, well above the ratios required to the Bank of 5.3 p.p. in CET 1 and 4.3 p.p. in Total Capital.
In the same period, in fully loaded terms, the Bank had a CET 1 ratio of 12.6%, a Tier 1 ratio of 14.2% and a Total Capital ratio of 15.9%.
The bank maintains a sound liquidity position, reflected in the Loan to Deposit (LtD) ratio, which stood at 80.5%, in the LCR ratio (314%) and in the NSFR of 137%.
In the first quarter of 2022, Unicaja Banco made an issue of €300 million in T2 subordinated debt, with excess of demand.
Strategic Plan 2022-24 and integration advances
During the first three months of the year, Unicaja Banco has kicked off the development of several initiatives in its 2022-24 Strategic Plan, presented on 10 December and focused on boosting commercial growth as a profitable and sustainable bank, with improved digital capabilities together with other channels and with a low risk profile. For that purpose, the Plan is based on five essential priorities and facilitating axes: deeper specialization to accelerate commercial activity, improved efficiency through operational excellence, advanced risk management with a conservative profile, improved and increased digital banking capabilities and commitment to sustainability in all the business lines. Among other financial goals, the Plan aims at reaching at the end of the period a ROTE (return on tangible equity) above 8% and a capital generation of €1,500 million.
The technology integration process keeps advancing at fast speed, as well as the implementation of the first efficiency measures (materialization of the first synergies), such as the staff restructuring plan, agreed with the labour representatives on 3 December and allowing the voluntary leave of 1,513 employees, and the reorganization of the commercial distribution channels.
In this process, the bank continues, after having become the leading bank in six autonomous communities, with the effort to contain and reduce expenses arising from the business model transformation, automation and process simplification. The bank keeps on working to provide a quality service and in the creation of value proposals to meet customers’ needs.
Boost to digital subscription, with 26% of consumer lending
Since the completion of the legal merger in July 2021, Unicaja Banco has intensified the actions to strengthen both the strategy of increasing business through digital channels and the joint commercial and business capabilities. The actions implemented in the first quarter of the year include, on the one hand, specific initiatives in the area of business banking, with the launch of the Next Generation EU funds web simulator, and on the other hand, the progress in the model of open banking and alliances with companies that are leaders in different fields and which will extend in the coming months to all the bank’s customer base. The bank is working hard to advance in the process of incorporating the best digital functionalities and the provision of online services and remote management for all its customers, as well as the possibility of online subscription of mortgages by expanding products and services, given its commitment to having a competitive offering.
The boost to commercial activity through digital channels has meant that, at the end of the first quarter, 26% of total consumer loan subscriptions were made through digital channels, an increase driven by the sustained growth in the volume of active digital customers, which now stands at 52% of the total, that is, 6.2% higher year-on-year. This momentum is reflected in the fact that new digitally acquired customers account for 40% of the total.
Simulator, advice and specific Next Generation funding
Last February, Unicaja Banco launched a web simulator through which business owners and the self-employed can obtain all the information they need for their businesses about Next Generation EU funds, and be accompanied during the process of searching for and processing these grants. This tool is supplemented by a program of specific actions carried out by specialized managers of the bank and aimed at different groups. The actions include training webinars and guidance for the management of these grants, as well as an offering of specific financing products (both advances and loans for the project and working capital products under preferential conditions).
In this way, the bank aims to facilitate the attraction and channelling of these funds, approved by the European Commission, to provide support for business projects mainly in the fields of innovation, digitalization, industrialization and energy efficiency.
Annual General Meeting of Shareholders and payment of a €67.33 million dividend
The Annual General Meeting of Shareholders of Unicaja Banco, held in Malaga on 31 March, approved, among other items, with the support of an ample majority of its shareholders, the annual accounts and the management of the Board of Directors in the past year, as well as the proposed distribution of a dividend of €67.33 million charged against the profit for the year 2021, which represents around 50% of the ordinary consolidated net profit for that year. This dividend, paid on 8 April, is in addition to the dividend of €16.91 million paid in 2021. The General Meeting of Shareholders also approved the proposal for the partial renewal of the Board of Directors.
Progress in sustainable finance and CSR actions
Unicaja Banco has continued to develop actions of Corporate Social Responsibility (CSR) and sustainable and responsible banking throughout 1Q 2022, such as:
- The bank has joined the updated strategic protocol promoted by the sector to reinforce the social and sustainable commitment of the banking sector, especially in relation to the elderly and the disabled. This protocol considers, among other measures, the extension of customer service hours, providing preferential treatment to the elderly at branches, training staff specifically on the needs of this group, and offering customers financial and digital education and fraud prevention activities.
- Unicaja Banco has signed a general action protocol with the Provincial Council of Malaga for the development of joint actions to contribute to promoting financial inclusion and education in the province of Malaga, especially for the benefit of those citizens who are less familiar with new technologies, such as the elderly and other vulnerable groups. Likewise, once the quarter has ended, the bank has signed a collaboration agreement with the Consejería de Igualdad, Políticas Sociales y Conciliación of the Junta de Andalucía to offer training to senior citizens on basic digital operations, in order to reduce the financial digital gap.
- The Edufinet Project of financial education has continued to develop its activities, with the following activities worth mentioning: the participation in a training program to promote entrepreneurship among women at risk of social exclusion; the development of sessions, in collaboration with the University of Malaga, to bring finance closer to the elderly; the participation in the ‘Business Week, organized by the University of Huelva, or the organization of activities on the occasion of the ‘Global Money Week’, promoted by the Organization for Economic Cooperation and Development (OECD).
Additionally, more than 11,000 secondary and baccalaureate students, from nearly 40 Spanish provinces, have participated in the 13th Conferences on Financial Education for Young People during this school year. In total, over the course of its 13 editions, this initiative has exceeded 125,000 participants.
Finally, a new collaboration agreement has been signed with the Asperger's Association of Madrid to continue bringing the main keys to financial education closer to this group.
