Grupo Unicaja Banco recorded a net profit of €148 million in the first half of 2023. Excluding the impact of the new temporary banking tax -which amounted to €63.8 million and was recorded in full in the first quarter-, net profit would have amounted to €212 million, 24.5% higher than in June 2022. In the second quarter, net income amounted to €114 million, compared to €34 million in the first quarter.
The Group’s result stood on the increase in core revenues -with net interest income up 20.9% year-on-year and net fee income up 2.1%-, the 5.2% reduction in personnel expenses, and lower loan-loss provisions, down 15%. These results are accompanied by an improvement in the balance sheet quality and the maintenance of a strong solvency and liquidity position.
While not yet reflecting the full rise in the Euribor, customer spread increased year-on-year by 85 basis points to 2.26%, with a contained financing cost. The gross margin remained stable, the pre-provision profit increased by 1.4% and the net operating income grew by 3.2%. Net income amounted to 148 million, compared with 170 million in the first half of 2022. The cost to income ratio -excluding the effect of the temporary banking tax- improved by 4.5 percentage points year-on-year to 47.9%.
The balance of performing loans stood at 51,231 million. In a context of shrinking demand, the balance of loans to individuals remained stable at 34,735 million, with consumer financing increasing by 3.8% year-on-year. The mortgage portfolio outperformed the sector average. In the first half of the year, 3,847 million in new loans and credits were granted, of which 1,448 million were mortgages to individuals (with a market share in formalizations amounting to 7.3% of the national total, well above Unicaja Banco’s natural share in the sector).
Retail customer funds remained flattish compared to the previous quarter. The customer deposit base is very stable, with 76% corresponding to individuals and with the average deposit standing below €20,000. Term deposits grew by 42.8% y-o-y. Off-balance-sheet funds and insurance increased by 1.3% to 21,004 million. Total customer funds stood at €99,192 million.
The volume of non-performing assets (NPAs) continued its favorable downward trend, with a year-on-year fall of 7.3%, due to a 12.6% decrease in the stock of foreclosed assets and a 2.1% drop in non-performing assets. The NPA reduction has been accompanied by the maintenance of high coverage levels, in line with Unicaja Banco’s traditional policy of prudence. The coverage ratio of non-performing assets has improved by 1.4 p.p. y-o-y, reaching 65.4%; that of NPLs stood at 65.8%, and that of foreclosed assets at 64.9%. The NPL ratio remained at 3.6%, and the cost of risk remained contained at 30 b.p.
Unicaja Banco maintains high and strong solvency levels. The CET 1 fully loaded increased one percentage point compared to June 2022, standing at 13.8%, with an excess of capital over regulatory requirements of 1,755 million. Following the repayment of most of the TLTRO funding, liquidity levels remain high, with an LCR of 284% and an NSFR of 143%.
Retail customers funds remain stable
Total customer funds stood at €99,192 million, with a very stable and granular customer deposit base (76% corresponds to individuals, the average deposit being less than €20,000 and 80% of the eligible deposits are secured by the Deposit Guarantee Fund). Term deposits increased by 13.6% in the quarter and by 42.8% over the last twelve months. Off-balance-sheet funds and insurance increased by 1.3% y-o-y, with growth of 13.6% in savings insurance and of 14.8% in other managed funds. Total mutual funds stood at 11,360 million, and pension plans reached 3,719 million.
Performing lending stood at 51,231 million. In a context of higher credit costs, caused by rising interest rates, which have limited demand and led to early repayments, loans to individuals increased by 1.7% in the quarter, down 0.9% year-on-year. Consumer financing grew by 25.5% in the quarter and by 3.8% year-on-year. The mortgage portfolio balance fell by 1.5% in year-on-year terms, although it performed better than the sector, which recorded a drop of 2.4%. New loans in the year amounted to €3,847 million, of which 1,448 million corresponded to mortgage financing for individuals, representing 37.6% of the total. Unicaja Banco’s market share in new mortgage loans stands at 7.3% of the national total (according to data as of May 2023, accumulated over the last 12 months), well above the bank’s natural share in the Spanish banking sector.
Improvement in the balance-sheet quality
Unicaja Banco maintains its traditional policy of prudent risk management. At the end of the first half of the year, the NPL stood at 3.6% and the cost of risk remained contained at 30 bp. The total volume of non-performing assets (NPAs) continued its downward trend, with a year-on-year fall of 7.3%. The balance of non-performing loans was 2.1% lower than in June 2022. More than half of NPL entries in the first half of the year were subjective marking, which represent 34% of the NPL stock. The year-on-year reduction in the stock of foreclosed assets, in gross value terms, was 12.6%.
At the same time, Unicaja Banco maintains its high coverage levels, standing at 65.8% for NPLs and 64.9% for foreclosed assets. Coverage of total NPAs (non-performing and foreclosed) stood at 65.4%.
Net interest income up 20.9% y-o-y
Unicaja Banco recorded a consolidated net profit of €148 million in the first half of the year, compared to €170 million in the same period of the previous year. Excluding the impact of the new temporary banking tax, which amounted to €63.8 million and was recorded in full in the first quarter, net income would have amounted to 212 million, up 24.5% compared to June 2022. In the second quarter, net income amounted to €114 million, compared to €34 million in the first quarter.
Net interest income increased year-on-year by 20.9% to 616 million, supported by the retail business, whose contribution in the second quarter was 23 million higher than in the previous quarter. While not yet reflecting the full rise in the Euribor, the customer spread (commercial) increased by 85 bp year-on-year, to 2.26%. Net fee income rose by 2.1% year-on-year to 269 million, driven by mutual funds and the sale of securities. Net fee and commission income accounted for 32% of gross margin. The gross margin reached €831 million, with a 0.2% decrease y-o-y, affected by the new temporary banking tax.
Operating expenses continued to fall, by 1.7% year-on-year, with a 5.2% drop in personnel expenses, after realizing the synergies derived from 100% of the planned closure of branches and 91.5% of the personnel departures contemplated in the labor force reduction plan (ERE). The cost to income ratio -excluding the effect of the temporary banking tax- improved year-on-year by 4.5 pp to 47.9%.
As a result, the pre-provision profit amounted to €402 million, 1.4% more than in the same period of 2022. Loan loss provisions were 15% lower. Net operating income amounted to 264 million, 3.2% more than in the previous year.
Consolidated profit before tax was 223 million, and net income amounted to 148 million.
Solvency and liquidity
CET 1 fully loaded ratio up to 13.8% and strong liquidity position
Unicaja Banco maintains high and solid solvency levels. As at the end of 1H23, it had a CET 1 phase in ratio of 14.1%, a Tier 1 capital ratio of 15.8% and a Total Capital ratio of 17.8%. These ratios are well above those required to the Bank of 5.8 p.p. in CET 1 and 5.0 p.p. in Total Capital.
In fully loaded terms, the bank had a CET 1 ratio of 13.8%, a Tier 1 capital ratio of 15.5%, and Total Capital of 17.4%. CET 1 fully loaded increases by one p.p. in the last twelve months, thanks to the reduction of risk-weighted assets, related to the sale of foreclosed assets, lower equity exposure and deleveraging, mainly in the corporate segment.
The bank has €1,755 million in excess of regulatory requirements in CET1, and an excess of €3,008 million in total capital.
The Texas ratio stands at 40.9%, a y-o-y improvement of 3.3 p.p.
Following the repayment of most of the TLTROs, the bank maintains a comfortable and high liquidity position, reflected in the Loan to Deposit ratio, which stood at 78.6%, a short-term liquidity ratio (LCR) of 284%, and a net stable funding availability ratio (NSFR) of 143%.
Digital business and commercial action
In the second quarter of 2023, progress continued to be made in the Digital Plan, included in the 2022-2024 Strategic Plan, which has been reflected in a strong growth in the number of digital customers and an increase in digital attraction and sales. Other actions carried out include the 100% digital activation of the service for transferring accounts from other entities, and a categorizer of account and card movements.
At the end of the second quarter, 62.7% of our customers were digital. Of new customers, 34% have been recruited through the digital channel. The contribution of digital channels to the subscription of new consumer loans already accounts for 47.3% of the total, 22.6% for accounts and 26% for subscriptions in mutual funds/delegated portfolio management.
On the other hand, Unicaja Banco has promoted various commercial initiatives, including the launch of the Salary Account (Cuenta Nómina), which offers a 4% APR bonus for direct deposit of salary or pension up to 5,000 euros in the first two years; the adhesion to regional programs to facilitate financing of first homes for young people of up to 35 years of age, and a new range of cards with 100% recycled materials. Also noteworthy is the renewal of the line of support for industrial entrepreneurship, subsidized with funds from the Next Generation program, and the new campaigns and agreements for the agricultural segment with specific and advantageous conditions.
During the second quarter, Unicaja Banco has continued to develop its innovation strategy, aimed at anticipating and analyzing the main disruptions in the sector in the medium term derived from the impact, among others, of artificial intelligence, blockchain and cryptocurrencies (in view of the MiCA regulation coming into force in 2024) by developing alliances and openbusiness with fintechs and startups. In each area, various co-innovation labs have been running, where the bank collaborates with expert companies and leaders in each area. On the other hand, Unicaja Banco remains attentive to the advances in the design of the new Digital Euro, the Pilot Regime Regulation, and the introduction of Generative AIs in banking processes.
Actions in sustainable finance and CSR
In the area of Corporate Social Responsibility (CSR) and sustainable and responsible banking, the following actions carried out in the second quarter are to be highlighted:
i. Unicaja Banco has made progress in its sustainability positioning, in accordance with the 2022-2024 Strategic Plan, highlighting the commitments in products, risk management and information disclosure. This positioning also underscores the importance of other lines of action in the social area (financial education, adhesion to the United Nations Global Compact, support for the 2030 Agenda and the SDGs, and participation in the Social Housing Fund).
ii. In the first half of the year, the bank has completed the development and implementation of the most relevant milestones of its Sustainable Finance Action Plan. This Plan serves as a driver for the integration of sustainability factors in the business model, in risk management and in the disclosure of information, in response to supervisory expectations. Likewise, the company has been working on the offer of sustainable financial products and on the reduction of its own and its customers’ carbon footprint, fostering a culture of sustainability.
iii. Unicaja Banco has signed an agreement with ONCE to promote the social and financial inclusion of blind and visually impaired people, in order to facilitate their accessibility to the bank’s financial products and services, with special attention to digital channels, so that they have maximum autonomy when using them.
iv. The bank has given, together with the Asturian Federation of Entrepreneurs, financial and ESG training to SMEs and freelancers, as part of its support to the business fabric.
v. In financial education, Unicaja Banco and Funcas have renewed their agreement for the fifth consecutive year. Likewise, the Edufinet Project has continued its activity, with special attention to the elderly, among others, with a view to managing their finances and improving their digital banking skills. An agreement has also been signed with the SECOT association for the insertion and training of this demographic.
 Capital ratios include net income, net of accrued dividends, computability pending approval by the European Central Bank.
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