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Bankia posts an attributable profit of 1,040 million euros in 2015, up 39.2%
01 February 2016
- The bank will propose a dividend of 302 million euros
- Return on equity (ROE) reaches 10.6% (9% including the IPO provision), compared to 8.6% in 2014
- The Common Equity Tier 1 (CET1) ratio is up 161 points at 13.89% on a phase-in basis, while the Fully Loaded ratio reaches 12.26% (+166 basis points)
- High profitability and strong capital generation allow Bankia to increase the dividend by 50%, so that the State, through BFA, recovers almost 200 million euros more of state aid
- Non-performing loans (NPLs) are down 3,551 million euros in the year, accompanied by a decrease in foreclosed assets
- The NPL ratio falls from 12.9% to the 10.8%, while the NPL coverage ratio increases 2.4 points to 60%
- Strong recurrent income from the banking business, cost cutting and lower provisions due to the drop in the NPL ratio allow a 12.5% improvement in profit after provisions
- Customer funds under management are up 3,795 million euros in the year, with increases in both deposits and off-balance-sheet funds
- New lending to businesses (+16.6%) and consumer finance (+38%) accelerate, and the loan balance of both these segments increases 3.5% in the year
Bankia achieved a net attributable profit of 1,040 million euros in 2015, an increase of 39.2% compared to 2014 earnings of 747 million.
Return on equity (ROE) came to 10.6%, compared to 8.6% in 2014, meeting the target set in Bankia’s Strategic Plan 2012-2015 of reaching a competitive ROE in the region of 10%.
These profitability figures do not include the provisions recognised in financial years 2014 and 2015 to cover legal proceedings related to the IPO, which were not envisaged in the Strategic Plan. If these provisions are included, the ROE would have been 9% in 2015, up from 6.6% in 2014.
Bankia’s chairman José Ignacio Goirigolzarri noted that “Bankia has proven itself capable of achieving its objectives. We are a very sound, very solvent and very profitable bank. Based on these strengths we are able to propose a 50% increase in the dividend and so make further progress in repaying the state aid to taxpayers.”
“This strength,” the Bankia chairman added, “allows us to confront the future challenges calmly, fully confident that Bankia has the capabilities to be the best commercial bank in Spain.”
For his part, Bankia’s CEO, José Sevilla, summed up 2015 in four milestones. Firstly, “Bankia has once again demonstrated great commercial strength, with growth in customer funds and an increase in new lending in the segments that are most important to the bank: consumer finance, the self-employed, SMEs and businesses”.
Secondly, “Bankia has yet again improved its fundamental balance sheet ratios. We have reduced non-performing loans by more than 3,500 million euros in one year and those that still remain on our balance sheet have a better coverage.” Thirdly, Sevilla underlined “the strong capital generation capacity, which allowed Bankia to end the year with the highest solvency ratio of all the large Spanish banks”.
Lastly, the Bankia CEO pointed out that “the recurring nature of our core banking revenue and effective cost cutting make Bankia very efficient, which translates into a greater earnings capacity, pushing profit for the year above 1,000 million euros”.
As regards the results for 2015, the trend seen in recent quarters continued at year-end. Thus, net interest income was 2,740 million euros (-6.4%), affected mainly by the fall in the yield of the Sareb bonds.
Excluding this effect and in spite of interest rates of 0%, the tough competitive environment and the bank’s decision to withdraw floor clauses, net interest income would have increased 1.7% in the year.
Customer margin improves
New lending and the reduction of funding costs brought the customer margin at the end of the fourth quarter of 2015 to 1.56%, compared to 1.41% at the end of the same period of 2014.
Fee and commission income remained basically stable (-1%), with a total of 938 million euros in 2015 as a whole. Trading income, meanwhile, rose 29.2% to 281 million euros. Behind this rise are the gains obtained through management of the ALCO portfolio. While the portfolio volume remained unchanged, asset turnover brought gains.
Gross income thus came to 3,806 million euros. Operating expenses, meanwhile, fell 4.8% to 1,658 million euros, leaving operating income before provisions at 2,148 million euros, down 5.2% on 2014.
Cost cuttimg offset the pressure on revenue, leaving the cost-to-income ratio steady at 43.6% over the year as a whole (43.5% in 2014).
Another point worth mentioning is the positive impact that the improvement in the quality of Bankia's balance sheet has had on the income statement, with a reduction in both non-performing loans and foreclosed assets in 2015.
Thanks to the above-mentioned improvement in the balance sheet, even though the bank had to recognise 724 million euros of provisions for non-performing loans and foreclosed assets, provisions were down 34.6%. The cost of risk (provisions as a percentage of loans) fell from 0.60% in 2014 to 0.43% in 2015.
As a result, profit after provisions grew 12.5% to 1,597 million and profit before tax was 1,636 million euros, up 33.6%. After tax (391 million), minority interests and the effect of the provision for litigation regarding the IPO, which had a net impact on results of 184 million euros, net attributable profit came to 1,040 million euros, 39.2% more than the 747 million reported by the bank in 2014.
Excluding the effect of the IPO litigation, return on equity went from 8.6% in 2014 to 10.6% last year, or from 6.6% to 9% if the effect is included.
Increase in dividend
With this earnings growth, the Board of Directors of Bankia has agreed to propose in Bankia’s next General Meeting of Shareholders of the bank that a dividend of 2,625 euro cents per share be paid out of 2015 earnings. This is 50% more than the 1.75 cents paid out of profit for 2014. The pay-out (percent of earnings paid in dividends) rises to almost 30%.
In absolute terms, Bankia will return 302 million euros to its shareholders. Of this total, the State, through BFA (taking BFA's current 64.2% stake in Bankia as a reference), will recover a further 194 million euros of state aid, bringing the amount already repaid by Bankia to 1,626 million euros.
A stronger, better capitalised balance sheet
On a recurring basis, Bankia has reduced the balance of non-performing loans (NPLs) each quarter, both organically and through portfolio sales. Over the last year as a whole, NPLs fell 3,551 million to 12,995 million euros.
Over the course of the year the NPL ratio fell more than two points, from 12.9% to 10.8%. At the same time, the coverage ratio of the NPLs remaining on the balance sheet improved from 57.6% to 60%.
Besides reducing the NPL ratio, Bankia also succeeded in disposing of foreclosed assets, whose balance sheet carrying value went from 2,877 million euros at the end of 2014 to 2,689 million in December 2015.
This decline was driven by the increase in asset sales. Over the year as a whole, Bankia sold 9,180 assets, 52% more than in 2014.
Improving solvency ratios
As regards solvency, measured in terms of the BIS III Fully Loaded ratio, that is to say, under the requirements that will apply in 2019, Bankia ended the year with a Common Equity Tier 1 (CET1) ratio of 12.26%. During 2015 the bank improved its solvency by 166 basis points, having started from a level of 10.6%. The total capital ratio, meanwhile, rose from 12.14% to 13.53%.
Under the Phase In metric, required by current regulations, in 2015 the CET1 ratio climbed from 12.28% to 13.89% (+161 basis points), while total capital reached 15.16% (+134 basis points), compared to 13.82% one year earlier. The increase in the bank’s capital strength would have been even greater (specifically, 52 basis points greater) if it had not been for the provision for the IPO.
In terms of liquidity, the commercial gap continued to improve, falling to 8,451 million euros at 31 December last year from 13,656 million one year earlier, a decrease of 38.1%. Thus, the loan-to-deposit (LtD) ratio went from 105.5% to 101.9%.
Strong commercial activity
On the commercial side, the Bankia network continued to perform strongly. Customer funds, including deposits, mutual funds, pension funds and insurance, grew by 3,795 million, an increase of 3.3%. The increase was both in deposits (+2.2%, adding 2,064 million) and in off-balance-sheet customer funds (+8.2%, an increase of 1,731 million).
As regards lending, new loans grew strongly, especially in the businesses and consumer finance segments. New lending to the self-employed, SMEs and corporates reached 13,963 million euros, up 16.6%. Consumer finance grew 1,213 million (+38%).
Thanks to this growth dynamic in lending, the stock of loans to both segments, which is a key factor in the shift in Bankia's balance sheet mix, increased by 3.5% last year, to reach 46,800 million euros.
BFA, Bankia's parent company, posted profit after tax of 1,597 million euros in 2015, almost four times the previous year's figure of 418 million. Both figures already include the provisions recorded to cover the legal proceedings in relation to the IPO, which at BFA Group level amounted to 1,060 million euros in 2015, compared to 780 million in 2014.
As regards solvency, the BFA Group ended 2015 with a CET1 Fully Loaded ratio of 12.88%, marking a year-on-year increase of 253 basis points. Under the Phase In metric, the CET1 ratio went from 13.28% to 14.58%, an increase of 130 basis points.
Main events of 2015
On 26 January, Bankia intensified its focus on the self-employed by offering this segment further opportunities to not pay fees and also launched a specific “no fees” programme for the farming sector.
On 9 February, Bankia announced an improvement in the terms of its variable and fixed-rate mortgages.
On 25 February, Bankia and the Bertelsmann Foundation signed an agreement to jointly promote dual vocational training in Spain.
On 5 March, Bankia launched its "Creéditos" campaign, aimed at stimulating consumer finance.
On 10 March, Bankia issued 1,000 million euros in mortgage covered bonds for a term of 10.5 years with a coupon of 1%.
On 7 May, BFA-Bankia announced the sale of a 558 million euro portfolio of developer loans.
On 11 May, Bankia signed an agreement with the Chinese company Union Pay International, the world's biggest card issuer.
On 26 May, Bankia announced the creation of the first dual vocational training project to train professionals from the finance sector.
On 3 June, Bankia completed the sale of its stake in Realia to Inmobiliaria Carso for 44.5 million euros.
On 4 June, Bankia sold a 383 million euro portfolio of loans backed by hotel properties.
On 7 July, Bankia paid its first ever dividend for a total amount of 202 million euros.
On 8 July, Bankia launched Bankia Índicex, a tool that allows SMEs to immediately assess their digital competitiveness, free of charge.
On 28 July, Bankia issued 1,250 million euros in mortgage covered bonds for a term of seven years with a funding cost below that of Treasury bonds.
On 16 August, Bankia started to offer loyal SME, retailer and self-employed customers a legal protection service for their businesses.
On 1 September, Bankia launched the “TPV Móvil” mobile POS terminal solution for professionals who need to take payment for their services from any location.
On 13 September, Bankia announced the start of a free programme to help SME, retailer and self-employed customers start up their online business.
On 16 September, Bankia signed an agreement with Banco Sabadell and EURO6000 not to pass on to its customers the two euro surcharge for cash withdrawals at 17,730 ATMs.
On 25 September, the BFA-Bankia Group announced the sale of a 1,206 million euro portfolio of real estate-related loans.
On 7 October, Bankia and Mapfre reached an agreement under which the bank will offer consumer finance to Mapfre customers on preferential terms.
On 16 October, Bankia completed the final sale of 100% of the shares of City National Bank of Florida to the Chilean Banco de Crédito e Inversiones, posting a net gain of 117 million euros.
On 23 October, Bankia and FCC sold Globalvía to the USS, OPTrust and PGGM funds, which exercised their pre-emption right.
On 16 December, Bankia announced that it had reached 100,000 online customers, to whom it offers personalised service and advice using channels other than the branches, through its free "Connect to your expert" service.
On 22 December, BFA-Bankia reached an agreement for the sale of a 645.1 million euro portfolio of loans to businesses.
On 23 December, the BFA Group announced an additional provision of 1,060 million euros to cover possible IPO-related costs.
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