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Earnings

Bankia 2014 Attributable Profit Rises 83.3% to €747 Million

Bankia obtained net attributable profit of 747 million euros in 2014, an 83.3% gain over the year-earlier figure, when the bank recorded 408 million euros. Meanwhile, the BFA Group, Bankia's parent company, recorded a net profit of 418 million last year.
Bankia Comunicación

By  Bankia Comunicación

Publish on 
27 February 2015

  • Bankia to pay dividend of €202 million, with €126 million going to BFA
  • The BFA-Bankia Group has set aside an extraordinary provision of €780 million for potential contingencies from its 2011 IPO, specifically €312 million in Bankia
  • Without that extraordinary charge, Bankia's profit would have been €966 million, 58% higher than the pro forma profit of €611 million in 2013
  • Return on equity (ROE) was 6.6% in Bankia (8.6% excluding the effect of the IPO provision), on track to reach 10% in 2015
  • Recurring operating income before provisions rose 42.5% to €2,267 million
  • Higher revenues and lower expenses allow the recurring cost-to-income ratio (ex net trading income and exchange differences) to improve in the fourth quarter to 43.7%, 8.9 percentage points better than year-end 2013
  • Balance of non-performing loans (NPLs) was decreased €3,475 million during the year, taking NPL ratio to 12.9%, the lowest in two years and nearly two percentage points below 2013
  • Bankia raised €7,225 million in new customer funds during the year, including strict deposits and funds managed off-balance sheet
  • The bank has extended €12,000 million in new financing to professionals and the self-employed, SMEs and businesses in 2014, with a 40% rise in the number of loans granted
  • The common equity tier 1 ratio (CET1 Phase In) rose to 12.28% in 2014, compared with 10.69% in 2013, and the 'fully loaded' ratio reached 10.60%, after considering the IPO provision and dividend distribution

Bankia obtained net attributable profit of 747 million euros in 2014, an 83.3% gain over the year-earlier figure, when the bank recorded 408 million euros. Meanwhile, the BFA Group, Bankia's parent company, recorded a net profit of 418 million last year. These earnings figures allow Bankia to pay a dividend of 202 million euros, some 126 million euros of which will be received by BFA, based on its current holding. 

The combined BFA-Bankia Group set aside an extraordinary provision of 780 million euros out of 2014 earnings, with 312 million euros charged to Bankia's accounts. Without the extraordinary provision, Bankia would have made an attributable profit of 966 million euros, beating market expectations. That figure is 58% higher than the pro forma 2013 result of 611 million euros. The BFA Group's net profit, in turn, would have been 1,104 million euros. 

Bankia's return on equity (ROE) for 2014 was 6.6%, which excluding the effect  of the extraordinary provision would have been 8.6%, on track to make the 2015 ROE target of 10%. 

BFA and Bankia chairman José Ignacio Goirigolzarri underscored that “over the year, Bankia managed to make each quarter better than the previous one. This trend is a solid starting point for 2015, in which we are working toward meeting our target of bringing return on equity up to 10%”.

 “We at the  BFA-Bankia Group are firmly committed to continue working every day  to make the entity more profitable, to have it create more value for all of its shareholders and thus advance toward returning the financial aids received. We are now taking one more step toward this end by announcing a dividend distribution out of Bankia's 2014 earnings”, added Goirigolzarri. 

Bankia CEO and BFA director José Sevilla noted that in 2014 “the bank once again showed its commercial strength  and earned the confidence of its customers, to whom we are most grateful for having increased the funds they place with our bank by more than 7,200 million euros during the year”. 

“Today Bankia is a highly efficient organisation, which allows us to better serve our customers. It is a bank with very comfortable solvency levels and an ever healthier balance sheet, after having reduced non-performing loans by nearly 3,500 million euros during the year”, Sevilla continued. 

Revenues Rising 

All income statement margins improved over the previous year and topped their highs for the year in the fourth quarter.  Net interest income for 2014 as a whole came in at 2,927 million euros, a 14% gain. 

This advance was the result of improvement in the customer margin, which reached 1.41% at the end of the year, lifted in the last months of the year by a higher loan yield and lower funding costs. The year-end 2013 customer margin stood at 0.82%.  

Fee and commission income totalled 948 million euros in 2014, some 1.3% higher than the previous year. As a result, core banking revenue (interest and fee and commission income) climbed to 3,875 million euros, a gain of 10.7%, after topping 1,000 million euros in the fourth quarter. After having improved quarter by quarter gross income for the year was 4,009 million euros, 6.3% above the 2013 figure. 

More Efficient 

Operating expenses declined to 1,742 million euros, 8.5% below 2013, thus hitting the 2015 cost-cutting target one year earlier than planned. The reduction in costs and steady rise in revenue allows Bankia to improve its recurring cost-to-income ratio (excluding net trading income and exchange differences) to 43.7% in the fourth quarter 2014, compared with 52.6% in the last quarter of 2013. 

During the year, Bankia set aside 1,108 million euros in recurring provisions, 36.1% less than in 2013 thanks to the sizeable decline in non-performing loans and consequent improvement in the bank's balance sheet. 

The above gives a pre-tax profit figure of 1,224 million euros, which, after discounting the provision, would have placed Bankia's net attributable profit at 966 million euros (58% higher than in 2013), and ROE at 8.6%. 

However, the aforesaid extraordinary provision of 312 million euros leaves attributable profit at 747 million euros, an increase of 83.3%. 

Increase in Customer Funds  

On the business side, quarter by quarter customers expanded their positions in Bankia, both in deposits per se and in off-balance-sheet funds, basically pension plans and mutual funds. For the year as a whole, the bank raised 7,225 million euros in customer funds, including 4,891 million euros in strict customer deposits and 2,334 million euros in off-balance sheet funds. 

The market share of term deposits rose from 9.52% at December 2013 to 10.21% in December 2014, while the share of mutual funds has improved from 4.74% to 4.98%. 

On the lending side, Bankia extended new financing of nearly 15,000 million euros to households and businesses last year. Some 12,000 million euros of these loans went to self-employed individuals, to small and medium enterprises (SMEs) and corporate customers. Last year, the bank granted nearly 27,000 new loans to businesses, 40% higher than in 2013 (http://darcuerda.bankia.com/es/proyectos-en-marcha/) 

With regards to the balance sheet,  loans and advances declined to 121,769 million euros, 6.2% lower, as a result of the sale of certain loan books for 1,607 million euros and mortgage repayments of 4,283 million euros. Conversely, in the fourth quarter gross loans and advances (excluding sales of loan books) were practically stable and, in the key business segments, there was a 1,500 million euros increase in consumer and business loans.  

This lending and deposit-taking performance reflected the bank's stepped-up commercial activity. On average, each Bankia employee sold 31 products per month in the fourth quarter of 2014, compared with 21.7 one year earlier. 

NPL Rate Lowest in Two Years 

Another key development in 2014 was the strong drop in non-performing loans recorded by the bank, thanks both to loan recovery management and to the success in keeping the entry of new NPLs under controllin check, as well as to the sale of default loan portfolios. 

Overall the balance of non-performing loans declined by 3,475 million euros during the year, going from 20,022 million euros at the close of 2013 to 16,547 million for 2014. 

This brought the NPL ratio down for the fourth straight quarter, to end the year at 12.86%,  179 basis points lower than the 14.65% rate seen at the end of 2013. This is the lowest NPL ratio since the close of 2012.  

The decline in the NPL ratio was achieved in parallel to improvement in provision coverage of the NPLs that remain on the balance sheet, with the coverage ratio rising by more than one percentage point during the year, from 56.5% to 57.6%.  

A More Solvent Bank

As regards solvency ratios, under Basel III standards, Bankia closed the year with a Common Equity Tier 1 (CET1) phase in ratio of 12.28%, 159 basis points higher for the year, after having closed 2013 at 10.69%. The total capital ratio total rose to 13.82%, marking a 276 basis points gain for the year (2013: 11.06%). These figures include the effect of the 202 million euros dividend payment proposed by the Board of Directors.  

On a 'fully loaded' Basel III basis,  that is, moving future requirements up to the present date, the common equity tier 1 ratio was 10.60%, marking an increase of 200 basis points for the year, and the total capital ratio was 12.14%, for an advance of 316 basis points.  

On the liquidity side, Bankia continue strengthening its position over the course of the year, reducing its commercial gap by 11,414 million euros (45.5%), supported on  higher customer deposits and deleveraging of the balance sheet. The loan-to-deposit ratio thus closed 2014 at 105.5%, versus 115.4% at year-end 2013. 

BFA Group 

The BFA Group, parent company of Bankia, recorded recurring profit after tax of 1,104 million euros last year, 35% higher than the 2013 pro forma net profit of 818 million euros (discounting the positive effect of the exchange of hybrid instruments). After Bankia and BFA making the extraordinary provision for the IPO, the  BFA Group net profit stands at 418 million euros. In terms of solvency, BFA closed the year with a CET1 phase-in ratio of 13.28%, compared with 10.46% at the end of 2013. Total solvency improved by 379 basis points to 14.79%.

Main Events in 2014 

On 9 January 2014 Bankia placed a 1,000 million euros issue of senior debt, which was 3.5 times oversubscribed. 

On 16 January the BFA-Bankia Group sold its stake in NH Hoteles, posting revenue of 191.8 million euros and net gains of 63.7 million euros. 

On 31 January Bankia entered into a comprehensive bancassurance agreement with Mapfre. 

On 28 February BFA completed the sale of 7.5% of Bankia's share capital, bringing in revenue of 1,304 million euros, and started to repay the state aid it has received. 

On 17 March the bank announced the launch of instant loans to SMEs and independent proffesionals through POS terminals. 

On 27 March the bank made an undertaking to its suppliers to pay invoices issued electronically within 30 days. 

On 10 April the BFA-Bankia Group completed the sale of its stake in Iberdrola, with net gains of 266 million euros.  

On 15 April Bankia announced a programme offering exemption from fees and commissions to small businesses  and the self-employed. 

On 13 May the bank issued 1,000 million euros of subordinated debt. 

On 13 June the bank sold 16.51% of Deoleo, with net gains of 10.6 million euros. 

On 23 June Bankia launched a customer acquisition campaign under the slogan “We’re expecting you. You decide when.” 

On 25 June the Board of Directors of Bankia appointed José Sevilla as chief executive officer and Antonio Ortega as executive director.  

On 9 July Bankia appointed Manuel Pérez Meneses Director of Business Banking, Ignacio Soria Director of Corporate Banking and Jesús Apraiz Director of Capital Markets. 

On 14 July Bankia completed the sale of its investments in various companies in the hotel and health care sector for 32 million euros, posting gains of 7.6 million euros. 

On 17 September Bankia launched the “Préstamo Dinamización” line of loans, in which the interest rates on lending to businesses are reduced by an average of 30%. 

On 23 September BFA-Bankia completed the sale of its stake in Mapfre (2.99%) for 276.8 million euros, bringing in capital gains of 66.5 million euros. 

On 30 September the bank announced a new insurance marketing campaign with policy discounts of up to 50%. 

On 9 October BFA-Bankia sold a portfolio of 335 million euros in developer loans and 419 foreclosed assets. 

On 24 October sold off a loan portfolio of 772 million euros. 

On 26 October the results of the stress tests conducted by the ECB and European Banking Authority were released, showing that Bankia would keep its capital ratio at 10% in 2016, even in the worst-case scenario. 

On 2 December Bankia sold 38 real estate assets to Goldman Sachs for 355 million euros. 

On 23 December Bankia sold its stake in Metrovacesa for 98.9 million euros, with net gains of 13 million euros.

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