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Capital has increased and still the most solvent of the large Spanish banks

Bankia stabilises its margins and posts net profit of 205 million in the first quarter, a decrease of 10.8%

The result for the quarter includes the impact of application of the new IFRS 16 accounting standard and lower trading income.

Communication Bankia

By  Communication Bankia

Publish on 
29 April 2019 - 07:30

  • Core earnings, i.e. pure banking profit, reached 306 million euros, up 0.3% vs. one year ago
  • The CET1 Fully Loaded ratio reached 12.61%, up 22 basis points during the quarter
  • For the first time in recent years, the balance of total performing loans has increased and now exceeds 106,500 million
  • New mortgage lending and new consumer lending record year-on year growth of 14.6% and 25.8% respectively, while the balance of loans to companies advances 6.4%
  • Non-performing loans fall by close to 500 million euros in the quarter, reducing the NPL ratio by 250 basis points, to 6.2%
  • The rate of customer acquisition continues to increase, with the customer base up by 137,000 people in the last year and direct income deposits, up 133,000
  • The volume of assets managed in mutual funds increased by 898 million in the quarter, to 20,012 million euros, growth of 4.7% in just one quarter
  • Customer satisfaction has reached record levels and stands at 90.1 points at the end of March, demonstrating the success of the merger with BMN
  • 23.5% of the bank’s total sales were made through digital channels, with the digital customer base expanding by 586,000 in the last 12 months

Bankia obtained a net attributable profit of 205 million euros during the first quarter of 2019, a decrease of 10.8% compared to the same period of the previous year. The result for the quarter includes the impact of application of the new IFRS 16 accounting standard and lower trading income.

Focusing on the core banking business (net interest income, plus fees and commissions, less expenses), profit comes to 306 million euros, an increase of 0.3%. This performance shows that the bank’s increased emphasis on sales, the improvement in lending and post-merger cost synergies are all bearing fruit.

Bankia chairman José Ignacio Goirigolzarri stated, “we have strong earnings, totalling 205 million euros, and are also very satisfied because, together with these results, we have put the BMN merger behind us”.

We have strong earnings and I believe this is very good news for Bankia’s customers and shareholders.

José Ignacio Goirigolzarri
Bankia chairman

“This is apparent in various aspects: our customers’ level of satisfaction increased very significantly in this first quarter; activity levels are improving at an increasing pace, which will soon translate into results; and our loan book has grown in this quarter for the first time in recent years,” Goirigolzarri explained. He concluded, “I believe this is very good news for Bankia’s customers and shareholders.”

CEO José Sevilla, for his part, emphasised that “this first quarter has seen an improvement in solvency and a boost in sales, especially in the businesses we have targeted in our Strategic Plan: lending, payment services, mutual funds and insurance.”

This first quarter has seen an improvement in solvency and the most important thing for us this quarter has been the steady growth in number of customers.

José Sevilla
CEO Bankia

“The most important thing for us this quarter, however, has been the steady growth in number of customers,” Sevilla went on, pointing out that “in the last twelve months we have gained more than 137,000 new customers.”

“Also, we are continuing to reduce non-performing assets, which fell by close to 500 million euros during the quarter,” he said, adding that “once again, we have also increased our capital ratio, by 22 basis points, during this first quarter, putting us back at the head of the large Spanish banks in terms of solvency.”

Margins stabilising and expenses contained

Net interest income performed better, reaching 502 million euros (-4.2% with the effect of IFRS16 and -4.7% without it), showing a more stable trend during the quarter. This performance is attributable to a smaller contribution from the fixed income portfolios after the sales completed in 2018 and the improvement in customer margin (the difference between the cost of deposits and the yield on loans), which has risen to its highest level in recent years and currently stands at 1.60%.

Meanwhile, net fee and commission income for the first three months of the year totals 260 million euros, 1.2% less than in the same period of last year, due to the removal of fees and commissions for BMN customers. Income from all other fees and commissions increased 4.3%.

For their part, fee income from payment and collection services are up 8.3% year-on-year. Within these, fee income from payment services are up 3.5%.

Gross income reached 813 million euros, 13% less than in the same quarter of the previous year, while operating expenses came to 456 million euros, down 5.6% year-on-year, post IFRS16 (-6% without this effect) demonstrating the realisation of the synergies generated after the merger with BMN.

Provisions are down 36.9% year-on-year and the cost of risk (provisions as a percentage of loans) has improved by 9 basis points, reaching 0.14% at the end of March 2019. As a result of all this, net attributable profit came to 205 million euros.

Balance sheet clean-up

In the first quarter, Bankia continued to steadily reduce non-performing assets and the NPL ratio, while also increasing coverage.

As a result of asset sales and organic reduction, non-performing loans have fallen by close to 500 million euros (-5.3%). This reduction brings the volume of NPAs (non-performing loans and foreclosed assets) to a gross total of 10,428 million euros, reducing the NPA ratio (NPAs as a percentage of total risk assets) to 7.9%.

As a result of the progress made in cleaning up the balance sheet, the Group has reduced the NPL ratio by 250 basis points since March 2018, to 6.2%. The ratio fell 30 basis points in this first quarter. At the same time, the NPL coverage ratio continues to improve and ended the quarter at 55%, up four basis points.

Leader in solvency

In terms of solvency, Bankia continues to strengthen its lead among the large Spanish banks. During the first quarter, it issued 1,000 million euros of Tier 2 subordinated debt and 500 million of senior preferred debt, while also announcing the early redemption of the previous Tier 2 issue. The bank has thus further increased its stock of loss-absorbing capital instruments to meet the future MREL requirement.

The CET1 Fully Loaded ratio under regulatory criteria (including unrealised sovereign gains in the fair value portfolio) was 12.61%, generating 22 basis points of capital. The transitional CET1 Phase-in ratio reached 13.78% in the quarter, while the total capital ratio was 17.51%.

With these levels, Bankia has a capital surplus of 453 basis points above the SREP minimum requirements and a total capital surplus of 476 basis points.

The major reduction in non-performing assets and the strengthening of the bank after the merger with BMN led the rating agency Fitch to upgrade Bankia’s long-term rating from ‘BBB-’ to ‘BBB’. S&P Global Ratings also affirmed Bankia’s long-term rating at ‘BBB’, with a Stable outlook.

Business performance: more customers, more lending and more managed funds

Bankia continues to improve its sales performance each quarter. In the last 12 months, the customer base has grown by 137,000 people, 43% more than it grew the previous year, and the number of customers with direct income deposits has increased by 133,000 (+40%).

In lending, new mortgage lending has grown at a rate of 14.6% year-on-yeat, reaching 728 million euros, accounting for 7.33% of new lending at the end of February. Fixed-rate mortgages already account for 54.3% of new mortgage loans, while 36.5% of new mortgages are granted to new customers.

Bankia continues to pay special attention to lending to companies. Loans to companies grew 6.4% in the quarter and accounted for 7.53% of new lending at the end of February, up from 5.82% one year ago.

In consumer finance, Bankia maintains its prudent lending policy and reached a total of 589 million euros of new consumer loans in the year to March, an increase of 25.8%. The share of the stock of consumer loans is 5.61%, a quarter of a point more than one year ago.

As a result of all the above, the outstanding balance of performing loans has grown for the first time in recent years and now exceeds 106,500 million (+0.1%). The growth is consistent across consumer finance (+16%), real estate developer loans (+10%) and loans to companies (+6%) on a year-on year basis.

As regards managed funds, mutual funds grew a remarkable 898 million in the quarter, to a total of 20,012 million euros, an increase of 4.7% in just one quarter. Bankia attracted more funds in March than any other entity in the market. Over the quarter as a whole, its share of new funds reached 16%, while its share of total managed funds was 6.63%, 21 basis points more than one year ago.

In pension funds the volume under management also rose 2%, while the volume of strict customer deposits increased by 1.7%. In insurance, total new business premiums grew 42%.

Another higher value added segment targeted in Bankia’s Strategic Plan is payment services. Card revenue in retail establishments increased by 14.1% in the last year, while revenue from point-of-sale terminals grew 13%. The bank’s market shares in both businesses have thus grown at a good pace and at the end of the quarter stand at 12.2% in cards (+47 basis points year-on-year) and 12.5% in POS terminals (+38 basis points).

Customers more satisfied and more digital

Bankia continues to move forward in its digitalisation plans, with the result that customers are increasingly satisfied with the new products and services tailored to their needs.

The customer satisfaction index improved significantly during the quarter, rising from 86.9 points in December 2018 to 90.1 points at the end of March, demonstrating the success of the merger with BMN.

As regards the multichannel strategy, sales through Bankia’s digital channels reached 23.5% of total sales, while the number of digital customers increased by 586,000 compared to March 2018.

Moreover, nearly 740,000 customers now have their own online personal adviser through the “Connect with your expert” service, 22% more than one year ago.

Main events during the first quarter
  • On 25 January, Bankia reorganised its structure to support the bank’s transformation, created four deputy general directorates (Financial, Credit Risks, People and Culture, and Digital Transformation and Strategy) and increased the number of members of its Management Committee from eight to twelve.
  • On 30 January, Fitch raised Bankia’s long-term rating one notch to ‘BBB’ (from ‘BBB-’) and changed the bank’s outlook from positive to stable.
  • On 7 February, Bankia issued 1,000 million euros of 10-year subordinated bonds and strengthened its solvency position.
  • On 26 February, the Bankia Board elected Eva Castillo Sanz as lead independent director to replace Joaquín Ayuso García.
  • On 18 March, Bankia issued 500 million euros of five-year senior preferred bonds.
  • On 22 March, the General Meeting of Shareholders approved a 5% increase in the dividend, to 357 million, which entailed the payment of 11.576 euro cents per share out of profits for 2018.
  • On 27 March, Carlos Egea resigned from his executive role in Bankia after the successful completion of the BMN merger but will stay on as a member of the bank’s Board of Directors in the category of non-executive director.
  • On 29 March, Bankia announced that it would bear the mortgage expenses in new mortgages, thus becoming the only institution with a large number of branches to offer a mortgage with no expenses, no fees and no requirement to take up other products in order to be eligible for these conditions.


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