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Earnings

BFA-Bankia records profit of €213 million in Q1 2013

The BFA-Bankia Group recorded a profit after tax of €213 million in the first quarter of 2013, marking a return to profit for the bank in line with the forecasts of the Strategic Plan 2012-2015.
Bankia Comunicación

By Bankia Comunicación

Publish on 
24 April 2013

  • The Group generated 598 million in EBA Core Tier I capital with a ratio of 9.97% pro forma, after the capital increase, a key aspect for returning the aid received.
  • Bankia’s profit before provisions was €463 million in recurrent terms as cost savings offset declining revenues.
  • New lending by Bankia to businesses and individuals totalled €2,218 million between January and March.
  • Total non-performing loans fell by €255 million during the quarter and the coverage ratio remained stable at 13.1%.
  • The commercial gap was €430 million lower while the LTD ratio remained around 120%.
  • The bank is accelerating the restructuring of its branch network and will complete the adjustments to the Madrid and Valencia regions in May having technologically integrated all the Group’s systems.

The BFA-Bankia Group recorded a profit after tax of €213 million in the first quarter of 2013, marking a return to profit for the bank in line with the forecasts of the Strategic Plan 2012-2015.

The combination of profits and the reduction in risk-weighted assets of €4,292 million (measured in EBA Core Tier I terms) enabled BFA-Bankia to generate €598 million in capital, giving a capital ratio of 9.97% for the Group and 10.06% for Bankia. In both cases these figures include the effect of the exchange of hybrid instruments for shares announced last year, which will end in May.

BFA-Bankia is now taking the first steps towards creating value that will enable the State to recover its investment.

In the case of Bankia, profit after tax totalled €72 million. As in the previous quarter, the results include the effect of the €4,500 million subordinated loan from BFA to Bankia on 12 September 2012.

This loan, which is expected to be cancelled after Bankia's capital increase, generated a financial cost to the bank of €89 million for the quarter, which is offset at the Group level since the amount is paid by the subsidiary to the parent company.

The lower margins are the result of low interest rates and the sluggish economy, which subsequently affect the financial sector. In the first three months of 2012 the average Euribor 12-month interest rate was 1.67% but fell by 0.57% during the same period in 2013.

Net interest income for Bankia fell by 39.3% to €512 million in the first quarter year-on-year. Excluding the effect of the subordinated loan, net interest income would have decreased by 28.8% to €601 million.

Higher margins in new lending transactions, especially to SMEs and companies, combined with lower returns on deposits may contribute to better performance in financial income in the future.

Income from fees fell by 13.9% in the first quarter to €225 million, while income from financial operations decreased by 53.9% to €161 million compared to €349 million in Q1 2012.

The bond repurchase activity in the first quarter of 2012 was particularly intense and trading income for the first quarter of 2012 is not comparable to 2013 in like-for-like terms, when this activity was more recurrent.

Bankia's gross income therefore fell by 33.8% to €868 million. Excluding the effect of the subordinated loan, this figure would have fallen by only 27% to €957 million.

Administration expenses at Bankia were down by 14.2% to €446 million compared to the same quarter the previous year, while staff costs fell by 13.5% to €308 million and general costs by 15.8% to €139 million. Amortisation was also lower by 28.8% at €48 million.

Bankia's pre-provision profit was €374 million, a decline of 48.3% compared to the first quarter of 2012. This figure would have fallen by only 36% to €463 million excluding the effect of the subordinated loan.

Bankia made provisions of €272 million in the first three months of this year. Profit before tax was €102 million, while profit after tax totalled €72 million. At the BFA Group level, profit after tax was €213 million.

Evolution of business in Bankia

In the first quarter of the year, new lending to individuals and businesses totalled €2,218 million through 26,402 transactions.

This figure is broken down into €951 million in loans to large companies; €484 million to SMEs and independent contractors; €659 in mortgage lending; and €124 million in consumer credit. The bank periodically reports its lending activities via the website http://www.darcuerda.com.

Gross lending to Bankia customers fell by 2.2% to €142,606 million compared to December. This reduction was primarily due to households and businesses reducing their levels of borrowing.

On-balance-sheet customer funds as at 31 March increased by 1.2% to €165,820 million compared to December. This growth was primarily driven by the increase in the repo market activity, which allowed the bank to replace part of the funding it was obtaining from the European Central Bank.

This evolution offset the decline in retail deposits, which together with the lower volume of credit investments kept the LTD ratio stable at around 120%.

Solvency and liquidity

In terms of solvency, the BFA-Bankia group generated capital of €598 million in the first quarter of the year and the EBA Core Tier 1 ratio increased from 9.40% at the end of 2012 to 9.97% at 31 March. In both cases these figures include the effect of the exchange of hybrid instruments for shares announced last year, which will be completed in May.

Bankia's EBA Core Tier 1 ratio at the end of March was 10.06% after it generated capital of €416 million, including the effect of the exchange of hybrid instruments.

In terms of liquidity, Bankia reduced its ECB funding by €5,300 million to €43,600 million, the lowest level since June 2012.

The commercial gap remained virtually unchanged, decreasing by €430 million during the quarter to €32,840 million.

The BFA-Bankia Group ended the quarter with €41,200 million in liquid assets, which enables it cover almost all of its wholesale maturities.

Risks

With regards to the credit quality of the balance sheet, developer loans account for barely 3.4% of Bankia's loan portfolio with coverage of 46.7%.

Coverage of the bank's portfolio of loans to businesses (excluding developers) is 15.0% and to individuals 3.2%, sufficient to cover potential future impairments in these segments.

In relation to risk management, Bankia reduced the volume of non-performing loans in the first quarter by €255 million to €19.564 million. The NPL ratio in March was 13.08% with coverage of 61.88%.

Restructuring

In February Bankia announced its intention to accelerate the restructuring of its branch network with a new completion date of Q1 2014.

The restructuring in the Madrid and Valencia regions, which account for 60% of the bank's network, will be completed in May.

The bank had 2,942 branches as at 31 March, compared to 3,041 at the end of 2012.

Other significant events in the first quarter

Bankia began to roll out the brand in its branch network in January.

The bank joined the Housing Social Fund and contributed 1,000 properties.

On 8 February Bankia signed an employment agreement submitted by the bank with union representatives.

In March the company carried out a process to acquire various issues of mortgage covered bonds.

On 18 March Bankia completed the integration of the IT systems of the seven savings banks that merged to create the bank and La Caja de Canarias. The systems of Caja Rioja were integrated on 28 January.

On 22 March Bankia reached an agreement with a subsidiary fund of Apollo Global Management LLC to sell Finanmadrid.

On 22 March, the Fund for Orderly Bank Restructuring (FROB) passed a series of resolutions regarding the recapitalisation of the BFA-Bankia Group.

On 25 March, an agreement was signed with the insurance company Caser extinguishing the exclusive distribution commitments under agency agreements.

During the quarter, the bank launched pre-approved loan campaigns for businesses and individuals.

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