Grupo Unicaja Banco posts in 2021 a net profit, on a proforma basis (including the 12-month results of Liberbank and Unicaja Banco and excluding the accounting impact of the badwill from Liberbank integration and other merger adjustments and integration costs), of €137 million, 47% higher than one year earlier. The net profit including the badwill and restructuring costs stood at €1,113 million. Unicaja Banco, after the merger with Liberbank, has strengthened its commercial momentum both in assets (increase of 2.4% in the loan book) and funds (retail funds growth of 9.2%) and it has consolidated the positive evolution of improvement in the balance sheet quality, both in terms of NPAs decrease (-3.8% in NPLs and foreclosed assets) and of coverage increase (68.5% in NPLs and 65.5% in the whole NPAs), among the highest in the sector.
The integration process keeps advancing at fast speed, following completion of the legal merger on 30 July, the labour agreement reached on 3 December, the development of the organization chart in all its levels, and the presentation of the Strategic Plan 2022-24 on 10 December. The Strategic Plan 2022-2024 focuses on boosting commercial growth as a profitable and sustainable bank, with improved digital capabilities together with other channels and with a low risk profile. Among other financial goals, the Plan aims at reaching a ROTE (return on tangible equity) above 8% and a capital generation of €1,500 million. For that purpose, the Plan is based on five essential priorities and facilitating axes: deeper specialization to accelerate commercial activity, improved efficiency through operational excellence, advanced risk management with a conservative profile, improved and increased digital banking capabilities and commitment to sustainability in all the business lines.
In 2021, Unicaja Banco business volume recorded a solid y-o-y growth, with remarkable growth in mutual funds, up 23.3 y-o-y, and in mortgages, with a 34.6% increase in new lending and a rise of 3.1% in the loan book, reaching a domestic share in new mortgages of more than 9%, twice Unicaja Banco’s natural share.
After the integration and the recording of the merger and restructuring costs, Unicaja Banco maintains a strong solvency position (the CET 1 fully loaded stood at 12.5%), with a diversified risk portfolio and core revenues (net interest income plus fees, less administrative expenses) evolving favourably (+1.2% y-o-y).
Balance sheet
At the end of 2021, Unicaja Banco’s balance sheet reached €115,550 million, with a 5.9% increase in the fourth quarter
4.8% increase in customer funds
In recurrent and like-for-like basis, the balance sheet has maintained after the merger the positive trends of recent quarters, both in liabilities, with increasing customer funds, and in assets, especially in the mortgage portfolio. It is also noteworthy the growth in off-balance sheet products, namely mutual funds.
Customer funds at the end of 2021 stood at €108,230 million, 4.8% more than one year earlier on a like-for-like basis. 89% of customer funds belong to retail customers, reaching €96,007 million and resulting in a y-o-y growth of 9.2%, of which €22,038 million correspond to off-balance sheet funds (+11.6% y-o-y). In the current interest rate scenario, demand deposits maintained the trend of previous quarters, increasing by 7.5% y-o-y to €58,424 million, whereas term deposits continued to decrease, falling to €6,104 million.
Mutual funds grew by 23.3%, exceeding €12,400 million
The increase in off-balance sheet funds responds mainly to mutual funds, which posted a y-o-y growth of 23.3%, exceeding €12,400 million, with a net inflow of €2,136 million in 2021. Likewise, pension funds evolved positively, reaching €4,033 million, 4.5% higher than one year earlier.
Total performing loan book grows 2.4%, boosted by mortgages
Lending maintained its trend of relevant growth in terms of performing loan book, driven mainly by the sustained increase in mortgage lending and loans to the public sector.
The performing loan book reached at the end of 2021 €53,522 million, a 2.4% y-o-y increase. New lending maintained its strong pace, with a total of €13,087 million, of which €4,518 million correspond to mortgages, which post a 34.6% y-o-y increase. New mortgage lending represents a domestic market share of 9%, twice Unicaja Banco’s natural share in the Spanish banking sector.
This positive evolution makes the performing mortgage book to increase by 3.1% to €31,090 million. This sustained growth is achieved following a strategy of utmost prudence in risk management, with a Loan-to-Value (LTV) not exceeding 80% in 91% of cases. The mortgage book is composed of transactions to finance the acquisition of first residences (92% of the total book) and with a low NPL rate (3%), and new lending gathers in areas with a large economic and commercial dynamism, such as Comunidad de Madrid and Barcelona province, with nearly 50% of new transactions.
Consumer lending remain stable, with a balance of €2,776 million, up 1.7% y-o-y, as new lending grew by 7.7%.
Highly diversified loan book
A positive trend in 2021 has also been seen in the corporate sector, with an increase of the loan book, despite the foreseen reduction (21%) in new lending, after the end of the impact of ICO lending due to the COVID-19 pandemic. Loans to businesses stood at €14,093 million, up 3.1% y-o-y.
Unicaja Banco’s performing loan book is highly diversified: 58.1% corresponds to mortgage loans, 24.8% to corporate loans, 10.4% to loans to the public sector and 6.8% to consumer and real estate developers.
The corporate loan book is highly diversified by activity sectors, with a limited exposure in those sectors with a higher COVID-19 estimated impact.
Improved balance sheet quality and increased coverages
Unicaja Banco has maintained its strategy of maximum solvency and ongoing improvement of the balance sheet quality. At the end of 4Q, the NPL ratio stood at 3.5%, among the best in the Spanish banking sector, after reducing by 0.13 p.p. y-o-y. The total volume of non-performing assets decreased by 1.3% in the last twelve months.
In parallel, the foreclosed assets portfolio continued to decrease, with a 6% y-o-y reduction, thanks to the outflow of non-current assets in sales, for a gross amount of €435 million, mostly finished housing (48%), land (32%) and tertiary assets and work in progress (20%). All of the above has resulted in an improvement in the NPA ratio of 0.4 p.p. in the last twelve months, standing at 7.2%.
At the same time, Unicaja Banco has increased its coverage ratios, both for NPL and for foreclosed assets, reaching a 68.5% NPL coverage ratio (up 5.7 p.p. y-o-y) and a 62.7% foreclosed assets coverage ratio (up 6.7 p.p. y-o-y), among the highest in the Spanish listed banks. The total NPA coverage (NPL and foreclosed assets) grew to 65.5%, among the best in class.
P&L account
Commercial momentum
The net interest income reached €1,028 million, with a 7.3% decrease in recurrent terms, due to the lower contribution from the wholesale business and to the drop in interest rates, whose negative impact on the loan book has already ended its trajectory. Therefore, the retail net interest income barely decreased in the last quarter of the year (€3 million), and the customer spread stood at 1.4%.
The net fee income posts a significant increase, reaching €489, up 20% y-o-y (21.3% in recurrent terms), due mainly to the boost in savings, insurance and mutual funds. This increase largely offset the decrease in the net interest income, so that the core margin (net interest income plus fee income) reached €1,517 million, €15 million less than the figure of the previous year. After the negative result recorded in the line Other revenues/expenses (net), which amounts to €129 million -including the yearly contributions to the Depositors’ Guarantee Fund (€89 million) and to the Single Resolution Fund (€31 million)- and which, in comparative terms, reflects the impact of the recording by Unicaja Banco in 2020 of profit arising from a shareholders agreement on the investee company Caser, the gross margin reached €1,517, 7% less than in 2020.
Continuing with the cost optimization strategy, the administrative expenses remained stable, standing at a total of €841 million, 2.7% less than one year earlier. The bulk of integration synergies are still to be incorporated. This way, the pre provision profit reached €580 million, and the operating activity margin was €210 million, up 9% compared with 2020. Provisioning needs have declined, and loan loss provisions stood at €271 million, 35% lower y-o-y. The cost of risk stood at 41 bps.
After the total net adjustments, the transaction has generated a badwill of €1,301 million.
Pre-tax profit grew by 59%, up to €180 million, and net profit (on a proforma basis, excluding the impact of badwill and charges and provisions related to the merger) reached €137 million, up 47% y-o-y.
Solvency and liquidity
CET 1 ratio of 13.6%
After the merger, Unicaja Banco maintains strong solvency levels. As at the end of 2021, it had a CET 1 ratio of 13.6%, a Tier 1 capital ratio of 15.2% and a Total Capital ratio of 16.8%, well above the ratios required to the Bank of 5.6 p.p. in CET 1 and 4.2 p.p. in Total Capital.
In the same period, in fully loaded terms, the bank had a CET 1 ratio of 12.5%, a Tier 1 ratio of 14.1% and a Total Capital ratio of 15.8%.
The bank maintains a sound liquidity position, reflected in the Loan to Deposit (LtD) ratio, which stood at 75.0%, in the LCR ratio (307%) and in the NSFR of 142%.
In the last quarter of 2021, Unicaja Banco made an issue of €500 million in AT1 and two issues of preferred senior debt for €660 million, in both cases, with excess of demand.
Strategic Plan 2022-24 and integration advances
Unicaja Banco presented, on 10 December in Malaga, its Strategic Plan 2022-24, focused on boosting commercial growth as a profitable and sustainable bank, with improved digital capabilities together with other channels and with a low risk profile. For that purpose, the Plan is based on five essential priorities and facilitating axes: deeper specialization to accelerate commercial activity, improved efficiency through operational excellence, advanced risk management with a conservative profile, improved and increased digital banking capabilities and commitment to sustainability in all the business lines. Among other financial goals, the Plan aims at reaching at the end of the period a ROTE (return on tangible equity) above 8% and a capital generation of €1,500 million.
The implementation of Unicaja Banco’s Strategic Plan keeps advancing at fast speed, as well as the integration, following completion of the legal merger on 30 July, the labour agreement reached on 3 December, the development of the organization chart in all its levels, and the presentation of the Strategic Plan 2022-24 on 10 December. The Plan stands on the bank’s vision in four areas: shareholders (maximizing the organic capital generation), customers (giving priority to service quality), employees (boosting skills and talent) and society (maintaining the social commitment in the areas of influence with regard to environment and promotion of sustainable finance).
In this process, the bank continues, after having become the fifth largest bank in the Spanish market, with the effort to contain and reduce expenses arising from the business model transformation, automation and process simplification. The bank keeps on working on the quality service and in the creation of value proposals to meet customers’ needs.
Commercial momentum and digital transformation
The operational integration process in which Unicaja Banco is immersed is boosting the digital transformation strategy and the joint commercial and business capabilities.
In the business and commercial area, it is worth to mention the bank’s activity in the payroll portfolio, especially in the last quarter of the year, increasing acquisitions. Additionally, in 2021, Unicaja Banco has continued to develop its digital transformation strategy, both from the area of operational and functionality improvements and to boost the open-banking model and collaboration agreements with companies that are leaders in different fields and which will extend in the coming months to all the bank’s customers.
The bank is working intensely to advance in the process of incorporating the best digital functionalities and online service provision and remote management for all its customers, as well as in the possibility of digital subscription of mortgages, expanding the products and services, given its commitment to provide a competitive offering.
Sustainable finance
Unicaja Banco has continued to develop actions of sustainable and responsible banking throughout 4Q 2021, such as:
i. The Board of Directors has reviewed the Action Plan on Sustainable Finance, for a more adequate reflection of the new sustainability governance at the Bank, following the recent creation of the ESG Business Department and of the Sustainability and CSR Department, and to incorporate certain plans in order to respond to new regulatory requirements and to supervisory expectations.
ii. The incorporation to the Strategic Plan 2022-2024 of a specific axis on management of sustainable finance, especially linked to the development of sustainability in all the business lines. The bank will work in a renewed offering of products and services, in the reduction of carbon footprint (both its own and that of funded and investment portfolios), while promoting sustainability-conscious culture and the identification and management of environment and climate risks.
In this line, the ambition is to have 75% of mutual funds meeting ESG standards, developing a product offering including green mortgages, Agro Eco sustainable finance, energy renewal personal loans, green ECO motor loan and mobility master plan, sustainable investment and pension funds and electric cars insurance.
iii. The Edufinet Project of financial education has continued to develop its activities, such as those carried out on the Financial Education Day, by the Bank of Spain and the CNMV and held on 4 October, under the theme ‘Make your finances sustainable’. Likewise, the 4th Financial Education Congress was held in November, under the title ‘Financial Education for a time of paradigm shift’, with more than 200 participants. The Congress has held in-person and online and more than 35 experts from different fields have taken part as speakers and participants.
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