Grupo Unicaja Banco recorded a net profit of €34 million in the first quarter of 2023, a period in which the entity has fully accounted for the new temporary banking tax. Excluding the impact of the new tax, amounting to €63.8 million, net profit would have amounted to €98 million, an increase of 62.9% with respect to the same period of 2022.
The Group’s result stand on the increase in core revenues -with net interest income up 24.8% year-on-year and net fee income up 1.3%-, the 7.2% reduction in personnel expenses, and lower loan-loss provisions, down 30.5%. Although financial income from lending does not yet reflect the full repricing of the Euribor, customer spreads increased by 47 basis points to 2.01% in the quarter. Net operating income grew by 7.6% year-on-year to 93 million euros. Net income amounted to 34 million, compared with 60 million in the first quarter of 2022. The efficiency ratio improved by 8.5 percentage points year-on-year to 48.6%, excluding the effect of the temporary banking tax.
The balance of performing loans to individuals remained stable at 34,169 million, with consumer financing increasing by 3.8% year-on-year. The balance of performing loans stood at 51,606 million. In the first quarter of the year, 1,897 million new loans and credits were granted, of which 674 million were mortgages to individuals (with a market share in formalizations amounting to 7.5% of the national total, well above Unicaja Banco's natural share in the sector). Deposits from private-sector customers remained flattish. Individual customers accounted for 75% of deposits, with the average deposit being less than €20,000. Off-balance-sheet funds and insurance increased by 3.0% in the quarter to 20,851 million. Total funds under management increased by 1.4% to €99,585 million.
The results obtained were accompanied by an improvement in the quality of the balance sheet. The volume of non-performing assets (NPAs) continued its favorable downward trend, with a year-on-year fall of 8.7%, due to a 14.4% decrease in the stock of foreclosed assets and a 2.6% drop in non-performing assets.
The NPA reduction has been accompanied by the maintenance of high coverage levels, which are among the highest in the sector, in line with Unicaja Banco’s traditional policy of prudence. The coverage ratio of non-performing assets reached 65.3%, that of NPLs stood at 66.4%, and that of foreclosed assets at 64.2%. The maintenance of high coverage levels will allow the bank to continue accelerating the reduction of these assets. The NPL ratio remained stable at 3.6%, and the cost of risk remained contained at 26 b.p., compared to 36 b.p. in the same period of the previous year.
Unicaja Banco maintains high and sound solvency levels (CET 1 fully loaded increased half a percentage point in the quarter to 13.5%), with an excess of capital over regulatory requirements of 1,711 million. Liquidity levels remain high, with LtD ratio of 78.8% and LCR of 298%.
Balance sheet
Total customers funds grew by 1.4% in the quarter
Total customer funds increased by 1.4% in the first quarter to €99,585 million, with a very stable and granular customer deposit base (75% corresponds to individuals, the average deposit being less than €20,000). Term deposits increased by 18.6% in the quarter and by 21.4% over the last twelve months. Off-balance-sheet funds increased by 3.0% in the quarter, with growth in savings insurance of 8.2%, thanks to the marketing of a unit-linked product aimed at customers with a conservative investment profile. Mutual funds reached 11,370 million, after growing by 1.1% in the quarter; and those of pension plans reached 3,712 million, with a quarterly increase of 0.8%.
In terms of lending activity, performing loans to individuals remained stable (-0.3% year-on-year), registering a lower fall than the sector average (-0.8% year-on-year according to data from the Bank of Spain as of February). Consumer financing grew by 3.8% year-on-year. Performing lending stood at 51,606 million, down 3.6% year-on-year, taking into account that it has been affected by early repayments and a moderate demand for new credit. The outstanding balance of the corporate loan portfolio fell by 4.8% in the quarter, 15% of which is covered by ICO guarantees. New loans amounted to 1,897 million, of which 674 million corresponded to mortgage financing for individuals, representing 35.5% of the total. Unicaja Banco’s market share in new mortgage loans stands at 7.5% of the national total (according to data as of February 2023, accumulated over the last 12 months), well above Unicaja Banco’s natural share in the Spanish banking sector.
Unicaja Banco’s performing loan book maintains a low-risk profile and is highly diversified: 60.6% corresponds to retail mortgage financing, 23.4% to corporate loans, 10.4% to public administrations and 5.7% to consumer and other purposes.
Improvement in balance-sheet quality
Unicaja Banco maintains its traditional policy of prudent risk management. At the end of the first quarter, the NPL ratio remained stable at 3.6% and the cost of risk was contained at 26 b.p., compared to 36 b.p. in the same period of the previous year. The balance of non-performing loans was 2.6% lower than in March 2022. More than half of NPL entries in the first quarter were subjective marking, which represent 34% of the NPL stock. The sales of foreclosed real estate assets performed well, with positive results. The reduction in the stock of gross foreclosed real estate assets was 14.4% year-on-year. Non-performing assets continued their downward trend, falling by 8.7% year-on-year.
At the same time, Unicaja Banco maintains its high coverage levels, among the highest in the sector, standing at 66.4% for NPLs and 64.2% for foreclosed assets, with the aim of continuing to accelerate the reduction of this type of assets. Coverage of total NPAs (non-performing and foreclosed) stood at 65.3%.
P&L account
Net interest income up 24.8%
Unicaja Banco recorded a consolidated net profit of €34 million in the first quarter of the year (compared to €60 million in the same period of the previous year), which was impacted by the new temporary banking tax of 63.8 million euros, recorded in full in the first quarter. Excluding the impact of the new tax, net income would have amounted to 98 million, up 62.9% compared to the same period of 2022.
Net interest income increased year-on-year by 24.8% to 293 million. The higher results obtained by the retail business offset the impact of the higher cost of wholesale funding, mainly due to the change in the conditions of TLTROs. The customer spread increased by 47 b.p. in the quarter to 2.01%, although the financial income from lending does not yet reflect the full impact of the repricing of the Euribor.
The net fee income increased by 1.3% year-on-year to 135 million, driven mainly by mutual funds, securities and cards activities. Gross margin amounted to 373 million, 2.5% less than in the first quarter of 2022, as a result of the application of the new temporary banking tax, recorded under Other operating income and expenses. The performance of the results was also based on a 2.8% reduction in operating costs, with a 7.2% drop in personnel expenses, following the implementation of 87% of the exits planned in the labor force reduction plan. The efficiency ratio stood at 48.6%, a year-on-year improvement of 8.5 percentage points, excluding the effect of the temporary bank tax. The ROTE improved by 2.7 percentage points compared to March 2022, to 6.5%, excluding the impact of the aforementioned tax.
Pre-provision profit amounted to 160 million. Loan-loss provisions fell by 30.5%, bringing the quarterly cost of risk to a contained level of 26 basis points. Net operating income amounted to 93 million, 7.6% more than in the previous year. Consolidated profit before tax was 73 million, and net income amounted to 34 million.
Solvency and liquidity
CET 1 fully loaded ratio up to 13.5% and strong liquidity position
Unicaja Banco maintains high and sound solvency levels[1]. As at the end of 1Q23, it had a CET 1 phase in ratio of 13.8%, a Tier 1 capital ratio of 15.5% and a Total Capital ratio of 17.3%, well above the ratios required to the Bank of 5.5 p.p. in CET 1 and 4.6 p.p. in Total Capital.
In fully loaded terms, the bank had a CET 1 ratio of 13.5%, a Tier 1 capital ratio of 15.1%, and Total Capital of 17.0%. CET 1 fully loaded increases by 49 bps in the quarter, due to the organic generation of earnings and the reduction of risk-weighted assets.
The bank has €1,711 million in excess of regulatory requirements,
The Texas ratio stood at 42.3%, an improvement of 4 p.p. in the last twelve months.
The bank maintains a sound liquidity position, reflected in the Loan to Deposit (LtD) ratio, which stood at 78.8%, in the LCR ratio (298%) and in the NSFR of 144%.
Digital business and commercial action
Boost to the Digital Plan
In the first quarter, all the lines of the Digital Plan in the 2022-2024 Strategic Plan (which is progressing as planned) have been boosted, in addition to accompanying the development of the bank’s digital strategy in line with market demand. Digital onboarding has been implemented, including the fee-free remunerated salary account for new customers.
In addition, the first phase of the development of the Digital Consumer Platform has been completed, which involves an improvement in processes and allows the expansion of the scope of digital sales of loans, credit cards and with payment by installments, with all the operational functionalities that already process the entire digital offering aimed at customers in an automated way and with an omnichannel vision.
At the end of 1Q23, 61.9% of customers were digital. Of the new clients, 34% have been digitally on-boarded. The contribution of digital channels to the subscription of new consumer loans already accounts for 41%, it reaches 22% in accounts and 24% in subscriptions of mutual funds/delegated portfolio management.
Unicaja Banco has also renewed the agreement with Sociedad de Garantía Recíproca Iberaval SGR and the line of support for entrepreneurship and industrial growth, subsidized with funds from the European Next Generation program. On the other hand, it has reached an agreement with Cesce and Solunion to offer credit insurance solutions for the self-employed and small companies. It has also launched a campaign whereby it pays up to 250 euros, together with other advantages, to customers who deposit their payrolls or pensions by direct debit to their accounts. The Hipoteca Mixta has also been made available to customers.
General Meeting of Shareholders and payment of a dividend of 128.6 million
The Annual General Meeting of Shareholders of Unicaja Banco, held on 30 March, approved, among other matters, the annual accounts and the management of the Board of Directors during the past year, as well as the proposed distribution of a dividend of €128.6 million euros charged to the profit for the year 2022, which represents nearly 50% of the ordinary consolidated net profit for that year. This dividend, paid on 14 April, is equivalent to €0.048431 gross per share.
Developments in sustainable finance and CSR actions
In the area of Corporate Social Responsibility (CSR) and sustainable and responsible banking, the following actions were carried out in the first quarter:
i. Unicaja Banco has approved the first decarbonization targets for its loan portfolio, in accordance with the Paris Agreement, in order to reduce the carbon footprint generated by its activity and thus contribute to the fight against climate change. The corporate objectives approved for 2023 include for the first time those related to climate and environmental risk.
ii. Publication for the first time of the Consolidated Statement of Non-Financial Information 2022, with data related to the carbon footprint generated by the bank’s financing and investment activity. Likewise, the contents relating to climate risk management have been expanded in this report. For the first time, the degree of compliance with the TCFD (Task Force on Climate-related Financial Disclosures) recommendations in the areas of governance, strategy, risk management and metrics, and targets has been reported.
iii. The Board of Directors has reviewed the Corporate Social Responsibility Policy, which reinforces the commitment to a more efficient economic management that is fully respectful of the preservation of the planet.
iv. Unicaja Banco and Correos have signed a collaboration protocol to expand access to financial services in rural Spain. This agreement, which will come into effect in the coming months, will enable customers of the financial institution to access Correos Cash services, which enables them to withdraw and deposit cash at all Correos customer service points, as well as to take money to their homes through rural postmen.
v. The Edufinet Project, on financial education, has continued to develop its activities, with special focus on young people, senior citizens and unemployed women, among other groups.
[1] Capital ratios include net income, net of accrued dividends, computability pending approval by the European Central Bank.
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