Grupo Unicaja Banco recorded a net profit of €285 million in the first nine months of 2023, a 4.9% increase compared to the same period of the previous year. Pre-tax profit grew by 11.2% to 413 million. Excluding the impact of the banking tax -which amounted to 63.8 million and was recorded in full in the first quarter-, net profit would have amounted to €349 million, 28.4% higher than in September 2022. In the third quarter, net income amounted to 137 million, up 20.4% quarter-on-quarter.
The Group’s result stood on the increase in core revenues -with net interest income up 25.4% year-on-year and fee income up 1.6%-, the 4.9% reduction in personnel expenses, and lower loan-loss provisions, down 12.8%. These results are accompanied by an improvement in the balance sheet quality and the maintenance of a strong solvency and liquidity position.
All margins increased in year-on-year terms. Net interest income grew by 25.4%, supported by the retail business. While not yet reflecting the full impact of the Euribor repricing, customer spread increased by 121 bps year-on-year to 2.61%, with contained financial costs. Gross margin rose by 5.9%, pre-provision profit increased by 14.4%, and net operating income rose by 25.4%. The efficiency ratio -excluding the effect of the banking tax - improved in a year by 6 percentage points (pp) up to 45.9%.
The balance of performing loans stood at 49,533 million, in a context of shrinking demand for financing, increase of early repayment of variable-rate loans and concentration of maturities of ICO-backed loans. In this scenario, the balance of mortgage loans to individuals fell by 1.4% in the quarter, to 30,641 million, although consumer financing increased by 2.1% year-on-year. In the first nine months of the year, €5,179 million were granted in new loans and credits, of which 1,866 million were mortgages to individuals, maintaining the market share in new mortgages at 7.4% of the national total, above Unicaja Banco’s natural share.
Retail customer funds totaled €87,536 million. The customer deposit base stands out for its high granularity and stability, with a high weight of individual customers (75% of the total). Term deposits increased by 64.9% year-on-year and by 9.5% in the quarter. Off-balance-sheet funds and insurance increased by 3.2% year-on-year to 20,759 million, with growth of 9.7% in insurance funds, 0.2% in mutual funds and 0.7% in pension funds. Total customer funds amounted to €98,411 million euros.
The volume of non-performing assets (NPAs) accelerated its reduction, with a year-on-year fall of 13.1%, due both to a 15.3% decrease in the stock of foreclosed assets and a 11% drop in non-performing loans. The NPA reduction has been accompanied by the strengthening of high coverage levels, in line with Unicaja Banco’s traditional policy of prudence. The coverage ratio of non-performing assets has improved by 2.1 p.p. y-o-y, reaching 66.2%; that of NPLs increased by 1.0 pp to 65.8%, and that of foreclosed assets, by 3.2 pp to 66.6%. The NPL ratio decreased by 23 bps to 3.39%, and the cost of risk remained contained at 30 bps.
Unicaja Banco maintains high and strong solvency levels. The CET 1 fully loaded increased by 1.2 pp compared to September 2022, standing at 14.2%. The bank comfortably exceeds the required solvency levels, by 6.2 pp in phased in CET 1 (14.5%). Liquidity levels remain high, with an LCR of 259% and an NSFR of 147%.
Balance sheet
Stable, granular deposit base, with a high percentage of individual customers
Total customer funds stood at €98,411 million, with a flattish trend in the year (+0.2% compared to December 2022). Unicaja Banco maintained as a strength and competitive advantage having a very granular and stable deposit base (of which 75% correspond to individuals), which allows it to contain funding costs. Term deposits increased by 9.5% in the quarter and by 64.9% over the last twelve months.
Off-balance-sheet funds and insurance increased by 3.2% year-on-year, with growth of 9.7% in insurance funds and of 18.2% in other managed assets. Total mutual funds stood at 11,227 million, and pension plans grew by 0.7% to 3,677 million. Retail customer funds fell by 1.3% in the quarter and by 2.5% year-on-year, in line with the general trend in the sector, due to seasonal factors (higher household spending during the summer) and others such as price rises and higher interest rates, a fact that encourages early loan repayments. Furthermore, 1.3 pp was due to purchases of Letras del Tesoro by customers.
Performing lending stood at 49,533 million, in a context of shrinking demand and higher credit costs, caused by the rise in interest rates, which has led to an increase in early repayments, as well as a greater concentration of maturities of ICO-backed loans granted during the pandemic, which resulted in a 3.3% quarter-on-quarter reduction in the balance. Mortgage lending to individuals fell by 1.4% in the quarter, although consumer finance increased by 2.1% year-on-year. New loans in the year amounted to 5,179 million, of which 1,866 million corresponded to mortgage financing for individuals, representing 36% of the total. Unicaja Banco’s market share in new mortgage loans stands at 7.4% of the national total (according to data as of August 2023, accumulated over the last 12 months), above the bank’s natural share in the Spanish banking sector.
Improvement in the balance-sheet quality with high coverage
Unicaja Banco maintained its traditional policy of prudent risk management. In the third quarter, the NPL ratio decreased by 23 bps to 3.39% and the cost of risk remained contained at 30 bps.
The total volume of non-performing assets (NPAs) continued its downward trend, with a year-on-year fall of 13.1%. The balance of non-performing loans was 11% lower than in September 2022. The year-on-year reduction in the stock of foreclosed assets, in gross value terms, was 15.3%. The annual sales of foreclosed assets recorded positive results.
At the same time, Unicaja Banco reinforced its high coverage levels, giving continuity to the bank’s traditional policy of prudence, standing at 65.8% for NPLs (up 1.0 pp), 66.6% for foreclosed assets (up 3.2 pp) and at 66.2% (up 2.1 pp) for total NPAs coverage (non-performing and foreclosed).
Income statement
Growth in all margins
Unicaja Banco recorded a consolidated net profit of €285 million in the first nine month of the year, up 4.9% compared to the same period of the previous year. Excluding the impact of the banking tax, which amounted to 63.8 million and was recorded in full in the first quarter, net income would have amounted to 349 million, up 28.4% compared to September 2022. In the third quarter, net income amounted to 137 million, a 20.4% quarter-on-quarter growth.
All margins recorded year-on-year increases. Net interest income increased year-on-year by 25.4% to 973 million, supported by the retail business, whose contribution in the third quarter was 38 million higher than in 2Q. While not yet reflecting the Euribor repricing in full, the customer spread (commercial) grew by 121 bps year-on-year, up to 2.61%, with contained financial cost due to the granularity of deposits because of the high percentage of induvial customer deposits (75% of the total), which constitutes a strength and competitive advantage for the bank. Net fee income rose by 1.6% year-on-year to 401 million, driven by the good performance of the insurance and mutual funds activity. Net fee and commission income accounted for 30% of gross margin, which reached 1,333 million, with a 5.9% year-on-year increase.
Operating expenses continued to fall, down 2.2% year-on-year, with a 4.9% drop in personnel expenses, after realizing the synergies derived from 100% of the planned closure of branches and 94.8% of the personnel departures contemplated in the labor force reduction plan (ERE). The efficiency ratio -excluding the effect of the banking tax- improved year-on-year by 6 pp to 45.9%. As a result, the pre-provision profit amounted to 692 million, 14.4% more than in the same period of 2022. Loan-loss provisions were 12.8% lower. Net operating income amounted to 492 million, 25.4% more than in the previous year.
Consolidated profit before tax was 413 million, and net income amounted to 285 million, up 11.2% and 4.9% respectively.
Solvency and liquidity
CET 1 fully loaded ratio up to 14.2% and strong liquidity position
Unicaja Banco maintains high and solid solvency levels[1]. As at the end of 3Q23, it had a phased in CET 1 ratio of 14.5%, a Tier 1 capital ratio of 16.3% and a Total Capital ratio of 18.2%. These ratios are well above those required to the Bank in 6.2 pp in CET 1 and 5.5 pp in Total Capital.
In fully loaded terms, the bank had a CET 1 ratio of 14.2%, a Tier 1 capital ratio of 15.9%, and Total Capital of 17.9%. CET 1 fully loaded has increased by 1.2 pp in the last twelve months, thanks to the generation of profit and to the reduction of risk-weighted assets, related to the sale of foreclosed assets and deleveraging, mainly in the corporate segment.
The Texas ratio stands at 38.1%, with a year-on-year improvement of 4.7 pp.
The bank maintains a comfortable and high liquidity position, reflected in the Loan to Deposit ratio, which stood at 76.8%, a short-term liquidity ratio (LCR) of 259%, and a net stable funding availability ratio (NSFR) of 147%.
Last September, Unicaja Banco issued €300 million of five-year senior non-preferred green bonds, covering the MREL’s sectorial regulatory needs, with oversubscription of close to 4.5 times the issue, granular and geographically diversified. This issue is in addition to those made in 2022, bringing green bond issues to €1,300 million.
After the aforementioned issue of the bank’s third green bond, total liabilities eligible as MREL represent 25.8% of risk-weighted assets as at the end of the third quarter, levels that anticipate and exceed the requirement established for January 2024, which in the case of Unicaja Banco, amounts to 24.5% of risk-weighted assets.
Digital business and commercial action
In the third quarter of 2023, the implementation of the Digital Plan, included in the 2022-2024 Strategic Plan, has continued. The measures implemented in digital adoption are contributing to the growth of active digital customers. Among other actions carried out, the development of the Remote Sales platform specialized by product lines, which allows the bank to expand the capacities available for digital marketing, stands out.
At the end of the third quarter, 64% of our customers are digital. Of new customers, 31% have been recruited through the digital channel. The contribution of digital channels to the subscription of new consumer loans already accounts for 49.4% of the total, 20.5% for accounts and 26% for subscriptions in mutual funds/delegated portfolio management.
In line with Unicaja Banco’s commitment to continue improving the customer experience, offering an increasingly accessible banking service, it has implemented a new service, free of charge, which involves 150 digitalization managers, available to users and distributed in the main branches of its different regions of operation, to provide support and training in the use of digital banking and ATMs, in order to facilitate the performance of daily operations and the subscription of financial products through these channels, in a convenient, simple and accessible manner.
Additionally, the bank has joined several programs by different autonomous communities in the areas where it operates, aimed at facilitating the purchase of a first home for young people of up to 35 years of age; and it has entered into new agreements with confederations of business owners in different territories to promote new lines of financing.
Innovation
During the third quarter, Unicaja Banco has continued to develop its innovation strategy. Within the framework of its co-innovation labs, it has made significant advances in the design of solutions that help to streamline and improve regulatory compliance processes. These labs are part of an improvement process that allows the incorporation of innovations with the potential to increase the levels of assurance and safety offered to customers in a prudent, efficient and sustainable manner.
Actions in sustainable finance and CSR
In the area of Corporate Social Responsibility (CSR) and sustainable and responsible banking, the following actions carried out in the third quarter are to be highlighted:
- As part of the actions of the Sustainable Finance Action Plan, the credit, debit and prepaid cards have been updated with the aim of making them more sustainable, as they are manufactured with 100% recycled materials, which is one of the best alternatives for reducing the carbon footprint. The cards feature a new design with elements based on nature, and have the Mastercard certification seal, which guarantees that they are sustainable.
- Unicaja Banco has also celebrated the tenth anniversary of its adherence to the United Nations Global Compact. During this period, the bank has integrated the ten universal principles into its strategy, culture and action plan. It has also reinforced its commitment to the achievement of the Sustainable Development Goals (SDGs) and the Paris Agreement, showing its involvement in a balanced and sustainable economic development, communicating it to its different stakeholders.
- In financial education, directly and with actions within the framework of the Edufinet Project, promoted by Unicaja Banco and different institutions, the bank has continued to develop its activity. In addition to the elderly and young people, initiatives have been carried out for business owners and groups related to the world of sports. At the end of the quarter, Edufinet joined the celebration of the Financial Education Day (2 October), whose slogan this year was ‘Inclusive finance, finance for all’, an initiative promoted by the Financial Education Plan.
[1] Capital ratios include net income, net of accrued dividends, computability pending approval by the European Central Bank.
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