QUARTERLY REPORT 2Q14 APRIL-MAY-JUNE

Transcription

1 QUARTERLY REPORT 2Q14 APRIL-MAY-JUNE

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3 Main highlights (Amounts in thousand) Var. % Business volume Total assets managed 173,535, ,362,869 (0.5) On-balance sheet total assets 157,180, ,287,391 (1.3) Own funds 12,742,911 10,998, Customer deposits 86,611,004 83,578, Lending to customers (gross) 110,558, ,423,240 (2.5) Solvency CET 1 ratio (%) Tier 1 ratio (%) Total capital ratio (%) Fully loaded Basel III Leverage ratio (%) Risk management Total risks 150,587, ,638,271 (2.0) Non-performing loans 21,036,304 16,597, Allowances for credit losses 9,271,550 8,711, % nonperforming ratio % coverage of non-performing and written-off loans % coverage of non-performing and not written-off loans % coverage with guarantees Earnings Net interest income 1,129,562 1,235,254 (8.6) Gross operating income 2,140,111 1,807, Profit before provisions 1,242, , Profit before tax 176, ,032 (24.2) Consolidated profit for the year 128, ,608 (25.4) Net profit attributed to the Group 128, ,360 (24.6) Net return and efficiency Average total assets 151,630, ,436,386 (3.1) Average risk-weighted assets (RWA) 84,238,982 91,418,903 (7.9) Average total equity 12,588,223 10,770, ROA (%) RORWA (%) ROE (%) Operating efficiency (%) Per share data Final number of shares fully diluted (thousands) 2,132, ,044, Average number of shares (thousands) 2,096, ,995, Adjusted share closing market price ( ) > Market capitalization 10,407, ,815,515 > Book value per share diluted ( ) Net earnings per share ( ) (38.6) Price/Book value Price/Earnings (annualized) Other data Shareholders 272, ,196 (8.4) Employees 15,546 15,905 (2.3) Spain: 13,688 14,060 (2.6) Men 8,600 8,941 (3.8) Women 5,088 5,119 (0.6) Abroad: 1,858 1, Men 1,126 1, Women Branches: 2,155 2,206 (2.3) Spain 1,954 2,007 (2.6) Abroad ATMs 2,716 2,886 (5.9) Note: From January 1st 2014, due to the entry into force of IFRS 11, the equity method is applied to jointly controlled entities. For comparative purposes, this criterion has been applied to information concerning the financial year Fully loaded Basel III Leverage Ratio CRR. 2. Coverage ratio (value of guarantees after haircuts Bank of Spain included) 3. Including 36,051 thousand shares converting in November 2015 and 6,831 thousand shares converting in December Including the mandatory convertible notes. The Group s consolidated financial statements as of June 30th 2014, the audit of which is being finalized, were prepared in accordance with the accounting principles and methods established by the International Financial Reporting Standards adopted by the European Union (IFRS-EU), consistent with those used in the formulation of the audited financial statements in the Annual Report for the year

4 Salient aspects General environment and evolution of earnings in 2Q14 The economic environment continues to exhibit positive signs which seem to confirm the recovery of the economy. This trend has been joined very recently by the employment rate which has shown a positive annual variation for the first time in the last six years. The economic recovery is being reflected by the main national and international bodies, which have been revising upwards their forecasts for Spain in Even so, there are remaining imbalances, most notably an unemployment rate of 24.5%. In short, the figures seem to point to a consolidation of the recovery, even though it is therefore necessary to maintain prudence in the face of a recovery which will be less speedy than in previous episodes because of the depth of the crisis and the effects wreaked on the economic agents. Under this maxim of prudence, Banco Popular continued to demonstrate its ability to generate income and to continue strengthening its balance sheet. Highlights of the quarter The second quarter of 2014 saw confirmation of the change of trend in non-performing loans (NPLs) which, for the second quarter running, fell to 13.97%. In addition, there was a recovery in the business, supported, on the hand, by moderate growth (up 1% since March) in lending and, more importantly, in the growth of the interest margin (up 6% on 1Q), with liability costs continuing to fall month by month. Gross operating income of 1,223 million in the quarter The net interest income of 580 million in the quarter was 6% higher and was again the highest of the banking sector in relative terms. This increase was based mainly on management of customer spreads and, very significantly, in the decline in the cost of retail liabilities. The second quarter also saw a continuing decline in the cost of time deposits and new deposits were arranged, on average, at 31 basis points lower than in the first quarter and 90 basis points below the cost of the stock. Moreover, further progress was made in changing the structure, increasing the relative weight of demand deposits. Wholesale financing will contribute in coming quarters to an improvement in the margin, since the upcoming maturities are at rates higher than present market rates. Fees and commissions amounted to 168 million in the second quarter, impacted by the effect of corporate transactions. The past due fees have fallen a 42% on annual basis as a result of a better economic situation. Financial asset and liability transactions, on the contrary, contributed positively to the gross income, thanks to the management of the debt portfolio. Additionally, the Bank s operating income reflected two extraordinary events. On the one hand, the sale of the economic rights associated with the distribution of the portfolio of certain insurance products contributed 96 million, whereas the exceptional losses recorded by certain investees had a negative impact of 23 million in the quarter. Thus, gross operating income amounted to 1,223 million in the quarter, the highest in the Bank s history. High net operating income Administrative expenses, including depreciation and amortisation, were held at 453 million in the quarter, the same level as in recent quarters. During the year, the personnel expenses remained flat while the general expenses grew a 17.5% mainly due to corporate transactions and the property maintenance. Although at a less pronounced rate, the Bank continued to optimise its branch network and at 30 June had 2,155 branches open, 11 fewer than in 1Q. 4

5 The strength of income and the stability of costs led to net operating income of 770 million, with an efficiency ratio of 34%. The 725 million of provisions booked in the quarter were enough to enhance by 2 percentage points the coverage of doubtful loans. Also booked in the quarter were the capital gains on the sale of the collective investment institution depositary business. The net profit for the quarter was 65 million Commercial activity: growth of lending to business enterprises Both the gross lending and the interest-earning lending grew again in the second quarter, with even stronger commercial activity focused on the Bank s natural market. Thus, SMEs lending grew in the quarter and the balance of lending at 30 June stood at 31,462 million. As noted earlier, management of retail liabilities made it possible to go further in cutting prices while also increasing the relative weight of demand deposits, thus trimming the cost even further and endowing liabilities with greater stability. Risk management: decrease in non-performing loans The reduction of non-performing loans was consolidated and for the second consecutive quarter both the stock of doubtful balances and the NPL ratio fell, the latter to 13.97%, 31 basis points less than in the preceding quarter. The amount of subjective doubtful balances was 3,409 million and contributed 2.26 percentage points to the NPL ratio. By sectors, the non real estate NPL rate fell to 7.20%, compared with 7.43% in the previous quarter. However, that of the real estate sector was up 117 basis points at 56.34%. The provisions for bad debts increased to 9,272 million, raising the coverage rate to 44% and to 54% including write-offs. Taking into account all risks subject to provisions including property, the total coverage for these risks stood at 13.7%. In line with the Bank s announced strategy, the sale of properties continued to accelerate and the 350 million sold in the second quarter were 41% more than in 1Q and twice the same figure in It should be noted that the provisions booked allow to sell above the book value without incurring in losses, this fact, together with the stabilisation perceived in the property market, makes it possible to look forward with confidence to continue upping the rate of sales in the future. The combination of the containment of NPLs, a rising level of sales and the booking of provisions makes it possible to observe a change of trend in the net NPA stock, which fell with respect to the preceding quarter after very sharp recent increases. Solvency: CET1 OF 11.4% and leverage ratio of over 6% The regulatory tier 1 core capital ratio stood at 11.38%, 72 basis points higher than at March end, although part of the improvement was attributable to the application of the phase-in arrangements to the deduction of intangibles. The complete application of the new fully loaded capital accord would place the ratio at 10.43% taking into account the MCNs. The leverage ratio of 6.04% places the Bank in a privileged position in the banking sector. 5

6 Balance Sheet Variation % (Amounts in thousand) months 12 months ASSETS Cash and balances with central banks 992,642 2,826,838 2,066,356 (64.9) (52.0) Financial assets held for trading 1,703,341 1,510,574 1,814, (6.1) Other financial assets at fair value through profit or loss 542, , , Investment portfolio 24,833,997 16,175,138 25,863, (4.0) Loans and receivables: 110,116, ,035, ,111, (1.8) Loans and advances to other debtors 101,899, ,123, ,324, (3.3) Other loans and receivables 6,017,134 5,531,536 5,567, Of which Interbank deposits 853, , ,599 > (3.8) Fixed income 2,199,900 1,380,055 1,219, Changes in the fair value of hedged items in portfolio hedges of interest rate risk 234, , , Hedging derivatives 407, , ,505 (29.6) (37.9) Non-current assets held for sale 7,281,111 6,296,601 5,502, Investments 1,228,510 1,262,705 1,137,254 (2.7) 8.0 Insurance contracts linked to pensions 143, , , Reinsurance assets 15,289 14,462 5, > Tangible assets 1,853,777 1,835,903 1,884, (1.6) Intangible assets 2,459,786 2,457,550 2,483, (1.0) Tax assets 3,431,556 3,516,827 3,412,298 (2.4) 0.6 Other assets 1,935,424 1,531,634 1,660, Total Assets 157,180, ,709, ,287, (1.3) LIABILITIES Financial liabilities held for trading 1,184, ,426 1,159, Other financial liabilities at fair value through profit or loss 627, , , Financial liabilities at amortised cost: 138,865, ,213, ,729, (3.4) Liabilities of credit institutions 22,318,307 21,693,222 35,050, (36.3) Of which Interbank deposits 2,122,209 2,020,691 1,906, Deposits from other creditors 98,311,044 89,162,479 86,956, Debt certificates including bonds 15,641,462 16,282,375 18,626,590 (3.9) (16.0) Subordinated liabilities 1,467,199 2,324,019 2,095,911 (36.9) (30.0) Other financial liabilities 1,127, , , Hedging derivatives 1,852,328 1,473,749 1,659, Insurance contract liabilities 419, , , Provisions for contingent exposures 492, , ,875 (7.5) 1.6 Tax liabilities 554, , , Other liabilities 683, , , Total liabilities 144,680, ,082, ,830, (2.8) Equity Total equity 12,742,911 11,925,494 10,998, Capital, reserves and retained earnings 12,614,404 11,600,195 10,827, Profit or loss for the period 128, , ,360 (24.6) Dividends paid and declared Valuation adjustments (266,102) (350,500) (585,878) (24.1) (54.6) Minority interests 22,974 51,377 44,899 (55.3) (48.8) Net asset value 12,499,783 11,626,371 10,457, Total liabilities and equity 157,180, ,709, ,287, (1.3) 6

7 Commercial GAP (Amounts in thousand) Lending to customers 101,899,157 Asset repos (valuation adjustments included) (6,472,604) Total net lending to customers (ex asset repos) (a) 95,426,553 Current accounts 27,863,111 Term deposits 47,964,565 Valuation adjustments 183,010 Subtotal customer deposits (ex repos, ex-treasury) 76,010,686 Retail Commercial paper 437,239 Mediation loans 1 8,557,977 Securitizations sold to third parties 485,816 Marketable securities distributed through the branch network 2 468,588 Tax collection accounts 650,698 Total customer deposits (b) 86,611,004 GAP (a-b) 8,815,549 LTD (a/b) 110.2% 1. Funding from ICO and BEI public credit lines (prefunded for corporates loans). 2. Including mandatory convertible notes, preferred shares and subordinated debt distributed through the branch network. 7

8 Funds Managed Variation % (Amounts in thousand) months 12 months Customer deposits: General government 19,891,090 10,732,015 8,841, > Other private sectors: 72,243,483 72,111,152 70,663, Residents 64,103,085 63,595,104 62,292, Nonresidents 8,140,398 8,516,048 8,371,434 (4.4) (2.8) Valuation adjustments (±) 183, , , (5.7) Subtotal customer deposits and General Government 92,317,583 83,025,146 79,698, Deposits at central counterparty entities 5,993,461 6,137,333 7,257,992 (2.3) (17.4) Total customer deposits 98,311,044 89,162,479 86,956, Unadjusted debt certificates including bonds: 15,296,073 15,917,942 18,205,644 (3.9) (16.0) Bonds and other securities outstanding 14,308,662 14,922,018 16,141,814 (4.1) (11.4) Commercial paper 987, ,924 2,063,830 (0.9) (52.2) Valuation adjustments (±) 345, , ,946 (5.2) (17.9) Total debt certificates including bonds 15,641,462 16,282,375 18,626,590 (3.9) (16.0) Subordinated liabilities 1,467,199 2,324,019 2,095,911 (36.9) (30.0) Total on-balance sheet funds (a) 115,419, ,768, ,679, Mutual funds 8,465,821 8,341,528 7,665, Asset portfolio management 883, , , Pension funds 5,168,768 5,038,528 4,849, Insurance premium 1,837,344 1,808,398 1,833, Total other intermediated funds (b) 16,355,160 15,953,235 15,075, Total funds managed (a+b) 131,774, ,722, ,754, Retail Funds Variation % (Amounts in thousand) months 12 months Demand deposits (ex-treasury) and Other accounts 1 27,863,111 24,178,369 23,625, Demand deposits 47,964,565 50,277,210 49,428,379 (4.6) (3.0) Time deposits 15,369,897 8,387,588 6,450, > Asset repos 183, , , (5.7) Subtotal cusotmer deposits and General Government (ex-treasury) 1 91,380,583 83,025,146 79,698, Retail Commercial paper 437, ,641 1,620,950 (33.0) (73.0) ICO Mediation loans 2 8,557,977 7,798,768 6,372, Securitizations sold to third parties 485, , ,970 (9.1) (20.5) Marketable securities distributed through the branch network 3 468,588 1,165,071 1,256,892 (59.8) (62.7) Tax collection accounts 650, , , Asset repos (15,369,897) (8,387,588) (6,450,778) 83.2 > Total Retail Funds 86,611,004 85,137,703 83,578, Treasury repos have been deducted from Demand deposits (937 mlns in June 2014). 2. Funding from ICO and BEI public credit lines (prefunded for corporates loans). 3. Including mandatory convertible notes, preferred shares and subordinated debt distributed through the branch network. 8

9 Lending to customers Variation % (Amounts in thousand) months 12 months Lending to general government 5,817,955 1,565,801 3,737,931 > 55.6 Lending to other private sectors: 104,526, ,204, ,467,050 (2.5) (4.5) Residents 94,585,128 97,328,718 99,494,382 (2.8) (4.9) Nonresidents 9,940,896 9,876,085 9,972, (0.3) Total lending to customers 110,343, ,770, ,204, (2.5) Other loans 214, , ,259 (13.2) (1.9) Total credit to customers 110,558, ,017, ,423, (2.5) Valuation adjustments (±) (8,659,012) (7,893,434) (8,098,505) Total 101,899, ,123, ,324, (3.3) Lending to customers by type Variation % (Amounts in thousand) months 12 months Trade loans and discounts 3,428,532 3,370,774 3,512, (2.4) Secured loans 41,082,479 43,005,888 48,137,337 (4.5) (14.7) Mortgage 39,808,007 42,040,253 46,848,340 (5.3) (15.0) Other 1,274, ,635 1,288, (1.1) Repos 6,472,604 7,102,146 6,309,083 (8.9) 2.6 Term loans and other lending 36,541,136 32,479,201 36,678, (0.4) Leasing 2,244,001 2,322,267 2,505,741 (3.4) (10.4) Doubtful assets 20,789,417 20,737,154 16,280, Total lending to customers 110,558, ,017, ,423, (2.5) 9

10 Risk Management Performance* Variation (Amounts in thousand) Amount In % Nonperforming loans Balance at 1 January 21,216,003 13,935,871 7,280, Additions 2,308,920 5,493,254 (3,184,334) (58.0) Recoveries 2,428,901 1,883, , Net variation (119,981) 3,609,396 (3,729,377) % increase (0.6) 25.9 Writeoffs (59,718) (947,815) 888,097 (93.7) Balance at 30 June 21,036,304 16,597,452 4,438, Variation (Amounts in thousand) Amount In % Credit loss allowances Balance at 1 January 8,525,999 9,128,749 (602,750) (6.6) Annual provision: Gross 2,880,750 3,173,668 (292,918) (9.2) Recoveries (1,845,176) (2,543,296) 698,120 (27.5) Net 1,035, , , Other variations (230,536) (99,964) (130,572) > Writeoffs (59,487) (947,562) 888,075 (93.7) Balance at 30 June 9,271,550 8,711, , Of which sub-standard risk provisions 828, ,627 (76,146) (8.4) (Amounts in thousand) Specific General Country risk Total Balance at 1 January 8,524,616-1,383 8,525,999 Net provisions 1,035,783 - (209) 1,035,574 Amount used 59, ,487 Other variations and transfers (230,562) - 26 (230,536) Balance at 30 June 9,270,350-1,200 9,271,550 *Including doubtful off-balance sheet risks and country risk and the related risk allowance 10

11 Risk Management Performance Variation (%) Amount In % Risk quality measures Total Risks ( thousand) 150,587, ,638,271 (3,051,087) (2.0) Nonperformance (Nonperforming loans/total risks) Credit risk premium Pre-provision margin over lending (Amounts in thousand) Coverage by type of non-performing balance Non-performing balances without mortgage guarantee or pledge guarantee 5,677,556 Non-performing balances with mortgage guarantee or pledge guarantees 15,358,748 Value of guarantees (incuding haircuts) 12,140,597 Total non-performing balances 21,036,304 Loans fully written off 4,515,853 Non-performing balances+loans fully written off 25,552,157 Total value of guarantees* 12,140,597 Provisions for insolvency 9,271,550 Provisions for insolvency with written-off balances 13,787,403 % Coverage for non-performing and written-off balances % Coverage for non-performing balances excl written-off balances % Coverage with guarantees * Does not include written-off loan guarantees Coverage analysis ( million) 25,552 NPLs 21,036 Coverage: % 25,928 Provisions 13, % Loans fully written off 4,516 Effective collaterals incl. BoS haircut 12,141 (47.51%) NPLs+Loans fully writen off Effective collateral + B-S provision Variation (Amounts in thousand) Amount In % asset impairment Financial assets 942, , , Credit risk and provisioning 933, , , Of which: writeoffs recovered 108, ,694 (21,009) (16.2) Investments 9, ,655 > Non-financial assets and property 167, ,272 (309,927) (64.9) Total 1,110, , ,

12 Solvency (Amounts in thousand) Capital 8,160,547 6,457,903 Reserves 3,941,428 3,893,484 Minority interest 18,743 35,725 Capital deductions (2,595,492) (1,231,585) Ordinary tier 1 capital 9,525,226 9,155,527 CET 1 ratio (%) 11.38% 10.08% MCNs 677,986 1,661,677 Preferred shares 605, ,676 Capital deductions (1,283,301) (1,798,353) Tier 1 capital 9,525,226 9,155,527 Tier 1 ratio (%) 11.38% 10.08% Total Capital 9,840,942 9,901,835 Total capital ratio (%) 11.76% 10.90% Fully loaded Basel III Leverage ratio (%) % Total risk weighted assets 83,670,289 90,872,218 from which credit risk 76,596,274 83,390,212 from which operational risk 6,520,771 6,782,694 from which market risk 553, , Fully loaded Basel III Leverage Ratio CRR. Equity (Amounts in thousand) Capital & reserves Valuation adjustments Minority interests Net asset value Balance at 31/12/ ,925,494 (350,500) 51,377 11,626,371 Capital increase 1 769, ,436 Variation in treasury stock (386) - - (386) Gain on treasury stock transactions Actuarial differences - (4,937) - (4,937) Remuneration of mandatory convertible debentures (47,995) - - (47,995) Consolidation operations and other (net) (33,734) - (2,114) (35,848) Corporate operations (25,838) (25,123) Value adjustments - 89,335-89,335 Net profit at 31 march ,507 - (451) 128,056 Dividends paid/announced in Balance at 30/06/ ,742,911 (266,102) 22,974 12,499, Script-dividend and MCNs conversion. Mandatory convertible notes (Amounts in thousand) Amount Balance sheet consideration Conversion price Conversion date BSOC II/ ,595 Equity Fixed price: November 2015 BSOC IV/ ,333 Subordinated debt TOTAL 677,928 Floating at market price Floor:2.50 1/3 June /3 Dec

13 Consolidated income and profitability (Amounts in thousand) Variation In % (Annualized % of ATA) Variation Interest and similar income 2,118,535 2,546,741 (16.8) (0.47) - Interest expense and similar charges 988,973 1,311,487 (24.6) (0.38) =Net interest income 1,129,562 1,235,254 (8.6) (0.09) +Return on equity instruments 6,733 10,592 (36.4) (0.00) +Share of results of entities accounted for using the equity method (5,946) 14,063 (0.01) 0.02 (0.03) +Fees and commissions, net 343, ,977 (10.2) (0.03) ±Gains or losses on financial assets and liabilities (net) 602, ,930 > Exchange differences (net) 21,054 25,806 (18.4) (0.00) ±Other operating results 42,363 (37,448) 0.05 (0.05) 0.10 =Gross operating income 2,140,111 1,807, Administrative expenses: 821, , Personnel expenses 459, , Other general administrative expenses 361, , Depreciation & amortisation 76,226 75, =Net operating income (Pre-provision profit) 1,242, , Financial asset impairment and provisioning 942, , Impairment of other assets 167, ,272 (64.9) (0.39) ±Gains/(Losses) on assets sales (net) 44, ,892 (81.4) (0.25) =Profit before tax 176, ,032 (24.2) (0.07) -Income tax 48,585 61,424 (20.9) (0.02) +Gains/losses on discontinued operations (net) =Consolidated profit for the year 128, ,608 (25.4) (0.05) - Profit attributed to minority interests (451) 1, =Profit attributed to the controlling company 128, ,360 (24.6) (0.05) Net return on risk-weighted assets (RORWA) (%) Net return on equity (ROE) (%) (1.12) Operating efficiency ratio (%) (3.99) In million Average total assets 151, ,436 (4,806) Average risk-weighted assets (RWA) 84,239 91,419 (7,180) Average equity 12,588 10,771 1,817 13

14 Quarterly Consolidated Income (Amounts in thousand) Q 1Q 4Q 3Q 2Q Interest and similar income 1,057,401 1,061,134 1,116,158 1,200,098 1,263,096 -Interest expense and similar charges 477, , , , ,339 =Net interest income 580, , , , ,757 +Return on equity instruments 5,622 1,111 3,586 3,612 5,053 +Share of results of entities accounted for using the equity method (11,776) 5,830 11,727 6,474 8,563 +Fees and commissions, net 167, , , , ,088 ±Gains or losses on financial assets and liabilities (net) 399, , , , ,153 ±Exchange differences (net) 10,420 10,634 12,422 14,192 13,462 ±Other operating results 71,363 (29,000) (47,162) 6,929 (17,082) =Gross operating income 1,223, , , , ,994 -Administrative expenses: 414, , , , ,598 Personnel expenses 232, , , , ,748 Other general administrative expenses 182, , , , ,850 -Depreciation & amortisation 38,104 38,122 37,099 38,270 39,150 =Net operating income (Pre-provision profit) -Financial asset impairment and provisioning 770, , , , , , , , , ,707 -Impairment of other assets 105,207 62, , , ,376 ±Gains/(Losses) on assets sales (net) 41,202 3, ,645 9,483 45,306 =Profit before tax 86,740 89, ,032 76,240 82,469 -Income tax 21,701 26,884 50,867 18,864 15,526 +Gains/losses on discontinued operations (net) =Consolidated profit for the year 65,039 63,017 99,165 57,376 66,943 -Profit attributed to minority interests (413) (38) 1, =Profit attributed to the controlling company 65,452 63,055 98,070 56,869 66,138 14

15 Quarterly Profitability (Annualized % of ATA) Q 1Q 4Q 3Q 2Q Interest and similar income Interest expense and similar charges =Net interest income Return on equity instruments Share of results of entities accounted for using the equity method (0.03) Fees and commissions, net ±Gains/losses on financial assets and liabilities (net) ±Exchange differences (net) ±Other operating results 0.18 (0.08) (0.13) 0.02 (0.04) =Gross operating income Administrative expenses: Personnel expenses Other general administrative expenses Depreciation & amortisation =Net operating income (Pre-provision profit) Financial asset impairment and provisioning Impairment of other assets ±Gains/(Losses) on assets sales (net) =Profit before tax Income tax Gains/losses on discontinued operations (net) =Consolidated profit for the year Profit attributed to minority interests =Profit attributed to the controlling company Net return on risk-weighted assets (RORWA) (%) Net return on equity (ROE) (%) Operating efficiency ratio (%) In million Average total assets 153, , , , ,161 Average risk-weighted assets (RWA) 84,129 84,349 89,381 90,710 91,677 Average equity 12,582 12,588 11,179 10,883 10,799 15

16 Yields and Costs (Amounts in thousand and rates annualized) Average balance Distribution (%) Income or expense Average rate (%) Average balance Distribution (%) Income or expense Average rate (%) Financial system 5,926, , ,002, , Loans and discounts (a) 98,865, ,834, ,055, ,158, Securities portfolio 25,516, , ,483, , Other assets 21,322, , ,894, , Total earning assets (b) 151,630, ,118, ,436, ,546, Financial system 25,628, , ,581, , Customer funds (c) 90,118, , ,337, , Demand accounts 18,767, , ,307, , Savings and time deposits 66,728, , ,276, , Deposits at central counterparty entities 4,223, , ,501, , Retail commercial paper 398, , ,252, , Marketable debt securities & other 17,281, , ,710, , Other interest-bearing liabilities 347, , , , Other funds 5,666, ,653, Equity 12,588, ,770, Total funds (d) 151,630, , ,436, ,311, Customer spread (a-c) Spread (b-d)

17 Quarterly Yields and Costs (Data in % and rates annualized) Q 1Q 4Q 3Q 2Q Rate Rate Rate Rate Distribution Distribution Distribution Distribution Distribution Financial system Loans and discounts (a) Securities portfolio Other assets Rate Total earning assets (b) Financial system Customer funds (c) Demand accounts Savings and time deposits Deposits at central counterparty entities Retail commercial paper Marketable debt securities & other Other interest-bearing liabilities Other funds Equity Total funds (d) Customer spread (a-c) Spread (b-d)

18 Net Fee and Commission Income (Amounts in thousand) Distributions (%) Variation In % Banking services 331, ,474 (8.4) Portfolio administration 52,633 46, Securities portfolios 16,273 15, Asset portfolio management 1,964 1, Mutual funds 29,454 20, Pension plans 4,942 8,592 (42.5) Other banking services 246, ,602 (7.1) Securities and foreign currency purchase and sale 7,270 5, Demand account administration 53,611 55,606 (3.6) Provision of collateral and other guarantees 67,811 72,919 (7.0) Asset transaction services 19,861 19, Collection and payment handling 37,515 40,315 (6.9) Other 60,730 71,823 (15.4) Means of payment 32,432 50,359 (35.6) Defaults 11,888 20,503 (42.0) Total 343, ,977 (10.2)

19 Personnel and general expenses (Amounts in thousand) Distributions (%) Variation In % Personnel expenses: 459, , Wages and salaries 338, ,488 (1.5) Social security charges 90,824 88, Other personnel expenses 16,069 14, Pensions 14,643 12, General expenses: 361, , Rents and common services 68,584 71,620 (4.2) Communications 15,840 15,911 (0.4) Maintenance of premises and equipment 36,942 23, IT and other technical expenses 93,451 71, Stationery and office supplies 3,051 4,054 (24.7) Technical reports and legal expenses 25,636 20, Advertising and publicity 16,863 16, Insurance 4,238 4, Security and fund transport services 9,542 12,495 (23.6) Travel 4,907 4, VAT and other 66,516 52, Other general expenses 16,324 10, Total 821, ,

20 The Banco Popular Share Shareholders and share price Shareholders 272, ,196 Number of shares outstanding (thousands) 2,089,835 1,713,515 Closing price ( ) Market capitalization (thousand ) 2 10,198,395 4,035,327 Maximum price ( ) Minimum price ( ) Trading volume Daily average number of shares traded (thousands) 19,625 86,636 Daily average trading volume (thousand ) 102,782 60,026 Stock market ratios Net earnings per share ( ) Dividend per share paid in the period ( ) Book value per share diluted ( ) Price/Earnings (annualized) Price/Book value (1) Closing prices. Prices before June 2013 reverse stock split (1x5) has been adjusted to be homogeneous (2) Calculated on shares outstanding (3) Calculated on average number of shares (4) Includes the mandatory convertible bonds and fully diluted shares Popular shares vs. Spanish and European indices (30/06/2013 = 100) n Banco Popular n Ibex35 n Eurostoxx Banks 20

21 Basis of presentation and accounting principles and standards Pursuant to Regulation 1606/2002 of the European Parliament and Council, dated July 19, 2002, the obligation for companies whose securities were listed on a regulated market in a Member State of the European Union at the date of their balance sheets to prepare consolidated financial statements in accordance with the International Financial Reporting Standards (IFRS) came into force on January 1, The Bank of Spain, as the accounting regulator of the Spanish banking industry, implemented and adapted the accounting standards for credit institutions in its Circular 4/2004, as published in the Official State Gazette on December 30, 2004, subsequently partially modified. From January 1st 2014, due to the entry into force of IFRS 11, the equity method is applied to jointly controlled entities. For comparative purposes, this criterion has been applied to information concerning the financial year Accounting principles and policies and valuation standards The Group s accounting policy is based on the accounting principles set forth in Note 15 to the 2013 consolidated financial statements, which included most notably the following: A) Impairment of the value of assets: The treatment of financial assets differs from that of all other assets, as discussed below. Coverage is envisaged for the losses on financial assets, provided that they are based on objective evidence. Specific and general allowances are booked for customer-attributable credit-loss risk, and specific allowances for country risk. The specific allowance reflects the deterioration of assets individually identified as impaired, and the general allowance reflects the inherent loss incurred based on the nature of each risk and estimated by statistical procedures pending allocation to specific transactions. The Bank of Spain has stipulated models and methodology conforming to IFRS for the calculation of the foregoing allowances. The regulations require strict treatment in the classification of doubtful balances in customer transactions, since default in the payment of one installment triggers the classification as nonperforming of the entire transaction. For all other assets, including goodwill, impairment is deemed to exist if and when the book value of the assets exceeds their recoverable amount. In the case of goodwill, an impairment test must be performed at least once a year, since goodwill is not systematically amortized, and the appropriate writedown is booked if there is evidence of impairment. B) Income: B1) Fees: Under IFRS the treatment of fees collected or paid differs depending on whether they are compensation for a service rendered or a cost incurred, or are remuneration additional to the interest rate on the transaction. The former are recognized as income when the service is rendered or the cost is incurred, and the latter are accrued over the term of the transaction. B2) Interest and dividends: Interest is recognized on an accrual basis by the effective interest rate method, and dividends are recorded when declared. C) Financial instruments are classified for valuation purposes and recorded as follows: - Instruments classified in the trading portfolio, including financial derivatives, are recorded at fair value, with changes taken to the income statement. - Loans and discounts and held-to-maturity investments are recorded at their amortized cost. 21

22 - Available-for-sale financial assets are valued at fair value, and changes in value are recorded in net worth until realized, at which time they are recognized in the income statement. - Substantially all financial liabilities are valued at amortized cost. D) Non-financial and intangible assets and inventories. These are valued at cost. For the valuation of tangible assets, the Banco Popular Group has not, on a general basis, taken the option provided in IFRS to revalue them, and accordingly they are presented in the balance sheet at cost restated, where appropriate, pursuant to the applicable enabling legislation, net of accumulated depreciation. E) Non-current assets held for sale. Recorded in this caption are the assets bought or foreclosed. Disclaimer This financial report has been prepared by Banco Popular solely for purposes of information. It may contain estimates and forecasts with respect to the future development of the business and to the financial results of the Banco Popular Group, which stem from the expectations of the Banco Popular Group and which, by their very nature, are exposed to factors, risks and circumstances that could affect the financial results in such a way that they might not coincide with such estimates and forecasts. These factors include, but are not restricted to, (i) changes in interest rates, exchange rates or any other financial variable, both on the domestic as well as on the international securities markets, (ii) the economic, political, social or regulatory situation, and (iii) competitive pressures. In the event that such factors or other similar factors were to cause the financial results to differ from the estimates and forecasts contained in this report, or were to bring about changes in the strategy of the Banco Popular Group, Banco Popular does not undertake to publicly revise the content of this report. This financial report contains summarised information and in no case shall its content constitute an offer, invitation or recommendation to subscribe or acquire any security whatsoever, nor is it intended to serve as a basis for any contract or commitment whatsoever. 22

23 NOTES BANCO POPULAR ESPAÑOL Registered office: C/ Velázquez 34, Madrid Teléfono: Fax: banco popular español Banco popular portugal totalbank TargoBank banco popular-e,com popular banca privada Banco Pastor 23

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