How To Improve Bankia'S Financial Performance

Transcription

1 Morgan Stanley European Financials Conference Bankia Overview March 2014 Mr. Leopoldo Alvear - CFO Bankia

2 Contents 1. Strategy and restructuring plan results 3. Asset quality and risk management 4. Liquidity and solvency 5. Conclusions 2 / March 2014

3 Strategy and restructuring plan On track to meet the goals of our Strategic Plan 2012 Recapitalisation and clean up the balance sheet 2013 The Turnaround Year 2014 Developing our commercial model IN PROCESS 3 / March 2014

4 Strategy and restructuring plan UPDATE ON MANAGEMENT ACTIONS Focus on new commercial model Branch network reorganization (CLRs and Oficinas Agiles ) Customer-focused organizational structure Product simplification and new pricing model Strategy oriented to SMEs loan origination Profitability growth and cost reduction Positive evolution of basic business lines (NIM and fees) Clear reduction of funding costs Strong cost control and efficiency improvement Balance sheet and risk management High asset coverage ratios Significant improvement on commercial GAP and LTD ratio Reduction of NPLs assets Strong capital generation capacity On track to meet the goals established in our strategic plan 4 / March 2014

5 Strategy and restructuring plan UPDATE ON MANAGEMENT ACTIONS Focus on new commercial model Branch composition Basic branches Oficinas Agiles CLRs Concentrated on medium and high value customers. More than 90% of basic branches have been operating for more than 10 years. Extended opening hours Oriented to provide services to high frequency transactions Sale of basic products (credit cards, term deposits, etc..) Up to 20 oficinas agiles opened as of today. 125 expected by the end of the year. Intense activity on monitoring and recovering of NPLs. Referral of high value customers to the basic branches. Settlement activities. 30 CLRs operative up to date. New branch composition based on client segmentation 5 / March 2014

6 Strategy and restructuring plan ORGANISATIONAL RESTRUCTURING AND SIMPLIFICATION Branch network Organisational structure NUMBER OF RETAIL BRANCHES AREA HEAD OFFICES REGIONAL HEAD OFFICES CLOSURES PROGRESS 17% 58% 81% 100% - 38% 35% YoY reduction 33% YoY reduction 3,000 2,800 2,400 2,100 1,900 ORIGIN Q Q Q Q Branch closures completed two years earlier than planned Organisational structure simplified 6 / March 2014

7 Strategy and restructuring plan REGAINING COMMERCIAL MOMENTUM Sales volume Products sold (thousands) Market shares Deposits market share % 9.08% 8.66% DEC 12 DEC 13 DEC 12 DEC 13 Products sold per employee (# per month) Credit market shares % % Total OSRs 9.51% SMEs and corporates 5.55% 5.79% DEC 12 DEC 13 DEC 12 DEC 13 DEC 12 DEC 13 Source: Bank of Spain Productivity levels have improved 7 / March 2014

8 Strategy and restructuring plan Bankia Group financial performance Results Profit after tax in 2013 ex exchange of hybrids amounts to 608 million. Net interest income was up for the third quarter in a row at 2,567 million, with operating expenses down 17% year-on-year. Asset quality Non-performing loans (ex transfer of refinanced loans to nonperforming under new regulations) were down for the fourth quarter in a row, giving a cumulative reduction of around 1,200m for the year. The coverage ratio on the loan book stands at 8.2% of total loans and 56.5% of non-performing loans. Liquidity & solvency The commercial gap has been further reduced and the LTD ratio has improved to 115.4%. The Bankia Group increased its capital ratio by more than 200 bps to reach an EBA Core Tier 1 ratio of 11.7%. 8 / March 2014

9 Strategy and restructuring plan Financial Markets confidence Senior debt issue Sale of 7.5% stake in Bankia by BFA Issue volume Maturity date 1,000 million 17/01/2019 Nº shares sold 863,799,641 % Bankia s capital 7.50% Sell price ( ) 1.51 Spread MS bps P/BV divestment > 1.50x Oversubscription 3.5x Total Amount ( ) 1,304 million # Orders > 250 orders Discount % /close price previous day Nº shares sold / average daily volume last 30 days 4.4% 11.1x Excellent response to the Group s first issue, with 85% of international demand Oversubscription 2,0x Demonstrated market confidence on entity turnaround 9 / March 2014

10 Contents 1. Strategy and restructuring plan results 3. Asset quality and risk management 4. Liquidity and solvency 5. Conclusions 10 / March 2014

11 2013 Results Bankia pro forma income statement Key figures in Mn The following pro forma income statements exclude the cost of the subordinated loan by BFA to Bankia in the amount of 109mn in 2012 and of 89mn in Q1 and 53mn in Q2, which was cancelled on 23 May. In 2013, profit from discontinued operations, in the amount of 158 mn, is included in profit from the sale of investees and other profit Diff Diff % A Net interest income 3,198 2,567 (631) (19.7%) B Gross income 4,119 3,772 (347) (8.4%) C Operating expenses (2,293) (1,905) (388) (16.9%) D Pre-provision profit 1,826 1, % Provisions and other expenses (23,907) (1,287) - - of which maximum provision for litigation (230) E Taxes 2, of which activation of monetisable DTAs 230 Profit after tax (19,098) / March 2014

12 2013 Results A Net interest income Bankia Quarterly trend of net interest income Loan yield vs. cost of deposits Mn (1) 3,198 2, (1) (1) % (1) % 1.95% 1.04% 2.69% 2.63% 2.46% 2.49% 1.86% 1.70% 1.67% 1.54% 0.83% 0.93% 0.95% 0.79% Q13 2Q13 3Q13 4Q13 4Q2012 1Q2013 2Q2013 3Q2013 4Q2013 (1) Actual numbers, adjusted for the finance cost associated with the subordinated loan from BFA to Bankia, which was cancelled on 23 May. Credit yield Deposits cost Customer margin The positive trend in net interest income was consolidated during 4Q 2013, driven by the fall in the cost of deposits and asset repricing policies. Client yield stabilised. The cost of customer deposits decreased significantly during 4T Bankia Group data. m 12 / March 2014

13 2013 Results Fee and commission income - Bankia Fee income generation is stable Mutual Funds evolution m % 8,216 6, Q13 2Q13 3Q13 4Q13 Dec 2012 Dec 2013 Fee volume up 5% in the last quarter, despite large number of branches closed during the year Mutual funds market share increased from 4.52% at the end of 2012 to 4.82% in Dec 2013 Source: Bank of Spain Bankia Group data. m 13 / March 2014

14 2013 Results B Gross income Bankia Mn 4,119 (1) Trend of gross income 3,772 (1) (27) +13.7% Q13 2Q13 3Q13 4Q13 Net interest income + Fee income Rest (2) (1) Actual figures, adjusted for the finance cost associated with the subordinated loan from BFA to Bankia, which was cancelled after the Bankia capital increase (2) Exchange diff. + Dividends + Equity method + Other operating income Bankia Group data. Mn Basic banking business contribution up 13.7% compared to the first quarter 14 / March 2014

15 2013 Results C Operating expenses and efficiency Bankia Operating expenses Trend of efficiency ratio ex trading income* Mn -16.9% % pp 2,293 1, % 62.1% 60.1% 54.2% 52.6% Q13 2Q13 3Q13 4Q13 4Q12 1Q13 2Q13 3Q13 4Q13 Through cost containment efforts and acceleration of the restructuring plan, the Group succeeded in reducing total costs by almost 400 million (-17%) year-on-year, out of the 600 million envisaged in the Strategic Plan. The efficiency ratio was down 10.7 pp in the last quarter compared to 4Q Bankia Group data. Mn * Recurring efficiency ratio ex trading income and exchange differences. Calculated with pro forma data 15 / March 2014

16 2013 Results D Profit before provisions Bankia Pre-provision profit Pre-provision profit ex trading income Mn Mn 1,826 +2% 1,867 (1) 297 1,452 (1) % Q13 2Q13 3Q13 4Q13 (1) Real figures adjusted by the subordinated loan of BFA to Bankia canceled after Bankia s recapitalization process Pre-provision profit up 2% in 2013, mainly due to cost containment effort, offsetting decline in net interest income 16 / March 2014

17 2013 Results E Profit after tax - Bankia Bankia Group data. Mn 1Q Q Q Q 2013 Pre-provision profit (1) Provisions (272) (585) (294) (353) Profit from sales and other profit Recurring profit on discont. operations 0 32 (2) (2) (2) (2) Profit after tax RECURRING COST OF RISK bps Cumulative profit after tax was 608 million, in line with forecasts Cost of risk stabilised at 74 bps. (1) Includes 89 million of net interest income in Q1 and 53 million in Q2 due to the impact of the subordinated loan (2) Includes the recurring profit of Aseval 17 / March 2014

18 Contents 1. Strategy and restructuring plan results 3. Asset quality and risk management 4. Liquidity and solvency 5. Conclusions 18 / March 2014

19 Asset quality and risk management Matrix of loans Bankia Credit Portfolio Dec 2013 Oliver Wyman Stress Test - Sector Developers 3.0% Retail SMEs & Cor Base Case E.L. 1.8% 8.1% Retail 63.3% Corporates & SMEs 29.1% Adverse Scenario E.L. Bankia Coverage Ratio 4.1% 3.5% 13.2% 16.2% Public Sector & Others 4.6% Gross customer loans 129.8bn Net customer loans 119.1bn 19 / March 2014

20 Asset quality and risk management Credit quality Bankia Loans and coverage ratios on loan portfolios Dec 2012 Dec 2013 Portfolios Gross amount Provisions as % gross loans Gross amount Provisions as % gross loans Developers % % Corporates and SMEs % % Retail % % Total loan portfolio % % Total without developers % % The NPL coverage ratio excluding real estate developers rose from 6.7% to 7.2% Bankia Group data. bn 20 / March 2014

21 Asset quality and risk management Credit quality Bankia Trend of non-performing loans, NPL ratio and NPL coverage bn - 1.2bn * 20.0 Non-performing loans ( bn) Total risk assets NPL ratio 13.0% 13.1% 13.4% 13.6% 14.7% NPL coverage (1) 61.8% 61.9% 63.0% 62.6% 56.5% (1) Credit provisions / Total NPL volume DEC 2012 MAR 2013 JUN 2013 SEP 2013 DEC 2013 Refinanced loans DEC 2013 * Transfer of 1,404 million of refinanced loans to non-performing under the new regulations on refinancings. Bankia Group data. bn NPLs ex refinanced loans was down by around 1,200m over the year 21 / March 2014

22 Asset quality and risk management Credit quality Structure of refinanced loans By situation By type bn bn Portfolios Dec 2012 Dec 2013 Portfolios Dec 2013 % of total Performing Individuals % Substandard Corporates % Non-performing Developers % Total refinanced 19.4 Total coverage ratio 24.9% % Total refinanced 24.9 Total coverage ratio 22.4% 48% of refinanced loans were classified as non-performing at year-end 2013 Bankia Group data. bn 22 / March 2014

23 Contents 1. Strategy and restructuring plan results 3. Asset quality and risk management 4. Liquidity and solvency 5. Conclusions 23 / March 2014

24 Liquidity and solvency Liquidity indicators Trend of LTD ratio (%) Trend of commercial gap % -5.0 pp -24.6% bn Q12 1Q13 2Q13 3Q13 4Q13 4Q12 1Q13 2Q13 3Q13 4Q13 Main liquidity ratios improved significantly during 2013: LTD ratio fell 5 pp, while commercial gap was reduced by 25% Bankia Group data. bn 24 / March 2014

25 Liquidity and solvency Financial performance DIVESTMENT PLAN CASH GENERATED FROM COMPLETED SALES OF INVESTEES IN 2013 EXPECTED CASH GENERATED DURING 1H14 Amounts in million 715 1,272 PENDING APROVAL 650 COMPLETED Others 123 To 30 June To 31 Dec More than 1,900 million of cash will be generated from sale of investees by 1Q14. Almost 120 sales and liquidations completed by the end of / March 2014

26 2013 Highlights: Solvency Capital generated organically Bankia Group EBA CORE TIER I 11.71% 9.62% bp + 24 bp Organically Generated: bp PF DEC 2012 RWAs Profit DEC 2013 BIS II SOLVENCY RATIO 9.84% 11.97% More than 200 bp of capital generated in 2013, reaching an EBA CT1 ratio of 11.7% 26 / March 2014

27 Contents 1. Strategy and restructuring plan results 3. Asset quality and risk management 4. Liquidity and solvency 5. Conclusions 27 / March 2014

28 Conclusions On track to meet the goals of our Strategic Plan 2012 Recapitalisation and clean up the balance sheet 2013 The Turnaround Year 2014 Developing our commercial model IN PROCESS 28 / March 2014

29 29 / March 2014