INVESTOR PRESENTATION November 2016
Table of contents I. Instituto de Crédito Oficial II. Funding profile 2
Table of contents I. Instituto de Crédito Oficial II. Funding profile 3
Instituto de Crédito Oficial 100% State-owned Institution The Kingdom of Spain Financial Agency Supervised as a credit institution by the Central Bank of Spain Based on the principle of financial equilibrium 4
ICO: background 1971: Founded as the institution responsible for the co-ordination and control of Stateowned banks. 1988: Becomes a State-owned enterprise. Starts tapping markets to raise resources. Assumes ownership of State-owned banks capital. 1991:Reform of state banking Commercial banks BEX, BCI, BHE, BCL, BCA and Caja Postal State-owned investment bank and the State s Financial Agency (1995). 5
ICO: purposes and functions ICO s purpose is to support and foster economic activities which contribute to the growth and the improved distribution of national wealth. These aims are pursued by ICO in its twofold function as: State-owned bank The State s Financial Agency Second-floor facilities Direct financing Private equity platforms Economic policy Administration of Funds set up by the State 6
Second-floor facilities scheme 1. Financing application Processing flows Funds flows Final customer 2. Risk Analysis Banks 4.b Funds delivery 3. Loan signature 5.b Funds refund 4.a Funds delivery Bonds and loans 5.a Funds refund Markets & Supras 7
Second-floor facilities 8
Second-floor facilities On-lending facilities by sectors 2015 9
Direct Financing Outstanding facilities by sectors As at 31/12/2015 10
Business development plan 2016 Strengthen and consolidation of export facilities and promotion of Spanish company s internationalization. Promoting productive investment through longterm financing New distribution channels: second floor financing with international partners From volume to added value through specialization Boosting our subsidiary Axis as a catalyst for venture capital mainly through Fond-ICO Global Enlargement of the partnership with Multilateral Institutions as cost-effective funding providers and risk-sharing partners under the Investment Plan for Europe ( Junker Plan ) 11
ICO lending activity has reinforced its countercyclical role during the last crisis EUR Million Credit Institutions 200000 190000 180000 170000 160000 150000 140000 130000 Total Amount of New Loans (acc. balance 12 months, million Euros) 35000 Loans from Credit Institutions to SME (proxy <1M) 30000 Total Loans from ICO to total economy (rsh) 25000 20000 15000 10000 ICO 120000 110000 5000 100000 Source: ICO and BdE Aug-13 Oct-13 Dec-13 Feb-14 Apr-14 Jun-14 Aug-14 Oct-14 Dec-14 Feb-15 Apr-15 Jun-15 Aug-15 Oct-15 Dec-15 Feb-16 Apr-16 Jun-16 Aug-16 0 12
Counter-cyclical approach Total Assets (billion Euros) Ranking: Spanish banks in terms of assets (May 2016, billion Euros) Source: ICO * unaudited figures Source: AEB, CECA & ICO ICO gained ground during the crisis and has gradually decreased since 2012 13
Investment Distribution As at 30/09/2016 Total Loans: 37,045 MM 14
Financial highlights 2010 2011 2012 2013 2014 2015 30/09/2016 unaudited figures Total assets (Mill. EUR) 77,866 94,577 115,230 102,203 83,999 62,173 52,499 Equity & reserves1 (Mill. EUR) 3,308 3,646 4,294 4,720 4,934 5,302 5,313 Pre-tax profit (Mill. EUR) 41.36 55.14 84.03 101.07 104.70 59.47 92.86 Net interest income(mill. EUR) 352.86 434,54 760.06 727.47 578,87 99.13 12.06 Gross revenue (Mill EUR) 436.88 471.59 800.84 816.55 550.93 85.96-31.68 Profitability ROA (%) 0.06% 0.07% 0.08% 0.09% 0.11% 0.08% 0.22% Tier I Ratio2 (%) 11.75% 12.31% 14.46% 19.76% 23.85% 32.84% 27.87% Non-Performing Loans Direct Loans (%) 4.47% 2.73% 3.68% 5.25% 7.00% 8.79% 9.58% Total loans (%) incl. second floor loans 1.44% 0.93% 1.63% 2.29% 2.78% 3.74% 4.22% Provision coverage ratio (%) 100% 172% 137% 132% 141% 134% 133% Efficiency Ordinary Expenditure/ATA (%) 0.07% 0.05% 0.03% 0.03% 0.04% 0.05% 0.20% (1) Eligible capital for solvency purposes. (2) According to the forty-ninth Additional Provision of Act 42/2006 on the General-Government Budget Act, this ratio may in no case fall below 9.50%. ICO s own funds are of the highest quality (equity and reserves). ICO has issued neither subordinated debt, preferred stocks, contingent convertibles nor any other hybrid instruments. 15
Financial highlights Source: ICO, (*) unaudited figures 16
Refinancing risk As at 3 rd November 2016 ICO already complies with current fully loaded regulation stemming from Basel III capital and liquidity standards. No additional actions are expected to be taken for this purpose. ECB Repo Eligible Asset: EUR 16.9 Billion available (as at 1/11/2016) 17
Table of contents I. Instituto de Crédito Oficial II. Funding profile 18
Credit: key points Top quality guarantee Direct Explicit Irrevocable Unconditional Moodys Baa2 S&P BBB+ Fitch BBB+ DBRS A (low) Prudent risk management Minimizing rate, currency and liquidity risks Guaranteed by the Kingdom of Spain 0%* risk weighted * Minimum risk applicable in accordance with Basel III. Sound balance sheet 19
Funding policy 2016 Programme volume: EUR 3-4 bn EUR benchmark transactions Bolster social bonds Access to non-euro markets (USD, JPY, BRL etc.) Preference for short to medium maturities 20
Funding activity 2,9 Bn (72%) Billion EUR As at 20 th October 2016 21
EUR and USD Benchmark Curve Different colors refer to taps of outstanding bonds EUR USD Social Bond Million EUR Strategy: Benchmark minimum size: 500 million Taps minimum size : 50 million (adding up clips of 25 million) Private placement minimum size: 10 million As at 3 rd November 2016 22
Liability breakdown As at 30/09/2016 23
Borrowing profile As at 30/09/2016 By Region By Investor Type 24
ICO USD 500 mm 1,625% Due September 2018 Issued in September 2016 By Region By Investor Type 25
ICO: an SRI approach to financing New SRI policy and integration of SRI in ICO management by objectives. Revised Code of Conduct, with reinforced ethical principles. New Environmental Policy. First Spanish Public Sector Entity certified as Family and Personal Life Friendly firm 1st Gender Equality Plan. 1st ICO Suppliers Survey, to know and promote their SRI commitment. New impact indexes for ICO activity. Improvement in SRI ratings 2015/2016 : Sustainalytics 59/100 65/100 ICO wins 2016 European award for Environmental and SRI Sustainability by European Business Awards Adoption of Equator Principles (October 2016) ICO views Corporate Social Responsibility as a set of strategies, policies and actions that all companies should implement to ensure their activity is environmentally, economically and socially sustainable, encompassing the Institute itself as well as those groups of stakeholders that interact with it in undertaking its business activities. 26
ICO Social Bond platform set up in 2015 ELIGIBILITY CRITERIA SME Under European Union s definition REGIONS WITH GDP PER CAPITA BELOW NATIONAL AVERAGE EXCLUDED ACTITIVITES Aim to measure job retention and creation in SME s Neither Social nor Environmentally friendly: Alcohol, Tobacco, Gambling, Mining 2nd OPINION REPORTING https://www.ico.es/documents/19/69769/second+opinion+ico+social+bond+framework.pdf/44cfbcad- 7f67-4528-ac65-e9eefce8d070 On the 1 st anniversary EXTERNAL REPORT (audited) https://www.ico.es/documents/19/69769/ico+loan+portfolio_summary_2016_final0201201 6.pdf/8bc43626-6315-4e07-b146-b63dc0fcaf17 INTERNAL REPORT (detail allocation proceeds) https://www.ico.es/documents/19/69769/reporting+sb+feb+16.pdf/9c36b6cfb5ac-4d2c-a442-9b6ff0349b8c 27
ICO SOCIAL BOND EUR 500 mm 0,1% Due September 2018 By Region Issued in April 2016 By Investor Type By ESG participation 2016 Best Social Bond of the Year Number of SRI investors: 23/71 28
ICO SOCIAL BOND EUR 1,000 mm 0,5% Due December 2017 Issued in January 2015 By Region By Investor Type 29
Contacts Antonio Cordero Head of Funding and Treasury Rodrigo Robledo Head of Capital Markets Antonio Bandrés Arturo Gajón Susana Rica Sergio Sierra Mercedes Storch www.ico.es B ICO <GO> investors@ico.es Paseo del Prado 4 28014 Madrid Disclaimer: None of the information displayed constitutes an offer of securities for sale, or recommendation to purchase, to hold or sell any securities in the U.S.A. or in any other jurisdiction in which such offer or recommendation is not authorized. ICO has not registered, and does not intend to register, any of its securities (nor the guarantee thereof has been or will be registered) under the U.S. Securities Act of 1993 (the Securities Act) or any applicable US State Securities Laws or to conduct a public offering of securities in the U.S.A. ICO is complying with rules concerning the exemption from the registration of its securities under the Securities Act, by which those securities will be offered only for sale to qualified institutional buyers (QIBs) pursuant to rule 144A. This information is not directed at and may not be distributed to any person in any jurisdiction in which the access to this information is legally limited (v gr. USA -except QIBs- Canada, Japan, Australia). 30