The CaixaBank Group, chaired by José Ignacio Goirigolzarri and led by Gonzalo Gortázar, posted a net attributable profit without extraordinary items relating to the Bankia merger of €514 million, compared with €90 million reported in the same period a year earlier affected by the provisions made to anticipate the future impacts of COVID-19.
In late March, the Bank completed the merger with Bankia, thus cementing its leadership within the Spanish financial system as, following the merger, the Bank has more than €663 billion in assets and serves 21.1 million customers across Spain and Portugal.
CaixaBank's income statement for the first quarter does not include the earnings generated by Bankia during the period, since the merger was completed at the end of March, meaning it had no impact on CaixaBank's business segments. However, the balance sheet does show the incorporation of Bankia's assets and liabilities at their fair value as at 31 March, which is the date taken as a reference for accounting purposes.
Following the inclusion of Bankia's equity, the CaixaBank Group's accounts show an extraordinary item associated with the merger (badwill) of €4.3 billion, which, together with the extraordinary expenses associated with the integration and the ordinary earnings, resulted in attributable net profit of €4.79 billion in the first quarter.
The badwill is equivalent to Bankia's equity (€13.1 billion) less the purchase price paid by CaixaBank (€5.31 billion) and a number of accounting adjustments which were required to measure various assets and liabilities at fair value (€3.47 billion).
Net profit, without counting the extraordinary items resulting from the integration of Bankia, came to €514 million, of which €444 million come from banking and insurance activities, €58 million from Portuguese bank BPI, and €12 million from investees.
Firm support for families and companies
Gonzalo Gortázar, CEO of CaixaBank, has explained that with the merger with Bankia “we reinforce our leadership in the financial system, reaching market shares of around 25%, and exhibiting the best solvency, liquidity and credit quality ratios among the largest banks in Spain. This is allowing us to firmly support families and companies to overcome this crisis and lead the economic recovery”.
Gortázar has highlighted that "we closed this first quarter with a recurring net profit of 514 million euros, a figure that already shows a clear path towards normality".
The Bank's CEO has added that “we are aware of the enormous structural challenges facing the banking sector, derived mainly from the digitalisation of the economy and negative interest rates. That is why we have foreseen this situation by completing a merger that will allow us to substantially improve our competitive position”.
Increase in core revenues and cost reduction
Core revenues at CaixaBank —without including Bankia's earnings in the period— totalled €2.07 billion at the close of the first quarter, up 1% year on year. In a negative interest rates scenario, net interest income was down 0.7% to €1.19 billion, offset by revenue from insurance contracts (+9.3%), earnings from insurance investees (+39.2%) and growth of fee and commission income (+0.2%).
Gross income amounted to €2.06 billion, up 4%, thanks to an improvement in trading income, which reached €42 million and was mainly affected by the negative impact in 2020 of the assessment of credit risk in financial derivatives.
Income from the investee portfolio rose 34.4% year-on-year to €77 million, mainly due to an improvement in attributable earnings from SegurCaixa Adeslas, which was impacted by the asset valuation carried out in the same quarter of the previous year.
Meanwhile, recurring administrative expenses, depreciation and amortisation were down 3.3% year on year to €1.15 billion, as a result of the savings associated with the early retirements made in 2020, the sound management of the cost base and lower expenses incurred amid the COVID-19 pandemic. Between January and March, the Bank registered a total of €40 million in extraordinary expenses linked to the integration of Bankia.
Excluding extraordinary integration items, the Group's cost-to-income ratio was 53.5%, while ROTE came to 8%.
Pro-forma income statement
Aggregating the income statements of both CaixaBank and Bankia, pro-forma earnings without extraordinary items associated with the merger would be €580 million, compared to €184 million in the first quarter of last year.
Net interest income would be €1.64 billion, down 1.3% year-on-year, while the pro-forma core revenues of both banks would be up 0.7% year on year to €2.81 billion. Specifically, fee and commission income would reach €941 million, showing an increase of 1.6%. Pro-forma gross income would be €2.8 billion (+0.5%), while recurring administrative expenses, depreciation and amortisation would fall 2.6% to €1.6 billion.
Growth in customer funds
At the end of March, and following the merger with Bankia, the CaixaBank Group's total assets amounted to €663.6 billion (+47%), while equity was €35.55 billion (+40.6%).
Customer funds were up 39.6% year on year to €579.93 billion. Without counting the funds contributed by Bankia, customer funds gained 0.9% to reach €419.33 billion. Gross loans and advances to customers stood at €363.82 billion, up 49.2% in the quarter (-0.5% without counting Bankia's contribution).
By segment, loans and advances to individuals ended the quarter at €191.32 billion (+58.6%). Excluding Bankia, they were €119.31 billion (-1.1%), due to the ongoing household deleveraging process. In organic terms, loans for home purchases declined by 0.7%, while loans for other purposes were down 2%. Lending to companies grew 40.3% to reach €149.36 billion as a result of the integration, but remained flat in organic terms.
Meanwhile, assets under management in mutual funds gained 6.1% in organic terms and pension plans reported organic growth of 3.3% (41.2% and 28%, respectively, if we include Bankia).
Following completion of the merger, CaixaBank has strengthened its already solid market shares, reaching 25.3% in the loans segment, 25.2% in household and company deposits, and 24.9% in mutual funds.
Customer experience and digital transformation
With a base of 19.3 million customers in Spain, CaixaBank offers a unique omnichannel distribution platform with multi-product capabilities that continuously evolves to anticipate the needs and preferences of its customers.
CaixaBank continues to strengthen its leadership of the digital banking market with a 70.5% percentage of digital customers. The Bank is firmly committed to digital transformation and accompanying innovative companies with growth potential.
Note that CaixaBank has been named Best Consumer Digital Bank in Spain for the fifth straight year by Global Finance.
NPL and coverage ratios remain stable
Non-performing loans, excluding the integration of Bankia, remained virtually unchanged in the period at €8.65 billion. Taking into account the merged company's balance sheet, this figure climbs to €14.1 billion.
This brought the NPL ratio to 3.6% (3.3% excluding Bankia) and the coverage ratio to 67%. Meanwhile, the cost of risk (last 12 months) was 0.61%.
Good management of the capital and liquidity position
The Bank managed to strengthen its liquidity and solvency position between January and March. Total liquid assets amounted to €147.15 billion, up €32.7 billion in the first quarter, largely due to the integration of Bankia.
The Liquidity Coverage Ratio (LCR) at 31 March 2021 was 309%, revealing a comfortable liquidity position (average LCR of 273%, last 12 months) well clear of the minimum requirement of 100%. The Bank also has a robust retail funding structure, with a loan-to-deposits ratio of 97%.
Elsewhere, a total of €81.16 billion in TLTRO III financing had been drawn under the European Central Bank (ECB) credit facilities at 31 March. Of this amount, €6.22 billion was drawn in the first quarter, and the total amount drawn increased by €25.21 billion as a consequence of the incorporation of Bankia.
Turning to capital, the Common Equity Tier 1 (CET1) ratio was 14.1%. The first quarter of the year includes the extraordinary impact of Bankia's integration of +77 basis points, with the Purchase Price Allocation (PPA) effect generating -89 basis points.
Organic growth in the quarter was +30 basis points, added to +32 basis points due to market impacts and other factors, such as the impact from the improvements related to the quality of the data used for the prudential calculation of credit risk. The impact of the IFRS9 transitional adjustments was -2 basis points. Without applying the IFRS9 transitional adjustments, the CET1 ratio is 13.6%.
The Tier 1 and Total Capital ratios were 16.1% and 18.9%, respectively. Meanwhile, in relation to the MREL requirement, the RWAs ratio was 26.3%, already reaching the 2024 requirement.
Socially responsible banking
CaixaBank is a highly innovative financial group, offering the best customer service, and a benchmark in socially responsible banking. It is also firmly committed to being a key figure in helping lessen the impact of the COVID-19 health crisis by bringing all of its human, technological and financial resources to provide financing and to undertake other actions and initiatives to help households, companies and society as a whole.
In this context, the mortgage moratoria and ICO-guaranteed loans granted last year in Spain to cushion the effects of the COVID-19 pandemic on households and businesses alike performed well.
In 2020, more than €17 billion in loan moratoria were granted in Spain, of which €11.28 billion came from CaixaBank and €5.82 billion from Bankia. Half of the moratoria have since expired and, towards the end of April, a total of €8.5 billion remained in effect. In addition, non-performing loans represent 0.4% of the loan portfolio, 0.1% if excluding those that had incidents already before the granting of the moratorium.
At 31 March, the drawn balance on loans with ICO guarantees totalled €22 billion, of which €13.3 billion come from CaixaBank and €8.7 billion from Bankia. The Group has granted around 25% of all ICO-guaranteed loans within the industry.
