CaixaBank posts profit of €708 million on the back of improved banking income, with a 7% gain in lending and 9% in customer funds

• - The NPL ratio dropped across all segments during the quarter to 9% (-64bp in 2015) while the fall in non-performing assets picked up pace. - Loans stood at €211,559 million (+7.3 in 2015) following the integration of Barclays Bank, SAU and the reduction in debt deleveraging. The performing ex-real estate developer loan portfolio remained relatively stable during the first six months of the year (-0.2%) without factoring in the impact of Barclays Bank, SAU. - Customer funds amounted to €296,412 million (+9.1% in 2015), with a significant gain of €17,744 million (+27.5%) in off-balance sheet funds.

 • Core operating income climbed 17.6% year on year to reach €1,244 million.

• Net interest income was up 12.6% to €2,270 million; gross income came in at €4,564 million (+21.7%) while pre-impairment income was €1,970 million (+5.8%).

• Recurring expenses were up 8.8% to €2,053 million following the integration of Barclays Bank, SAU, despite shedding 0.7% on a like-for-like basis. Total expenses included the recognition of €257 million in non-recurring costs associated with Barclays Bank, SAU and €284 million in connection with the labour agreement signed in the second quarter.

• CaixaBank has further cemented its commercial strength with a market share in loans and deposits of 16.5% and 15.1%, respectively. It is similarly a market leader in assets under management in investment funds and pension plans, with a share of 17.5% and 21%, respectively. Additionally, Euromoney has named CaixaBank "Best Bank in Spain 2015", while Forrester Research has recognised the bank as the world's best bank when it comes to mobile banking services.

• The Bank has maintained its capital prowess,with a Common Equity Tier 1 (CET1) ratio fully loaded of 11.5%. Under phase-in criteria, CET1 phase-in stood at 12.8%.Bank liquidity amounted to €54,015 million euros. During the quarter, CaixaBank secured €2,000 million under the targeted longer-term refinancing operation (TLTRO) offered by the European Central Bank.

• The different programmes and initiatives of "la Caixa" Group aimed at providing access to social housing (affordable housing through both charity-assisted renting and social renting) currently have upwards of 30,000 homes available to low-income members of society.

CaixaBank, Spain's leading financial group with Isidro Fainé as Chairman and Gonzalo Gortázar as CEO, reported net attributable profit of €708 million for the first half of the year, marking a year-on-year increase of 75%.

 The improvement can be put down to the strength of the banking business, improved asset quality and sound financial health.

Strong commercial activity, which has enabled the Bank to boost its income generating capacity (gross income of €4,564 million, up 21.7%), has been shored up by the integration of Barclays Bank, SAU, which has driven up net interest income by 12.6%, fee and commission income by 10.4%, customer lending by 7.3% and customer funds by 9.1%.

Asset quality indicators have also fared well, with a drop in the NPL ratio to 9% across all segments during the quarter. Provisions totalled €10,897 million, with a coverage ratio of 54%.

CaixaBank remains one of the most solvent banks operating within the Spanish and European financial sectors, with a Common Equity Tier 1 (CET1) ratio fully loaded of 11.5%. Under phase-in criteria, CET1 phase-in stands at 12.8%.

The drivers behind the growth in pre-impairment income have been the Bank's high income generating capacity coupled with a drop in recurring expenses on a like-for-like basis. Moreover, the synergies unlocked from the integration of Barclays Bank, SAU (€102 million in 2015 and €163 million from 2016 onward) are beginning to feed through to the Bank's results.

With regard to corporate income tax, double taxation is carefully avoided in the case of income contributed by investees (tax paid at source must be deducted as otherwise it would mean paying the same tax twice). This had a marked impact in the first quarter of 2015 on recognising the negative goodwill arising from Barclays Bank, SAU.

Growth in lending and customer funds and leadership in investment funds and pension plans

The commercial strength of the CaixaBank Group and the acquisition of Barclays Bank, SAU have enabled sustained growth to be achieved in market shares for the main financial products and services. Additionally, Euromoney has named CaixaBank "Best Bank in Spain 2015", while the bank earned the highest overall score in the comparison of retail mobile banking services offered by banks in 13 countries, conducted by Forrester Research.

On the commercial front, the Bank continues to focus efforts on attracting and retaining customers, as shown by the 568,600 payrolls secured in the first six months (up 79% year on year), pushing up the Bank's payroll market share to 24.9% (+1.9pp in the last six months), with a total of 3.26 million payrolls paid directly into the Bank.

Customer loans and advances stood at €211,559 million (+7.3%) following the integration of Barclays Bank, SAU and the drop in debt deleveraging. The performing ex-real estate developer loan portfolio was up 8.9% during the first half of the year (up €15,204 million) following a stable performance (-0.2%) without factoring in Barclays Bank, SAU. Portfolio performance was driven by a significant drop in organic exposure to the real estate development sector (-21.5% in 2015) plus a number of seasonal factors.

Further, new commercial banking loans were up 43% on the first six months of 2014, with mortgage loans gaining 53%, consumer loans up 27% and loans to companies rising 68%.

CaixaBank's strong market shares in products to finance working capital needs (18.9% for factoring and reverse factoring and 16.3% for commercial loans) illustrate its commitment to providing credit for the productive system. The total loan market share was 16.5%.

Total customer funds stood at €296,412 million, up €24,654 million (+9.1% in 2015 with a +3.1% organic change). The second quarter saw an increase of €3,387 million (+1.2%), with highlights including the growth seen in demand deposits (+7.8%), which was driven in part by seasonal effects and the sound management of maturities and repayments of other retail customer funds. A further significant development was the reduction in term deposits (+5.4%), illustrating the efforts being made to manage margins on new transactions and channel savings towards off-balance sheet products. The market share for customer deposits was 15.1%.

CaixaBank remains a market leader when it comes to assets under management in investment and pension products. On the subject of investment funds, InverCaixa boasts a market share of 17.5% and is a leader in assets under management (€38,254 million, or €50,340 million including portfolios and SICAVs) and in the number of fund investors (1.1 million). In relation to pension plans, it also remains the market leader in assets under management, with a market share of 21%.

Increased banking income and cost discipline

Changes in income and expenses brought gross income to €4,564 million (+21.7%), with pre-impairment income of €1,970 million (+5.8%).

This strong performance lifted core income (interest income + fees and commissions - recurring expenses) to €1,244 million (+17.6%).

In a climate of very low interest rates, net interest income stood at €2,270 million, up 12.6% year on year. The solid performance illustrates the Bank's approach to retail banking activity, with a sharp drop in the cost of maturity deposits, which, coupled with the acquisition of Barclays Bank, SAU, helped cushion the impact of the lower returns on loans as interest rates continue to fall and the fixed income portfolio continues to shrink.

Fees and commissions amounted to €1,027 million (+10.4%) due to the increase in sales of off-balance sheet products and the integration of Barclays Bank, SAU.

Recurring expenses on a like-for-like basis (pro-forma including Barclays Bank, SAU in the first half of 2014) shed 0.7% thanks to the drive to pare back and streamline costs. Factoring in the integration of Barclays Bank, SAU, recurring operating expenses were up 8.8%.

A total of €257 million in non-recurring costs was recognised in 2015 in connection with the integration of Barclays Bank, SAU. In addition, a total of €284 million was recognised in the second quarter of 2015 in relation to the labour agreement for the voluntary termination of 700 contracts of employment in regions with an oversupply of personnel.

Customer arrears down across all segments

The drop in the NPL ratio picked up pace to rest at 9% at the end of the period after shedding 64 basis points in the year to date, despite the integration of Barclays Bank, SAU. The annual change can be explained by the sharp drop in NPLs (-99bp), which helped offset the integration of Barclays Bank, SAU (+21bp) and the impact of the deleveraging process (+14bp). Stripping out real estate developers, the NPL ratio would have fallen to 6.7%.

The organic decline in non-performing loans across all segments also picked up pace, falling to €20,115 million (-2,227 million), without factoring in the €2,232 million from Barclays Bank, SAU. The coverage ratio remained high at 54% while total loan-loss provisions came in at €10,897 million.

The intense activity of BuildingCenter, CaixaBank's real estate subsidiary, generated sales and rentals of real estate assets for a total of €2,346 million in the past 12 months, with 21,455 properties either sold or rented. Sales and rentals of real estate assets, including real estate developers and factoring in the value of the original investment, stood at €5,917 million for the past twelve months, with 36,747 properties sold or rented.

The net portfolio of foreclosed real estate available for sale amounted to €7,009 million, remaining relatively unchanged in the second quarter of 2015 (€6,998 million at 31 March 2015), with coverage of 56.8%.

At 30 June 2015, the Group's real estate assets held for rent stood at €3,062 million, net of provisions. The occupancy ratio for the portfolio is 87%.