Exchangeable Bond into 2.5% of Repsol further strengthens the solvency of CaixaBank

• CaixaBank expects to reach a fully-loaded BIS-3 core capital ratio of above 9% by 31st December 2013
• After the Transaction, CaixaBank will retain its full 12% stake in Repsol and its equity method of accounting

Today, CaixaBank, the largest domestic bank in Spain, successfully completed a €594.3MM Exchangeable Bond into 2.5% of Repsol. The bonds were priced with a conversion premium of 20.51% over yesterday's closing price, or €18.93 per share, and will pay a coupon of 4,5%. The bonds also include a cash settlement feature at the option of CaixaBank. The offering was more than five times oversubscribed and was completed in only a few hours.

As a result of the transaction, CaixaBank will generate 37bps of fully-loaded BIS-3 core capital and expects to reach a fully-loaded BIS-3 core capital ratio of above 9% by 31st December 2013. This target does not include any benefit arising from a potential government guarantee on deferred tax assets.

Note that after the transaction, CaixaBank will retain its full 12% stake in Repsol, as well as its voting rights and its equity method of accounting.

Continuous balance-sheet reinforcement

CaixaBank reported a BIS 2.5 core capital ratio of 12.5% at 30th September 2013 (the highest among peers), on the back of strong organic capital generation. In addition, Total Capital reached 13.4% (resulting in an eligible capital excess of €7,605 MM), or 14% if the €750 MM 10-year subordinated bond issued in October is included. The Leverage Ratio, measured as BIS 2.5 Core Capital over Total Assets, stood at 5.2%.

This Transaction forms part of CaixaBank's capital optimisation programme and follows the sale of 11% of Grupo Financiero Inbursa earlier this year which generated €1.8 Bn of core capital on a fully-loaded BIS-3 basis.

The placement of this Exchangeable Bond also improves the strong liquidity position of CaixaBank, which at September-end was operating with total available liquidity of €66.3 Bn, balance-sheet liquidity of €21.8 Bn and a loan-to-deposit ratio of 118% (down 10% YTD).

This issuance follows two successful placements in October; a €1.0 Bn 3.5 year senior unsecured note, and the above-mentioned €750 MM subordinated bond; the first issuance by a Spanish bank in the institutional subordinated debt market since 2010.

By June-end CaixaBank had completed all the reclassification of refinanced loans while front-loading all the related provisions, yet it still managed to report a NPL ratio of 11.40% with 65% coverage as of September-end. The loan portfolio is backed by €16.6 Bn of total credit provisions, including €4.4 Bn of unallocated provisions.

With regard to foreclosed assets, Real Estate marketing activity continues to accelerate, with €1,544 MM in assets sales and rentals during the first 9 months of 2013, 141% more than in the same period last year. The total number of marketed units reached 12,988.

This combination of capital strength, excess liquidity and sound asset quality is behind CaixaBank's status as the only domestic financial institution with investment grade ratings from all the main credit rating agencies.

CaixaBank is the leading retail franchise in Spain and continues to increase the focus on its core banking business

CaixaBank has emerged as one of the winners in the restructuring of the Spanish financial sector, and has successfully acquired and integrated 5 different banking platforms in the last 12 months.
 
It is the largest domestic bank in Spain, with €515 Bn of total business volume (loans and customer funds) as of September-end 2013 while servicing the largest client base in the country of 13.7 MM customers. Customer penetration reached 27.4% among individual customers and 22.7% of them chose CaixaBank as their primary banking relationship.

Market shares in the main banking products and services stand at around 15% and it is the #1 player in key retail products like payrolls, pension deposits, mortgages or life insurance products. Retail market leadership is supported by the leading multi-channel distribution network and by continuous technological innovation.

Summary of 9M'13 Results: resilient operating results still offset by high provisioning charges

In what is still a challenging environment, CaixaBank obtained gross revenues totalling €5,276 MM for the first 9 months of 2013, up by 2.6%. Recurring pre-provision profit (excluding extraordinary expenses) reached €2,269 MM; or €1,437 MM when including extraordinary restructuring expenses.
Total write-downs and provisioning charges in the first 9 months amounted to €5,956 MM, of which €3,449 MM were charged against results and the remainder booked as fair value adjustments associated with the acquisitions of Banco de Valencia and Banca Cívica.

Despite this large provisioning effort, CaixaBank reported a net attributable profit of €458 MM (€173 MM in 2012).

Highlights of the third quarter included q-o-q growth in net interest income (mainly due to the reduction in deposit costs, with a front-book cost of 137 bps versus 235 bps for the back-book), repeated reduction in operating expenses as cost synergies from acquisitions continued to have an impact and a reduction in the growth of troubled assets (non-performing loans and foreclosed assets).