quarterly results presentation 1q 2014

Quarterly results presentation

1Q 2014

28 April 2014

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Disclaimer

This document has been prepared by Bankia, S.A. (“Bankia”) and is presented exclusively for information purposes. It is not a prospectus and does not constitute an offer or recommendation to invest.

This document does not constitute a commitment to subscribe, or an offer to finance, or an offer to sell, or a solicitation of offers to buy securities of Bankia, all of which are subject to internal approval by Bankia.

Bankia does not guarantee the accuracy or completeness of the information contained in this document. The information contained herein has been obtained from sources that Bankia considers reliable, but Bankia does not represent or warrant that the information is complete or accurate, in particular with respect to data provided by third parties. This document may contain abridged or unaudited information and recipients are invited to consult the public documents and information submitted by Bankia to the financial market supervisory authorities. All opinions and estimates are given as of the date stated in the document and so may be subject to change. The value of any investment may fluctuate as a result of changes in the market. The information in this document is not intended to predict future results and no guarantee is given in that respect.

Distribution of this document in other jurisdictions may be prohibited, and therefore recipients of this document or any persons who may eventually obtain a copy of it are responsible for being aware of and complying with said restrictions. By accepting this document you accept the foregoing restrictions and warnings.

This document does not reveal all the risks or other material factors relating to investments in the securities/transactions of Bankia. Before entering into any transaction, potential investors must ensure that they fully understand the terms of the securities/transactions and the risks inherent in them. This document is not a prospectus for the securities described in it. Potential investors should only subscribe for securities of Bankia on the basis of the information published in the appropriate Bankia prospectus, not on the basis of the information contained in this document.

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Contents

1. Highlights of the quarter

2. 1Q 2014 Results

3. Asset quality and risk management

4. Liquidity and solvency

5. Conclusions

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Highlights of the quarter

COMMERCIAL ACTIVITY AND PLAN

DEVELOPMENTS MARKET CONFIDENCE RESTORED

COMMERCIAL ACTIVITY DYNAMIZATION 1

MAJOR PROGRESS IN DIVESTMENT PLAN

FINANCIAL PERFORMANCE

SIGNIFICANT LIQUIDITY AND CAPITAL GENERATION

2 CONTINUED IMPROVEMENT IN CORE BANKING BUSINESS

EFFICIENCY RATIO IMPROVEMENT

NPL RATIO REDUCTION AND INCREASED COVERAGE

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Highlights of the quarter COMMERCIAL ACTIVITY DYNAMIZATION

New loans in 1Q 2014 totalled more than €2,800m, 26% more than in the same

period of 2013

€Mn

1

NEW LOANS 1Q 2014 LENDING MARKET SHARES INCREASED

Market shares of new loans in main segments increase sharply

Source: ICO

Source: BdE

Feb 13 Feb 14

CONSUMER 6.28% 9.61% +333 bps

Businesses < €1m 3.45% 11.05% +760 bps

Businesses > €1m 1.62% 11.35% +973 bps

ICO financing 2.30% 11.99% +969 bps

Mar 13 Mar 14

New lending

1.930,9

647,7

221,3

Businesses Retail Mortgages Consumer

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Highlights of the quarter COMMERCIAL ACTIVITY DYNAMIZATION 1

Total customer funds grew by €1.7 bn compared to year-end 2013, in an environment in which the cost of term deposits fell 46 bps compared to 4Q 2013

TOTAL CUSTOMER FUNDS

DEC 13 MAR 14 Var.

157.5 159.2 + 1.7

ON-BALANCE-SHEET CUSTOMER FUNDS

136.7 137.5 + 0.8

€Bn

20.8 21.7 + 0.9 OFF-BALANCE-SHEET CUSTOMER

FUNDS

Priv. sector deposits mkt. share

%

DEC 13

8.66%

FEB 14

8.75% +9 bps

Mutual Funds market share

%

DEC 13

4.82%

MAR 14

4.92% +10 bps

Source: BdE

Source: BdE

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Highlights of the quarter MAJOR PROGRESS IN DIVESTMENT PLAN 1

MAIN DIVESTMENTS

More than 50 divestments in participated companies since the beginning of the year

FEB 14

MAR 14

Sale of equity stake in NH Hoteles for €123 million

Restructuring of the life and non-life bancassurance

business with Mapfre (includes sale of 51% of Aseval)

Sale of three portfolios of doubtful and bad loans totalling €713 million

Sale of 70.2% of the capital of Bancofar, S.A. to Banco

Caminos, S.A.

LIQUIDITY GENERATED IN BANKIA GROUP

TO DEC 2013 €1,272 million

DEC 2013 -

TO DATE €197 million

PENDING REGULATORY APPROVAL *

€791 million

TOTAL €2,260 million

More than €2,200 million of liquidity generated to date

* Pending approval: CNB, Bancofar and Aseval

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SALE OF 7.5% OF BANKIA BY BFA

No. of shares sold

Total amount

Discount on prev. day’s price

863,799,641

€1,304 million

4.4%

Selling price (€) €1.51

% of Bankia’s capital 7.50% Issued volume

Maturity

Spread

Oversubscription

€1,000 million

17/01/2019

MS + 235 bps

3.5x

# Orders > 250 orders

SENIOR DEBT ISSUANCE

Oversubscription ≈ 2.0x

Financial markets believe in Bankia’s project

MARKET CONFIDENCE RESTORED 1

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Efficiency ratio ex net trading income is already around 49%

PRE-PROVISION PROFIT EX NET TRADING INCOME EFFICIENCY RATIO EX TRADING INCOME (1)

62.1%

60.1%

54.2%

52.6%

49.3%

1Q 2013 2Q 2013 3Q 2013 4Q 2013 1Q 2014

%

INCREASE IN CORE BANKING INCOME AND IMPROVEMENT IN THE EFFICIENCY RATIO 2

(1) Efficiency ratio excluding net trading income and exchange differences

€Mn

1Q13

297

2Q13

338

3Q13

397

4Q13

419

1Q14

468

+ 57.6%

+ 11.7%

89 53

(1) Figures adjusted for the financing cost associated with the subordinated loan from BFA to Bankia, which was cancelled on 23 May 2013.

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Cost of risk capped at 69 bps

NPL

€Bn

DEC 13

20.0

MAR 14

19.2

- 0.8 bn

NPL RATIO

%

DEC 13

14.7%

MAR 14

14.3%

- 34 bps

NPL COVERAGE

%

DEC 13

56.5%

MAR 14

57.4%

+ 92 bps

NPL RATIO REDUCTION AND INCREASED COVERAGE 2

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LOANS TO DEPOSITS EBA CORE TIER 1 RATIO

%

DEC 13

115.4%

MAR 14

111.9%

-3.5 p.p.

%

DEC 13

11.71%

MAR 14

11.96%

+25 bps

Liquidity ratios improve significantly Solid capital generation

SIGNIFICANT LIQUIDITY AND CAPITAL GENERATION 2

LTD ratio: (Net credit / (retail commercial paper + strict customer deposits + ICO/EIB deposits + single-certificate covered bonds)

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Contents


2. 1Q 2014 Results



5. Conclusions

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The pro forma income statement for 1Q 2013 excludes the cost of the subordinated loan by BFA to Bankia in the amount of €89m in Q1 2013, which was cancelled on 23 May 2013.

1Q 2014 Results Pro forma income statement – Bankia Group

A

B

C

Net interest income

Gross income

Operating expenses

Pre-provision profit

Provisions and others

D

1Q 2013

601

957

(494)

463

(272)

1Q 2014

698

930

(441)

489

(221)

Var. %

16.1%

(2.8%)

(10.7%)

5.6%

(18.8%)

Profit after tax 134 186 38.5%

Var. €

97

(27)

(53)

26

(51)

52

€Mn

Fee and commission income 225 231 2.7% 6

Gross income ex net trading income 791 909 14.9% 118

E Taxes (57) (82) 43.9% (25)

Pre-provision profit ex net trading income 297 468 57.6% 171

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Quarterly performance of net interest income

1Q 2014 Results

Loan yield vs. cost of deposits (1)

€Mn

(1) Figures adjusted for the financing cost associated with the subordinated loan from BFA to Bankia,

which was cancelled on 23 May 2013.

1Q13

601

2Q13

633

3Q13

643

4Q13

690 (1) (1)

89 53

1Q14

698

+ 16.1%

Net interest income up 16.1% in

1Q 2014 vs. 1Q 2013

Significant reduction in cost of deposits

Gross customer spread reached 1.12%, up 30 bps on 4Q 2013

A Core banking business: Net interest income

Consolidation of the positive trend in net interest income

(1) The series exclude the effect of City National Bank, the sale of which is expected to be approved during 2Q 2014

1.89% 1.74% 1.70%

1.57% 1.33%

0.81% 0.81%

0.68% 0.82%

1.12%

2.70% 2.55%

2.38% 2.39% 2.44%

1Q2013 2Q2013 3Q2013 4Q2013 1Q2014

Cost of customer deposits Gross customer spread

Loan yield

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Quarterly performance of fee and commission income

1Q 2014 Results

Performance of core banking business

€Mn

1Q13

225

2Q13

225

3Q13

237

4Q13

249

1Q14

231

+ 2.7%

Stable capacity to generate fee and commission income and steady improvement in core banking business: +12.5% compared to 1Q 2013

1Q13

825

1Q14

928

+12.5%

Core banking business: Fees and commissions

Higher fee and commission income compared to same period previous year

€Mn

Core banking business = net interest income + fee and commission income

A

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Quarterly performance of gross income

1Q 2014 Results

Gross income ex net trading income

€Mn


791

1Q13

957

826

2Q13

958

861

3Q13

945

878

4Q13

912 (1) (1)

909

1Q14

930

+ 1.9%

Positive trend in gross income continues in first quarter of 2014

Gross income excluding net trading income improves 14.9%

166 132 84 34 21

Net trading income

Gross income ex net trading income

Gross income

Gross income evolves positively

89 53

1Q13

791

1Q14

909

+14.9%

€Mn

B

89

+ 3.5%

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Quarterly performance of operating expenses

1Q 2014 Results

Efficiency ratio ex net trading income

€Mn

1Q13

494

2Q13

488

3Q13

464

4Q13

459

1Q14

441

- 10.7%

Proven capacity to continually reduce operating expenses

- 3.9%

Efficiency ratio ex net trading income already at 49.3%

Operating expenses Sustained reduction of operating expenses

62.1%

60.1%

54.2%

52.6%

49.3%

1Q 2013 2Q 2013 3Q 2013 4Q 2013 1Q 2014

%

(1) Efficiency ratio excluding net trading income and exchange differences

C

- 12.8 p.p.

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1Q 2014 Results


Strong performance in core banking business, combined with continued decline in costs, drives pre-provision profit growth: +58% 1Q13 vs 1Q14

1Q13

463

1Q14

489

+ 5.6%

Pre-provision profit Solid trend of pre-provision profit

Pre-provision profit ex net trading income

€Mn

1Q13

297

2Q13

338

3Q13

397

4Q13

419

1Q14

468

+ 57.6%

+ 11.7%

€Mn

89 53


89

D

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1Q 2014 Results

Net profit rises to €186 million, up 38.5% compared with same period previous year

RECURRING COST OF RISK 1Q 2014 69 bps


Profit from sales and others

Profit on discontinued operations

Provisions

463

0

0

(272)

1Q 2013 (1)

489

62

21

(303)

1Q 2014

Profit after tax 134 186

Profit after tax Profit generation capacity in line with Plan estimates

(1) Figures adjusted for the financing cost associated with the subordinated loan from BFA to Bankia, which was cancelled on 23 May 2013.. +38.5%

€Mn

E

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Contents


2. 1Q 2014 Results



5. Conclusions

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Trend of NPL, NPL ratio and NPL coverage

NPL

Total risk assets

NPL ratio

NPL coverage (1)

€Bn

DEC 2013

136.7

14.7%

56.5%

(1) Loan loss provisions / NPL

Asset quality and risk management Credit quality Decrease in NPL and reduction of NPL ratio

MAR 2014

134.0

14.3%

57.4%

Organic reduction / sale of portfolios

Trend of NPL

NPL - Dec 2013

+ Gross additions

- Recoveries

20.0

- Write-offs

NPL - Mar 2014

+ 0.9

- 1.4

- 0.1

19.2

Net additions - 0.5

NPL’s down €0.8 bn (€0.5 bn through organic reduction, €0.3 bn through portfolio sales); NPL ratio down 34 bps to 14.3%; and NPL coverage ratio up 92 bps reaching 57.4%

34 bps

92 bps - Sales - 0.3

€Bn

20.0 19.2 €0.8 bn

- 62 bps

NPL formation

+28 bps Denominator

effect

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Bankia Group data. €Mn

Balance of credit exposure and coverage ratios

Asset quality and risk management Credit quality Prudent provisioning allows for steady increase in coverage ratios

Increase in Businesses and RE developers coverage ratios, with Total portfolio (ex-RE developers) coverage ratio standing at 7.2%

DEC 13

82.2

MAR 14

81.1

3.5%

COVERAGE RATIOS

Retail customers

3.5%

DEC 13

37.8

MAR 14

36.8

16.2%

Businesses

16.4%

DEC 13

3.9

MAR 14

3.5

42.7%

Real Estate developers

44.7%

DEC 13

129.8

MAR 14

127.6

8.2%

Total portfolio

8.2%

GROSS EXPOSURE

DEC 13

126.0

MAR 14

124.1

7.2%

Total portfolio (ex-RE developers)

7.2%

€Bn

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Contents


2. 1Q 2014 Results



5. Conclusions

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Bankia Group data. €Bnn

LTD ratio (%) Commercial GAP

LTD ratio reached 111.9%, while Commercial GAP descends to €21.6 Bn

111.9

1Q13

120.9

€Bnn %

2Q13 3Q13 4Q13 1Q14

118.2 116.7 115.4 21.6 32.8 29.6 27.6 25.1

1Q13 2Q13 3Q13 4Q13 1Q14

- 34.1% - 9 p.p

Liquidity and solvency Liquidity indicators Main liquidity indicators show a positive trend

- 3.5 p.p - 13.9%

LTD ratio: (Net credit / (retail commercial paper + strict customer deposits + ICO/EIB deposits + single-certificate covered bonds)

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Liquidity and solvency Capital generated organically Strong capital generation in the quarter EBA CET1 ratio BIS III phase-in CET1 ratio

EBA Core Tier 1 capital ratio c. 12%

MAR 14 DEC 2013 Organic capital

generation

10.91% 10.69%

MAR 14 DEC 2013 Organic capital

generation

11.96% 11.71%

+25 bps

+22 bps

BIS III fully loaded ratio increases to 9.12%

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Contents


2. 1Q 2014 results



5. Conclusions

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Conclusions

Positive performance in customers deposits, following completion of branch network restructuring

Core banking revenues growing again, with continued reductions in operating expenses

Back to normality for Bankia in the financial markets (fixed income and equity)

Efficiency ratio already below 50%

Capital ratio improves during one more quarter

NPL ratio reduction with increased coverage

We continue to make progress in the accomplishment of the goals of our Strategic Plan

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quarterly results presentation 1q 2014

Economy & Finance