Annual Results Presentation 4Q 2013

1 of 31 / February 2014

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Annual results presentation

2013

3 February 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 year

2. 2013 results

3. Asset quality and risk management

4. Liquidity and solvency

5. Conclusions


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On track to meet the goals of our Strategic Plan

Recapitalisation and clean up the balance sheet

The Turnaround Year

Developing our commercial model

2012

2013

2014

IN PROCESS

Highlights of the year


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IT integration and workforce agreement

RECAPITALISATION COMPLETED, RESTRUCTURING PLAN EXECUTED

Additional non-strategic divestments

PROFITABILITY AND CAPITAL GENERATION TARGETS MET

Branch network restructuring completed two years ahead of schedule

1

Commercial momentum picked up


2013: THE TURNAROUND YEAR

2

Recapitalisation of Bankia completed

Recurring profit improved

Profit in line with expectations

Improved liquidity, sharp increase in capital

Investor and customer confidence in Bankia


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ORGANISATIONAL RESTRUCTURING AND SIMPLIFICATION…

Branch network Organisational structure

Branch closures completed two years earlier than planned

Organisational structure simplified

AREA HEAD OFFICES REGIONAL HEAD OFFICES NUMBER OF RETAIL BRANCHES

2,800 2,400

1,900

Q1 2013 Q2 2013 Q4 2013

2,100

Q3 2013

3,000

ORIGIN

CLOSURES PROGRESS

17% 58% 81% 100%

- 38%

35% YoY reduction

33% YoY reduction


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…REGAINING COMMERCIAL MOMENTUM…

Sales volume

Productivity levels have improved

Products sold (thousands)

Products sold per employee (# per month)

DEC 12 DEC 13

30.1 44.8

+ 48.8%

DEC 12 DEC 13

382 466

+ 22.0%

“Dar Cuerda” programme

More than €14,900 million of new loans granted in 2013.

80% went to self employed, SMEs and corporates.

Dec 2012

9.22%

Nov 2013

9.56%

5.55%

Nov 2013

5.97%

Dec 2012

Credit market shares

Total OSRs SMEs and corporates

Source: Bank of Spain


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…PROFITS IN LINE WITH EXPECTATIONS…

Efficiency ratio improved significantly, bringing our profit into line with projections

Efficiency ratio ex trading income Net profit

4Q12 1Q13 2Q13 3Q13 4Q13

* Recurring efficiency ratio ex trading income and exchange differences. Calculated with pro forma data

63.3% 62.1% 60.1% 54.2% 52.6%

- 10.7 pp

818

608 (1) Net profit does not include hibrids exchange result and fiscal adjustments (2) Real figures adjusted by the subordinated loan of BFA to Bankia canceled on 23rd of May

(1) (2) *


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…SIGNIFICANT IMPROVEMENT IN LIQUIDITY AND CAPITAL…

Solid liquidity position and more than 200 bps of capital generated in the year

LTD RATIO (%) EBA CORE TIER 1

115.4

4Q12

120.4

%

1Q13 2Q13 3Q13 4Q13

120.9 118.2 116.7

-5.0 pp

11.71%

DEC 2013

9.62%

PF DEC 2012

+ 209 pbs

Organic Generation


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60,0

80,0

100,0

120,0

140,0

160,0

180,0

200,0


The share of international investors in the Bank’s capital went from 3.8% to more than 10.4% in seven months

First issue of senior debt since the Group was created, with an international demand of 85%

Share performance vs. IBEX 35

Included in Ibex 35 in Dec 13

IBEX 35 BANKIA

…WITH THE CONFIDENCE AND BACKING OF THE MARKET


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Contents


2. 2013 results



5. Conclusions


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Bankia Group financial performance

Profit after tax in 2013 ex exchange of hybrids amounts to €608 million.

Net interest income was up for the third quarter in a row at €2,567 million, with operating expenses down 17% year-on-year.

Results

Asset quality

Liquidity & solvency

Non-performing loans (ex transfer of refinanced loans to non-performing under new regulations) were down for the fourth quarter in a row, giving a cumulative reduction of around €1,200m for the year.

The coverage ratio on the loan book stands at 8.2% of total loans and 56.5% of non-performing loans.

The commercial gap has been further reduced and the LTD ratio has improved to 115.4%.

The Bankia Group increased its capital ratio by more than 200 bps to reach an EBA Core Tier 1 ratio of 11.7%.

2013 Results


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Bankia Pro Forma Income Statement – €m

The following pro forma income statements exclude the cost of the subordinated loan by BFA to Bankia in the amount of €109m in 2012 and of €89m in Q1 and €53m in Q2, which was cancelled on 23 May. In 2013, profit from discontinued operations, in the amount of €158 million, is included in profit from the sale of investees and other profit.

2013 Results

A

B

C

D

Net interest income

Gross income

Operating expenses

Pre-provision profit

Provisions and other expenses

E

2012

3,198

4,119

(2,293)

1,826

(23,907)

2013

2,567

3,772

(1,905)

1,867

(1,287)

Diff %

(19.7%)

(8.4%)

(16.9%)

2.3%

-

Profit after tax (19,098) 608 -

Diff €

(631)

(347)

(388)

41

-

-

of which activation of monetisable DTAs 230

of which maximum provision for litigation (230)

13 de 31 / Febrero 2014

Taxes 2,982 28 - -


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Net interest income – Bankia

Bankia Group data. €m

Quarterly trend of net interest income

The positive trend in net interest income was consolidated during 4Q 2013, driven by the fall in the cost of deposits and asset repricing policies.

2013 Results

Loan yield vs. cost of deposits

A

€m

Client yield stabilised.

The cost of customer deposits decreased significantly during 4T 2013.

+14.8%

(1) Actual numbers, adjusted for the finance cost associated with the subordinated loan from BFA to Bankia, which was cancelled on 23 May.

2012 1Q13

601

2Q13

633

3Q13

643

4Q13

690

3,198 2,567

(1) (1)

(1) (1)

109

89 53

2.99%

2.69% 2.63% 2.46% 2.49%

1.95% 1.86% 1.70% 1.67%

1.54%

1.04% 0.83% 0.93%

0.79% 0.95%

4Q2012 1Q2013 2Q2013 3Q2013 4Q2013

Credit yield Deposits cost Customer margin


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Fee and commission income - Bankia


Fee income generation is stable

2013 Results

Mutual Funds evolution

€m

Fee volume up 5% in the last quarter, despite large number of branches closed during the year

Mutual funds market share increased from 4.52% at the end of 2012 to 4.82% in Dec

2013

2012 1Q13

225

2Q13

225

3Q13

237

4Q13

249

992 936 8,216

Dec 2013

6,460

Dec 2012

+27.2%

Source: Bank of Spain


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Basic banking business contribution up 13.7% compared to the first quarter

Gross income – Bankia B


(1) Actual figures, adjusted for the finance cost associated with the subordinated loan from BFA to Bankia, which was cancelled after the Bankia capital increase

(2) Exchange diff. + Dividends + Equity method + Other operating income

Trend of gross income

2012

4,119 (1)

4Q13

(27)

912

3,772 (1)

Rest (2) Net interest income + Fee income

2013 Results

€m

3Q13

65

945

2Q13

100

958

1Q13

132

957

939 880 858 826

+13.7%


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Operating expenses and efficiency – Bankia C


Trend of efficiency ratio ex trading income*

Through cost containment efforts and acceleration of the restructuring plan, the Group succeeded in reducing total costs by almost €400 million (-17%) year-on-year, out of the €600 million envisaged in

the Strategic Plan. The efficiency ratio was down 10.7 pp in the last quarter compared to 4Q 2012.

2013 Results

%

4Q12

Operating expenses

2012

2,293

1Q13

494

2Q13

488

3Q13

464

4Q13

459

1,905

-16.9%

€m.

1Q13 2Q13 3Q13 4Q13

* Recurring efficiency ratio ex trading income and exchange differences. Calculated with pro forma data

63.3% 62.1% 60.1% 54.2% 52.6%

- 10.7 pp


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D Profit before provisions – Bankia

2013 Results

Pre-provision profit up 2% in 2013, mainly due to cost containment effort, offsetting decline in net interest income.

Pre-provision profit

1,826 +2%

2012

1,867

2013

Pre-provision profit ex trading income

1Q13

297

2Q13

338

3Q13

398

4Q13

419

1,452

€m

+41.1%

€m

(1)

(1) Real figures adjusted by the subordinated loan of BFA to Bankia canceled after Bankia’s recapitalization process

(1)


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Profit after tax - Bankia E

Cumulative profit after tax was €608 million, in line with forecasts Cost of risk stabilised at 74 bps.

(1) Includes €89 million of net interest income in Q1 and €53 million in Q2 due to the impact of the subordinated loan (2) Includes the recurring profit of Aseval

RECURRING COST OF RISK 2013 74 bps

2013 Results

Pre-provision profit (1)

Profit from sales and other profit


Recurring profit on discont. operations

Provisions

470

296

32

1Q 2013

(585)

2Q 2013

463

(272)

0

0

481

21

21

(294)

3Q 2013

453

53

24

(353)

4Q 2013

(2) (2) (2) (2)

Profit after tax 157 134 161 156

608


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Contents


2. 2013 results



5. Conclusions


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Asset quality and risk management

Credit quality

Bankia Group data. €bn

Portfolios

Retail

Corporates and SMEs

87.6

43.0

Gross amount

Developers 4.8

Total loan portfolio 145.8

Provisions as % gross loans

3.3%

14.8%

44.8%

8.0%

Dec 2012

Gross loans and provision coverage ratios

Dec 2013

Total excluding developers 141.0 6.7%

82.2

37.8

Gross amount

3.9

129.8

Provisions as % gross loans

3.5%

16.2%

42.7%

8.2%

126.0 7.2%

The NPL coverage ratio excluding real estate developers rose from 6.7% to 7.2%


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NPLs ex refinanced loans was down by around €1,200m over the year

Trend of non-performing loans, NPL ratio and NPL coverage

MAR 2013

19.6

DEC 2012

19.8

JUN 2013

19.3

SEP 2013

19.0

Non-performing loans

(€bn)

Total risk assets 152.5 149.6 144.5 140.3

NPL ratio 13.0% 13.1% 13.4% 13.6%

NPL coverage (1) 61.8% 61.9% 63.0% 62.6%

20.0

* Transfer of €1,404 million of refinanced loans to non-performing under the new regulations on refinancings.

Credit quality

€bn

18.6

DEC 2013

136.7

14.7%

56.5%

DEC 2013

+ 1.4*

Refinanced loans

- €1.2bn

(1) Credit provisions / Total NPL volume


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Credit quality


Structure of refinanced loans

48% of refinanced loans were classified as non-performing at year-end 2013

Portfolios

Non-performing

Substandard

8.9

3.3

Dec 2012

Performing 7.2

Total refinanced 19.4

Total coverage ratio 24.9%

12.0

4.0

Dec 2013

8.9

24.9

22.4%

By situation

Portfolios

Developers

Corporates

1.5

10.4

Dec 2013

Individuals 13.0

Total refinanced 24.9

Total coverage ratio 22.4%

6.0%

41.8%

% of total

52.2%

By type

€bn €bn


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Contents


2. 2013 results



5. Conclusions


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Liquidity and solvency


Trend of LTD ratio (%)

Liquidity indicators

Trend of commercial gap

Main liquidity ratios improved significantly during 2013: LTD ratio fell 5 pp, while commercial gap was reduced by 25%

115.4

4Q12

120.4

€bn %

1Q13 2Q13 3Q13 4Q13

120.9 118.2

116.7 25.1

4Q12

33.3

1Q13 2Q13 3Q13 4Q13

32.8 29.6

27.6

-5.0 pp -24.6%


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Excellent response to the Group’s first issue, in the amount of €1bn, which was 3.5 times oversubscribed, with 85% of international demand.

Characteristics of senior debt issue

Markets reopened

Characteristics Geographic distribution of demand

Issue volume

Maturity date

Spread

Oversubscription

€1,000 million

17/01/2019

MS + 235 bps

3.5x

# Orders > 250 orders

Spain 15%

Rest of world 85%


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Capital generated organically

Bankia Group – EBA CORE TIER 1

+ 49 bps 11.06%

11.71%

SEP 2013 DEC 2013

↑Profit ↓RWAs

More than 200 bps of capital generated in 2013, reaching an EBA CT1 ratio of 11.7%

Gen. organically: + 65 bps

+ 16 bps

9.62%

PF DEC 2012

Gen. organically: +144 bps

9.84% 11.27% 11.97%

BIS II RATIO – SOLVENCY RATIO


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2013 Results

SUMMARY OF KEY FINANCIALS

RESULTS

PRE-PROVISION PROFIT IMPROVED:

+2%

POSITIVE TREND IN BANKING BUSINESS

BALANCE SHEET

COST REDUCTION:

- 17%

COST OF RISK CONTAINED: 74 bps

PAT: €608m

PRUDENT PROVISIONING POLICY

OPTIMAL LIQUIDITY MANAGEMENT

HIGH CAPITAL GENERATION

NPLs* reduced

- €1.2bn

LTD ratio improved

- 5 p.p.

EBA CT1

+ 209 bps

* Excluding the impact of the transfer of refinanced loans to non-performing


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Contents


2. 2013 results



5. Conclusions


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Conclusions

On track to meet the goals of our Strategic Plan

Recapitalisation and clean up the balance sheet

The Turnaround Year

Developing our commercial model

2012

2013

2014

IN PROCESS


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Annual Results Presentation 4Q 2013

Economy & Finance

Transcript of Annual Results Presentation 4Q 2013