Caixabank Sa Unsp/Adr

Good morning and welcome to CaixaBank results presentation for the third quarter of 2024. As usual, we are joined today by our CEO, Gonzalo Gortazar, and our CFO, Javier Pano. In terms of logistics, we plan to spend about 30 minutes with the presentation and about 50 minutes to one hour with the Q&A. The Q&A is live and you should have received instructions by email on how to participate. My team and I will be at your full disposal after the call. And without further ado, Gonzalo, the floor is yours.

Thank you, Marta. Good morning, everybody, and welcome to this presentation. You've seen our results this morning. I'd say, as the slide says, it's very strong operating momentum. Activity levels, particularly in customer funds, is what I would highlight the most. New lending, up 20%, although in terms of balances, as you will see later, obviously we're still in a very low growth environment, but some positive signals here. And when you look into net inflows, protection premium, and then customer funds, both are Off-balance sheet, wealth management balances are up 9% and on-balance sheet deposits are 5.5%, quite remarkable, not only in 9 months. There's very strong activity growth here, which also explains, as Javier will get into, how is our customer spread, et cetera, evolving in a quarter, based on great news, which is the fact that we are attracting more funds and growing nicely. Revenue growth is obviously relevant, both in terms of NII, if you look at it On a nine-month basis, if you look at it quarter on quarter, we managed to stabilize NII. We have been expecting growth, sorry, negative growth in sort of quarterly NII, but we managed to avoid that one other quarter. Cost income, cost of risk, all pointing into the right direction. And then that leads us to a fairly solid result in terms of net profit. And obviously, again, significant capital generation. This quarter we are announcing the interim dividend at the top end of the range that we gave some quarters ago. So 40% of the first half year results, 1.1 billion. And then even if we have not yet finalized the fourth share buyback, we have already received approval for the fifth one, which obviously we will execute after we present our plan in the Capital Markets Day and obviously after we finalize the fourth one. Activity, profitability, asset quality, efficiency, and capital generation, all moving in the right direction, in line with expectations, but it's nice to see them mostly at the top of the range in almost all dimensions. Quick reminder, we want to continue to emphasize, and we do this obviously for you, but also for a wider audience that We're a different bank and we have a different place in society. Some of the initiatives that you see on this page in terms of financial inclusion are, I would say, outstanding compared to other players in the Spanish market. Microfinance as well. Our social DNA, our volunteering efforts, which we have had in Valencia now. terrible rains and flood and having already our volunteers helping out besides a number of initiatives that were taken in terms of extending facilities and facilitating insurance payments, all that here in this heavily affected region of Valencia where we are currently living. based and talking from Valencia. ESG, well ahead of our mobilization finance commitments, sustainable finance mobilization, sorry, and obviously looking forward to present in the next capital market, say, what our targets are for the following year. Spanish economy doing very well. You see how conservative we've been in our projections. I think generally most economists have been in Spain, but always surprised on the upside. Last projection is for 2.8% growth this year, based on yesterday's figure for the third quarter. There's clearly upside towards the 3%, I would say, but obviously our economic research team will come up with their own conclusions. But Clearly, economy growing 3% while Europe is growing below 1% is quite remarkable. Portugal doing well this year, not as well as Spain, but as you can see, we're expecting them to converge in 2025. Employment, PMIs, tourism, generally we see the right trends and obviously very significant divergence with the Eurozone. And actually this time is for the better, okay? Business volume up 4.5% in these nine months. Obviously, it's mostly related to customer funds. But you see how we have now regained our ability to gain clients, 200,000 in the last 12 months. Also, we're increasing the proportion of relational clients. more loyal clients and generally with increasing market shares in Spain and as you will see later also in Portugal. Loan generation, new loan production up 20%. You see particularly higher in mortgages. Obviously, there's a significant process of amortization as well or payments and prepayments, scheduled payments and prepayments. But as you will see, the balance of mortgages is also growing. Consumer lending is up and new business lending also with some positive momentum. When you look at the balance sheet, I think one very remarkable thing is consumer lending. Again, another 1.5%, 1.4% growth this quarter. for a total of 5.9% in nine months, which is obviously way ahead of our expectations for this year. And the dynamics are pretty good also in terms of asset quality and what we see from the behavior of our clients. The other highlight is mortgages. We're basically flat in a year, but you see on the bottom right-hand side, We have now two consecutive quarters of stock growth in our stock of mortgages growing, which is obviously pretty good. Businesses are up as well. Here we have a bit of seasonality in the third quarter. I'll have to see how the fourth quarter evolves. Hopefully, again, we'll confirm that inflection point we were talking about last summer when we presented our second half results but clearly given the seasonality and the traditional weakness of the third quarter to me these are pretty good numbers the same way that the customer funds were quite remarkable And here you have some details, the 9% year-to-date wealth management in the quarter and deposits, again, pretty good. Deposits are stable this quarter, but remember we have big seasonality, positive seasonality in June. We were expecting a drop in deposits. This quarter, actually, they did not come down, and I'm sure Javier will elaborate into that so I won't spend more time. But again, very good dynamics. You see some of the market share figures quite good, giving us comfort that we can actually build on our ability to grow volumes faster than our competitors here in Spain as we have traditionally been doing. Wealth management, volume growth, net inflows, all pretty good. You have the The numbers, market shares, as you can see, particularly remarkable again in insurance, savings insurance. And then the fact that we have both an under-penetrated customer base coming from original Bankia clients that is gradually moving and converging, but we still have plenty of potential there. And the fact that overall the market is still under-penetrated vis-à-vis the Eurozone make us fundamentally bullish on this business. Something similar in protection insurance in terms of our ability to further penetrate former Bankia clients and the convergence with Europe. You can see those statistics on the right-hand side. And, again, the quarter has been pretty good, 11% growth year-to-date in premium and a good diversification between all the non-life components, health, home, auto products. And I can see, obviously, opportunities across the board as well here. BPI mentioned it briefly. Good performance, return on tangible equity 20%, cost income below 40% at 39%. Pretty impressive numbers for a bank that seven years ago when we took control was obviously with very different statistics, cost income above 70% and very low profitability. It's doing a fantastic job. job, BPI, asset quality, coverage and market share all doing well. Obviously still plenty for them and for us to do important. Revenue is up based on all the factors that I mentioned. Efficiency, cost of risk leading to our return on tangible equity at 16.9%. just very close to the 17 level that we are expecting for this year. And one final word on capital. I mentioned the highlights that we've actually generated a lot of capital, 171 basis points. year to date based on high profitability and still pretty good or pretty low rather than pretty good RWA growth. We have announced the fifth share buyback as I mentioned before and also the interim dividend payment. With that, we basically have either executed or announced the ongoing $9.5 billion of capital distribution during this three-year period. So there's another $2.5 billion pending, which we obviously expect to get to between now and the end of the plan, including obviously distribution of the final dividend and any additional capital distribution that we need to do to get to that 12 billion, which is obviously clear now, very close to us for it to be reached. And with that, I'll leave you with Javier.

Okay, thank you, Gonzalo, and well, good morning. From my side, I will Thank you very much. up by 1.9% year-on-year, but down 2.7% quarter-on-quarter. It's not the case for net interest income that, as Gonzalo said, is progressing also quarter-on-quarter. We'll elaborate on the following slide on that topic. Wealth management doing really well, up by close to 3% year-on-year, close to 6% quarter-on-quarter. Protection insurance with strong commercial dynamism, although we have some non-recurrent factors impacting the evolution year-on-year and quarter-on-quarter, so we'll elaborate on that in a few minutes. Then banking fees, that as you may see on a year-on-year basis close to flattish, as this, let's say, underlying pressure from maintenance fees on current accounts is gradually fading. And quarter-on-quarter with that seasonality impacting a few of the key businesses among those CIB, the third quarter always softens. Then on other revenues, not much to remark. I would only say that we have somewhat lower trading income this quarter. And then below, on total operating expenses and on those charges, I say that this is everything doing according to plan, so we are set to meet the guidance for the year on both. And then finally, other provisions with some improvement, as you may see. Let's move now to the details, starting with NII. I will have a more detailed explanation about some of the different moving parts here. So, year-to-date, we have NII up by 13.6%. Quarter-on-quarter, as we have said, a little bit positive. That commercial NII that is having a negative contribution, as we have seen, Thank you very much. is mainly swapped into floating. So below you have the evolution of the customer spread, and it's down by 15 basis points to 343 basis points. Then what is behind that is precisely that we have the bad book yield of the loan book down by 12 to 447 basis points, and then client fund costs that are up by 3 basis points. On the right-hand side, we have further additional information. Gonzalo has already commented that we have had a really strong quarter in terms of inflows into deposits. I would say that close to offsetting the really strong seasonality we usually have, positive seasonality we usually have in the second quarter. Remember that it was like deposits growing by 20 billion. So we have been able almost to compensate that in the third quarter. As a consequence, average deposit balances are already 4% up year to date, 3% up quarter on quarter. We have had a strong inflow, some of those coming from large depositors, public sector. As a consequence, the weight of interest-bearing deposits has gone up by 2.2 percentage points to 25.8%. But at the same time, the cost of those same interest-bearing deposits is already trending down 2.86% for this quarter on average. and set to clearly come down as a major part of those are fully indexed. But what we have added here is precisely the evolution of non-interest bearing balances This is, as we call it internally, the jewel of the crown, and we have been able to maintain this stable quarter on quarter, and as you may see, pretty much stable in the first quarter of this year. So, as a consequence, we are now expecting fiscal year 24 NII to be over 11 billion euros. Let's move now to revenues from services. On that front, year-to-date, we are up by 3.8%. Wealth management, as you see, up by more than 12%. Protection by 6%. And precisely on that front, we have some non-recurrent factors. that are impacting the view quarter on quarter or year on year. Quarter on quarter, remember that on non-life insurance, we had last quarter an extraordinarily positive in Portugal, and this is impacting the quarter on quarter evolution. And year on year, on the third quarter last year, we had an exceptionally low pace of claims on life risk insurance, and as a consequence, the year on year comparison is less favorable, no? As I said, this business, as you know, we are strong believers and it's set to continue to do really well in the long term. Fees, as I commented, that seasonality impacting CIB and maintenance fees that are gradually having less impact, as you can see, on the year-on-year evolution. A few words on costs. Up by 4.5% year-to-date. We are planning to meet our guidance. Remember, costs slightly below 5%, although we are going to be at the upper bound of that guidance. You may see on the central chart below that our cost of income is hovering at 39%, and on the bridge on the right, with a strong contribution from revenues. And I think that finally on comments on the P&L, some words on all those charges. It has been an eventful quarter, I would say, with cost of risk at 28 basis points on a 2-month trailing basis. We continue to hold comfortable NPL coverage at 71% and still maintaining unassigned overlays, circa 500 million euros. Moving to the balance sheet, some comments on MPLs, down by 100 million, 10.4 billion is the stock. As a consequence, the MPL ratio remains pretty much unchanged, 2.69%, well below the average of the industry in Spain, as you may see. You have the breakdown across the different segments, as you may see, very close to the average, so there is not any particular segment deteriorating or showing signs of deterioration, something that actually we are no longer expecting in any case. A very ample liquidity position, which is part of our DNA, as you know very well. A liquidity cover ratio at 213%, a stable funding ratio of 148, more than 200 billion of liquidity sources, 224 billion. A very stable deposit funding, 77% retail, 23 large depositors. This has increased a little bit, partially due to those inflows I mentioned before. A few words on MREL and the funding plan that is actually completed for the year successfully. We closed the quarter with an MREL ratio at 28-33%. The requirement is 366 basis points below, so with a very comfortable buffer, as you may see. We are complying with requirements mainly with subordinated instruments. And for the year, we have issued 7.3 billion, of which 39% EEG issues. Successfully, the third quarter, 3 billion, 1 billion, tier 2. For the year, we have issued more than 30% in foreign currency, mainly US dollars. Continuing with the currency diversification, we already started a few years ago. And finally, capital. Capital. We are already deducting this 500 million share buyback just announced today, minus 22 basis points on C81. And from there, we have plus 71 basis points of organic capital generation, minus 43 basis points from dividend accrual and C81s. and then minus 5 from other impacts, resulting into a CT1 ratio at 12-24%, that is a very comfortable MDA buffer at 362 basis points. We continue increasing shareholder value with the book value per share up by more than 11% once considering the dividends page. You know that we keep with our devolution policy that fourth share buyback that is approximately three quarters already executed, the interim dividend with a DPS of 14.88 cents and this fifth share buyback approved by DCV and by the board and set to start at some point from the November the 19th as November the 19th is our investor day the day we are presenting a new three year plan remember in Madrid at 9am local time we are happy to see that plenty of you have already confirmed attendance so we'll be glad to host you there so thank you very much and I think we are ready for questions