Caixabank Sa Unsp/Adr

Javier Pano. We will start with the presentation, about 30 minutes, and then we'll be followed by... Good morning, and welcome to CaixaBank results presentation for the fourth quarter and full year 2024. As usual, we are joined today by our CEO, Gonzalo Gortazar, and our CFO, Javier Pano. We will start with the presentation, about 30 minutes, and then we'll be followed by a Q&A, which is live, and will take about 45 minutes to one hour. And you should have received instructions by email on how to participate. Let me end by saying that my team and I will be at your full disposal after the call. And without further ado, Gonzalo, the floor is yours.

Thank you. Thank you very much, Marta. Thank you, everybody. Welcome to this year-end presentation. I'll start with what is the summary of the year 2020. which obviously you have seen now for a few hours, but basically I think to highlight the strong activity on which we are closing the year. Customer funds, in particular, with those numbers, 11.7% wealth management, 7% deposits. This has been obviously something that has gone on beyond what we were expecting for the year and a very positive fourth quarter. Similarly, on the loan side, the fourth quarter has been very strong, which allows us to end up a year in a clear growth trajectory with that 2.2% growth in performing loans and a very significant, obviously, in new lending revenues, close to 10% on NII and 4.6% from services, clearly above what we were expecting and guided four, so very happy with those numbers. Capital in line above the 12% benchmark, and that is after having announced another 500 million share buyback. This is number six, and we're obviously executing number five, so this will come after we finish the number five share buyback. dividend with that 53.5% payout ratio at 43.5 cents per euro, which makes it exactly to the 12 billion capital target that we had upgraded for these three years and obviously leaves us with a good starting point for capital into 2025. Net income is up 20%, return on tangible at 18%, Cost income below 40. These are all obviously numbers that are much better than what we were expecting. I'm not going to go through this page, but obviously it's been a very successful plan, very successful three years and ends with a very strong 2024. Very happy to have been able to achieve the main targets that we set ourselves for these three years. Moving on to activity, obviously starting with macro, we had great confirmation yesterday of the strength of the Spanish economy, 3.2% growth in 2024. We were expecting 2.8%. We had been seeing indicators through the quarter that actually economic activity was stronger than that, and this has been the confirmation. Obviously, during the year, started with a much more conservative approach to what we expected the Spanish economy to do, a lot of it related to a sort of weaker Eurozone, but the EU has confirmed that the Spanish economy has decoupled from the Eurozone. The reasons for that are obviously subject to much discussion, but clearly we're seeing very different numbers in the Eurozone, including today in Germany, France, versus what we've seen in Spain, and today also very good numbers in Portugal. This means that for 2025 our forecasts, particularly for Spain, are under review and given that all is sort of surprising on the upside, it's logical to expect that we will eventually be upgrading that expectation for GDP this year of 2025. The PMIs are quite, they speak for themselves with us close to 57 and all the large EU countries in the Eurozone below 50. employment, tourism, the fact that we continue to see very low levels of leverage in Spain, high saving rates, The fourth quarter in terms of GDP, the composition of the GDP growth has been now more biased towards investment recovery, which has been something that we have been lacking in the past and somehow supports our thesis that we're going to hopefully see a significant increase in loan demand and loan balances over the next three years. Too early to say, but certainly... As of today, what we were expecting a few months ago when we presented the plan seems to be vindicated. Clients up 280,000. Obviously, this is also in the context of a growing Spanish population through immigration, but gaining market share. You see some of the Numbers here overall, business volume, so it includes customer funds and loans, is up 12 basis points. And then some more highlights in consumer and SME, where we are obviously seeing higher returns than elsewhere. And then all what it has to do with wealth management. We'll discuss that later. And by the way, protection, you see life risk, significant market share gains. Another very important point is actually growth during the year has been accelerating. So we have had fairly decent start of the year, but then throughout the year, growth has been increasing. And when you look at the fourth quarter, whether it's consumer lending, business lending, mortgages, or on the customer fund side, deposits and wealth management, protection insurance, we see the right trend. Obviously, we'd love to guarantee that this is going to continue on to 2025. As of today, it does seem that the trend is going to be persistent. So, very good news, not just on the overall balance of the year, but also on how things have been accelerating in this period. Moving on to To new lending, very significant growth, 27% in residential mortgages in particular, huge improvement over 50%, still doing a lot of fixed rate mortgages, close to 80%, 78%. But consumer lending and when we look at business lending also. We have pretty good numbers and again in SMEs this year in particular with a significant gain in market share. From a pricing point of view, you look at the front book yields still above those of the back book. So we are indeed looking at a fine balance between accelerating growth but still obviously maintaining appropriate profitability. In terms of the loan book, We have an increase in consumer lending. That's been throughout the year. Business lending, we had a very strong fourth quarter with that 3.3% growth. And residential mortgages, again, you see private sector lending on the bottom right of this slide, again, suggesting that trend of improvement, which has accelerated in the fourth quarter. You see, obviously, from the point of view of the loan book, it's been businesses in terms of absolute size which has had the major impact. Customer funds up 8.7%, as I said, with both deposits and wealth management. Case of wealth management, slightly more, but fairly balanced. If you look at the overall, it's an increase of 55 billion euros in customer funds. 25, 24.5 of those are deposits and the rest... is off balance sheet wealth management where you see there's again 11.4 billion of net inflows and the rest is market impact. Market shares are very significant as you would see in the following page, particularly if you look at the right-hand side on the top. Wealth management market share for us is 29.5. You look at BBBA and Santander, PO1, PO2. Obviously, even if we put the two together, they're well behind us. So it means, in my view, that we're doing something right in this business, particularly right, where you have such a difference in market share. One of the reasons, obviously, it's about distribution, it's about advisory, it's about trajectory, and talking about trajectory, I just wanted to comment on numbers of profitability. And here you have a very simple, but I think it's important, looking at five-year performance to make sure that we look at a long enough period. You see both the asset management from our mutual funds as well as pension funds being actually well above our competitors. It's quite... quite a significant difference, which actually is repeated itself if it's a year, a five-year, or a ten-year horizon. There's a very different positive impact of profitability, which is obviously an increase in the value of ARAMs. That's very relevant, particularly when you look at long-term savings and insurance. certainly compared to deposits. The fact that we actually managed to get people to invest in long-term products 10, 20 years ago means that obviously we have much more money and we obviously have higher fees, but also that we are attracting and we have a good reason to attract money from other clients. And hence, the market shares, again, just have a look at the market share in annuities, gives you the example that this is basically a market that we have developed ourselves. And actually, it's covered in a need that our clients have. So that's why we have had very significant and positive impact over the years and obviously still expecting to continue on that front. Protection, very good year, 11.7% growth. MyBox has really been very successful now. We have had MyBox for quite a few years and every year it's proven that it's commercial success and certainly we're actually quite bullish about the potential and protection in insurance. You see some particular wins this year in home insurance, which is obviously a very relevant and attractive product. Returns are all moving in the right direction. You know these numbers. We have been able to reach our $12 billion distribution target. In fact, we have exceeded it because now we have close to 20 basis points of excess over 12% so that we We started the new plan now with excess, and it means that we're going to get closer to our targets that will allow us to further distribute capital. We're announcing the sixth share buyback, as I mentioned at the beginning, and maintaining basically the payout policy that we fixed for the past year. It's going to continue on to 2025. And then one final comment. Just some numbers. We continue to try and make sure that we do our business in a first-class way, not just financially, but also in terms of our social responsibility. Financial inclusion is one example, and the fact that we are actually increasing our presence in more and more towns where there's no bank, and this we're doing through our mobile technology, We now have 33 buses equipped that act as a mobile branch. This has been obviously very well received by the over half a million population that now has access to banking services. They didn't have to, and certainly by administrations and the overall public in general. Micro-lending, largest in Europe. I think worth highlighting what we're doing in context to the flood in Valencia, the Dana, where we have already actually done 10,000 lending transactions. And by the way, the deterioration we have seen in the book has been minimal and we are well provided for any deterioration that may happen in the future. I'm sure Javier will elaborate on that. on that and obviously we have well exceeded our mobilization of sustainable finance targets for these three years increasing now for the next plan as you already know so we continue to be a bank that is actually doing very well financially but also making sure that we actually do not just do good but do well but do good also to our communities and with that that's Javier okay Thank you, Gonzalo, and, well, good morning to you all. As usual, my comments on the P&L and the balance sheet, but let me first start with a brief overview of the P&L for the fiscal year. You already know it very well. Net income close to 5.8 billion. That is up by 20% compared to 2023. And, well, we are ticking all boxes in terms of guidance, as you may see, with that NIAI Finally, at 11.1 billion euros, that is up by close to 10%, revenues from services with a strong push on the fourth quarter, 5 billion, that is up by 4.6%, as Gonzalo said. outperforming our guidance on that point and then expenses 4.9% up and the cost of risk those 27 basis points also well into our guidance and finally that return on tangible equity at 18.1%. Also a brief comment on our activities in Portugal. BPI contributing to net income by over 500 million. That is also an increase of 20% compared to 2023. And, well, here on this slide you have several indicators, metrics, market shares, gains across key products, business volume also doing very well both on the lending side but also On customer funds, efficiency, an all-time low, also 37.5%. Profitability, close to 21%. ROTE in Portugal and continuing with a really strong credit position with an NPR ratio at 1.7%, well below the average of the industry in Portugal. And also this year, several rating upgrades, obviously with some tailwind from the sovereign, that is doing very well, but now BPI significantly for the major credit rating agencies, as you may see bottom right. And with that, let me move to the usual quarterly review, with that net income for the fourth quarter slightly over 1.5 billion. As you already know very well that this year in the fourth quarter we no longer have the deposit guarantee fund charge compared to the fourth quarter last year. And then moving to revenues, net interest income. For the quarter down 1.9%, something that was already pretty much expected in this new rate environment. But on the other hand, with revenue from services doing really well, and as you may see, up 6.7% year-on-year, 7.8% quarter-on-quarter. Its performance basically supported on wealth management. It's clearly good market performance, inflows. And this four-quarter, when you look at the comparison quarter-on-quarter, obviously with with the influence, the impact of success fees. Protection insurance that continues to do well with strong commercial activity, although we have on the year-on-year comparison some positive non-recurring items in the fourth quarter last year. And then banking fees, really recurring fees doing very well, I would say, in the fourth quarter, and also a strong push this fourth quarter from CIB. The only other thing I would like to remark on this quarterly P&L is the 67 million capital gain we have had after the disposal of Merchant Acquiring JV together with Global Payments Amnesty that has been disposed, as I say, during the quarter. Let's now move to the usual analysis on NII. Here you have the usual NII bridge. Well, as you may see, already client yields having a negative impact. This is basically lower loan index resets that are partially upset, but not fully, by lower deposit costs. Beyond that, we have, commercially speaking, a very good evolution in terms of business volumes, mainly from deposits, strong contributions from deposits in the quarter. And then also the ALCO having quite a significant positive contribution. This is coming mainly from lower costs on wholesale funding. Remember wholesale funding almost fully hedged into floating, already having a positive impact from that. And also those deposit hedges we have been commenting that are already having a positive impact. I would like here to highlight that during the fourth quarter we have added 13 billion of new structural deposit hedges, hence now the total amount outstanding is 50 billion euros. Below you have the usual charts on margins and yields. On margins, customer spread down by, as you may see, 10 basis points to 331 basis points. On yields, the bad book yield of the long book down 20 basis points to 427. Also deposits down, already the cost of deposits down this quarter to 80 basis points, minus 4 basis points. And this is a trend that is set to continue in coming quarters. And as you may see, the cost of deposits, including hedges, is coming down at a faster pace. And on the right-hand side, those additional details on the evolution of our deposits, something important to focus on. As on the first line, you may see the quarterly average balance of our deposits. As you may see, year-to-date, we are up by 6%. Interest-bearing deposits is now 27.2%, a slight increase and something that is expected to stabilize really soon. And the yield of those same interest-bearing deposits already trending down to 2.63%, a pace that is expected also to accelerate in coming quarters. But the most important probably... is what we call internally that jewel of the crown, which are those non-interest-bearing client deposits that, as you may see, in absolute terms remain stable since the second quarter of 2024, something that is quite remarkable. Moving now to revenue from services, really strong performance. As we said, up by 4.6% for the year, wealth more than double digit. I commented already, inflows, markets are really a very good momentum that we expect that is going to continue in the future. Protection up by 4% with that non-recurring factors in the fourth quarter last year. And finally, fees with that strong commercial CIB activity In the fourth quarter, compounded by reduced drag from lower maintenance fees as the year has been progressing. Costs, not much to say. Finally, delivering on our guidance by 4.9%. You have here all the details, the breakdown, and driving our cost to income to a historical low, 38.5%. Long-lost charges, the usual, let's say, four-quarter seasonality with a slight increase in terms of long-lost charges, but this does not prevent to deliver on our cost-of-risk guidance, as you may see, 27 basis points. Our coverage continues to be really sound, 69%, that is 7 billion of total provisions, of which unassigned collective provisions at 339 million. That means lower use than initially expected, which obviously bodes well for 2025. Let's move now to the balance sheet. First comment on MPLs. I would say that the overall situation is as good as ever in terms of asset quality. So MPLs down by 200 million, 10.2 billion euros. The NPR ratio, 2.61%, well below the average of the industry in Spain. You may see the breakdown across the different segments, and you may see that there are no major differences compared to the average, so there is not any single sign of deterioration or a negative evolution, so I think that we are quite comfortable with the current situation. Liquidity, the same message as in recent quarters. Very comfortable and ample situation with that liquidity cover ratio of 207%. Net stable funding ratio 146% liquidity sources well above 200 billion, 219. And in the central chart you have the comparison of our liquidity metrics with the top 10 Eurozone banks by market cap. So clearly our position, as you may see, is clearly outstanding. On the right-hand side, you have the mix of our deposit structure, 78% retail, as stable as in the past. Year-end, so a summary of our MREL position, with MREL ratio at 28, 56%, that is well above the requirement at 24, 42. Actually, we are complying with the requirement mainly with subordinated instruments. You know that this is a strategy that is yielding Good results in terms of our senior ratings, as you may see. Also rating upgrades during the year now. Cashabank well into single A. It has been a year with successful issuances, 30% in foreign exchange, and already started 2025 in really good shape with that new 81 combined with a tender offer, 1 billion plus 800 million tender offer for an net issuance of 200 million. Plus, after the good result of that transaction, adding 1 billion senior non-prefers also very successfully. A final word on capital. We are already fully deducting this number 6 share buyback, 500 million minus 22 basis points. We are fully deducting that from our Regulatory CT1 ratio, from there we have plus 49 basis points of organic capital generation, minus 26 basis points dividends and 81s, and then minus 5 basis points other impacts that this quarter is mainly the seasonal impact on the fourth quarter from operational risk, as you know. CT1 ending the year at 12-19%, but the positive news we have for you today is that After fine-tuning our figures, we are now expecting a buzzer for day one impact of circa plus 15 basis points, and with no material difference actually between day one impact and the fully loaded. On the right-hand side, you have additional metrics with that book value per share at 5.17 euros, dividend per share in total 43.52 cents, And that fifth share buyback that is being executed as we speak, 66% executed. And that 500 million final share buyback to comply with the 12 billion capital devolution. And now finally, the much awaited fiscal year 2025 guidance. NII expected to come down by mid-single digit for 2025. Revenues from services up low to meet single digit. Operating costs, as we already outlined it on our investor rate, up by circa 5%. Cost of risk less than 30 basis points. And return on tangible equity expected to be already circa 16% during next year. On the right-hand side, Keep in mind that our CT1 management target for this year is between 11.5 and 12.25, that 12.25 being the threshold for additional distributions, together with that regular, let's say, cash payout between 50% and 60%. And with that, I think that we are already ready for questions. Thank you.

Okay, operator, you can let the first question in, please.