Caixabank Sa Unsp/Adr

Good morning, and welcome to Cashabank Results presentation for the second quarter and the first half of 2025. 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 45 minutes to one hour with the Q&A, which, as you know, is live. And after the call, my team and I will be at your full disposal. So, without further ado, Gonzalo, the floor is yours.

Thank you, Martha, and good morning, everybody. Second quarter of the year, we see strong performance, and obviously what we are doing as a consequence is improving guidance. I think the highlight is the volume growth. You've seen the numbers. We're gaining clients, performing lows 4.8% year-on-year, deposits 7% up, wealth management, despite the volatility in the markets, up 8%. It's quite remarkable knowing where we're coming from and just reminding you the discussions we had at the time of presenting our plan in November about growth and whether it was feasible or not. What we're seeing is that growth is happening much faster and in a stronger form than we all expected, which is good news. And this is part of a reflection of our improving market share and obviously to a large extent is also a reflection of of the Spanish economy and the Portuguese economy doing very well as we'll discuss later on. I think this is certainly what I like the most. The volume growth is powering revenues as we say but most importantly it's powering revenues not this quarter but in the future so certainly makes us more optimistic about our performance going forward and particularly into the rest of 25 and 26, 27. We're saying we're calling the trough in the NII cycle. We think this is the lowest quarter. Javier will comment on our expectations going forward. You've seen services, both fees and wealth management protection and banking fees pretty good so far. 5.4% increase. Cost of risk and asset quality with a 2.3% NPL ratio and cost of risk, which is 24 basis points for last 12 months, even lower if you look at the first half of the year, is also something that we're seeing at this stage quite stable, and we're not expecting a deterioration going forward. We're seeing very good, very good trends. And from a capital point of view, liquidity will continue to be sort of evolving in line with our targets. We have a return on tangible of 18.5% this quarter, maybe closer to 20% if not for the banking tax, which is obviously significant. a very relevant feature. Net income is up 10% and we are improving guidance as you have seen by now, particularly in revenues from services from low to mid single digits to just the upper part of the range, the mid single digit range, reducing cost of risk guidance to around 25 basis points and increasing return on tangible equity above 16%. Those are the The highlights of a very positive quarter for us, no doubt. The economy. The economy is doing very well, as you know. We have seen now also the figures yesterday, which had a very strong increase, 0.7% quarter-on-quarter of GDP in Spain. We have just seen... the numbers for the Eurozone at 0.1% for the Eurozone, quarter on quarter. So, big gap between Spain and the Eurozone, and a gap that I think it's reasonable to think that is going to stay in place. Certainly, that's our expectation for this year and the following years. Remind you some of the key growth engines, immigration, the labor market, helping obviously very much the economy and our business. And on the other hand, we still see growth in disposable income and very high savings rate is obviously helping a lot the liability side of the balance. You've seen that 7.5% year-on-year growth is quite remarkable. I think also quite remarkable vis-à-vis our competitors or those that I have seen so far publishing, suggesting that we have growth. We're doing something well and I think whatever we're doing well is likely to continue because we're now having no distractions and back to that sort of different growth pace that we have always had. We will have some impact from obviously the tariffs accord in the economy but Spain is has a very limited exposure to the U.S., and also the reality is that given that actually second quarter numbers for the economy are coming in much stronger than what we expected. We expected actually 0.5% quarter-on-quarter growth for the Spanish economy in the second quarter, and it's been 0.7%, so that different growth rate is, in my view, going to be more than enough. to offset any impact, which we estimate around 0.2% in GDP of the tariff accord, which has ties that are unfortunately higher than what we were anticipating. We were anticipating closer to 10% rather than the 50% number that is obviously still preliminary. Sorry for that. Strategy, two pillars for our plan, growth, transformation. That's what we're seeing. I mentioned growth right now, so I'm not going to repeat myself on the fairly good numbers. Transformation is also very relevant. Digital sales, digital onboarding, digital clients, adoption of GNI. You have a few ideas there, and we're obviously going to keep updating you on our progress on this front, and our teams are available back. we're taking advantage of these relatively good times to make sure that we make our competitive advantage sustainable going forward for the very long term. Few transformation ideas on the business front that we have launched either in this quarter or very recently, Facilitea Casa, the house portal. We already have 42,000 listed properties It's obviously very early days, but it's actually delivering a very good service both for our clients, our real estate agents, and it's going to allow us to be closer to the action in one of the most important segments that we have, which is obviously mortgage, but all the products around buying a new house, and that includes not just mortgages, but obviously insurance and some other financial and non-financial services. So very promising that we have launched and we already have that level of listed properties. We keep growing the business and obviously improving things as we go ahead. A similar example with cars. On Facilitea Coches, we have financed $11,700. They go through this portal in the first half of the year. Most importantly, obviously, this is improving our relationship with car dealers and attracting more and more associated business around not just what goes through Facilitia, but generally the vehicle financing business. It's actually up 34% for us year on year. It's close to $2 billion. And obviously, there's a very significant potential here, given the initiatives and the fact that actually there's no other similar platform in Spain with the same characteristics of... of our platform. Now we say over 8,000 vehicles listed, and this keeps going. We've discussed it in the past, I'm not going to go deeper into it for the benefit of time, but obviously very promising. Tap2Pay, which we've launched both for Android and now for Apple, as first bank to offer the service. There'll be further news on that front. Generation Mars, Generation Plus, if you want, in English, a very special and offering level one financial and non-financial services for the senior citizens, where we have obviously made some good progress historically, but particularly this quarter with the launch of the initiative. Big, big opportunity for us. From the senior citizens to the digital younger citizens, imagine, I just want to give you some details of how it's going because it's relevant and you sometimes don't see all what's happening there. Look at business volume. It's up 23% year-on-year, 20 billion euros. And if you look at what the business volume includes, it's basically a full-service bank. It includes client funds, on-balance sheet, off-balance sheet, and lending mortgages, consumer lending. It's a real mobile bank, not just sort of a monoliner. or a secondary bank to people is really, as you can see, 55% of our clients actually have their recurring income deposited into Imagine, so it's basically primary bank for most of our clients, and it's a very significant tool for client acquisition. 50% of overall client acquisition at CaixaBank is coming through Imagine. We already have 8.5% of payrolls market share in Imagine Bank, so that means It's actually one of the larger banks, and obviously when you look at mobile banking penetration, it's leading back for the 18 to 34 years old, or the 16 to 34 years old, but obviously including the segment that is included in Kaiser Bank Non-Imagine, it becomes by far leading penetration. Forty percent is almost doubling in the next year. We'll keep you updated on Non-Imagine, but... We want to make sure that we have the full picture of us doing very well also in businesses that are growing very fast and are very critical for our future. Loan origination, very high numbers, 46% residential mortgages, 10% consumer, 26% new business lending, good front book yields, and obviously, as I said before, Great news that we've seen that kind of growth. You'll see it here on the balance sheet. Sorry we have too many numbers. Maybe you have the year-to-date, the quarter-to-quarter, and then below the graphic part is year-on-year. Obviously, the year-on-year shows two things. One is the absence of seasonality. This is very strong growth. And also the trend, which is very impressive. I would highlight particularly mortgages and business lending. a big jump in June. If you look at the GDP numbers for the second quarter that I mentioned before, you'll see there's a very significant contribution from Gross Fix Capital Formation, both residential and CapEx. CapEx actually is up 11% compared to last year, so... This CAPEX cycle in Spain, despite the fears we have because of the uncertainty associated with geopolitics and ties, etc., is actually happening. And obviously, we're making it possible, and lending is picking up as a consequence. We've seen it, obviously, already in consumer last year. Still growing fast now to 8.9%. And as you can see, the quarter-on-quarter figures, they have some seasonality included, particularly, I'd say, on the business lending front. But what you can see is still some degree of acceleration of business. of growth in the numbers. Customer funds are up 4.8% year-on-year and 4.7% year-to-date. Obviously, the market effect has been limited in this first half of the year due to the volatility. It still is positive. It was negative at some point, but after a much better June, it's positive. I think we'll see it in the next page. It's important to see how net inflows have continued to be positive at all times. And we look at the balance sheet numbers, 4.8% quarter-on-quarter against some seasonality. in there, but numbers are quite impressive, quite good. Javier will accelerate also, will elaborate also on the breakdown there, and it's pretty good news, I would say. As I said, net inflows doing very well despite the potential impact of market uncertainty and instability during the quarter that has not materialized. You see how even in the month of April we have positive inflows and obviously then a quick recovery in May-June to let us more in line with what was the first quarter of the year. So pretty good news. Keep that differential market share. Again, 29% in wealth management compared to 25% if we add Pier 1 and Pier 2, which basically speaks by itself. The protection business doing well, 12% growth year-on-year, above our target for the For the strategic plan, good breakdown between life risk and non-life, and a good breakdown, again, in non-life, both health, auto, and home insurance, gaining market share, basically continuing our cruising speed, and with a huge success of In My Box offering, which continues to be differential for our customers. Just a few words on BPI, just looking at sort of the long-term horizon of what has happened since 2017, which was the date when we acquired control, and today you see those market share gains in lending and mortgages and deposits and insurance in the region of 220 to 300, even close to 400 basis points. This is the trend on which PPI is, and obviously that trend allows the bank to be more efficient and more more profitable state with very attractive asset quality ratios and hence continues to be for us one of the most attractive parts of our business and one where we see continued opportunity for further growth and profitability. Thank you, and your turn.

Okay. Well, thank you, Gonzalo, and good morning to all of you. From my side, as always, additional details on the P&L and the balance sheet. Here you have the consolidated income statement, as you know very well, net income this quarter. Approaching 1.5 billion euros. This is down by 4% year-on-year on a performer basis when considering the quarterly accrual of the banking tax paid last year. But it's already up quarter-on-quarter. Better revenues all in all. You may see NII pressures clearly abating. We'll discuss all that in a few slides in a minute. and actually almost stable on a quarter-on-quarter basis, down by 0.4%. Then on revenue from services, the main driver here is wealth management. You may see double-digit growth year-on-year. Quarter-on-quarter, slightly negative, precisely impacted by the market's correction on average AUMs, but as you can see, the pace of inflows remains elevated. and has clearly recovered from the month of April. So we can expect also very good performance in coming quarters. Protection insurance, really strong commercial activity. Although the P&L impact is a little bit masked by some positive non-recurrent factors we had during the second quarter last year. But in any case, you know that here we have quite a strong view on future performance. And we are fully convinced we are going to deliver on that. And then banking fees with more recurrent banking fees that had some pressure in the past. This is also being, I would say, better contained. But we have had a really strong quarter on CIB, as you may see. On a quarter-on-quarter basis, fees are by 6%, which is driven mainly precisely by CIB. Then other revenues. Here I would like to highlight that this year we had the BFA dividend recorded on the first quarter. Hence, you have this difference on a quarter-on-quarter basis, and that, as you know very well, the telephonic dividend is no longer with us. Then, on expenses, no news at all. Everything is doing according to plan. Remember, this guidance for costs to grow 35%. We are not changing that view. And then on loan loss charges, really benign asset quality environment. So loan loss charges below initial expectations. Hence, we are improving our guidance on cost of risk, as you already know well. And my final comment on the income statement will be on the tax line, where, again, as forecasted, we are including a DTA write-up. With that, let's move to NII. Here you have the evolution, quarter on quarter, minus 0.4%. It's stabilizing earlier than anticipated. Now we are expecting that this second quarter will is the trough of this cycle, so we are expecting that the next quarter's NII is going to be higher than this second quarter of 2025, not by a wide margin, but in any case higher, and then clearly improving and accelerating from the second half next year. On the usual NII bridge, You may see all the different impacts on NII, client yields still having a negative impact. This is still some additional quarters having this negative impact. So here still lower rates impacting our floating rate loan book, not being fully compensated by lower costs on our customer deposits. Then volumes clearly adding quite a significant push and then the significant counterbalancing effect from ALCO, basically hedging, different hedging strategies we have been deploying and also fixing on portfolio projects. with increased yields as we are adding to the portfolio and also we are having maturities at very low rates. Below you have the charts for the customer spread at 309 basis points and then you have also The back book yield of the loan book at 375 basis points is still trending down, but also a significant reduction this quarter of our carry-on deposit costs. You may see ex-hedges and foreign exchange down to 58 basis points from 68 basis points. Additional details on deposits, clearly one of our strengths and that is offering increasing support for future NII evolution. You may see here the quarterly evolution of average balances for deposits. You may see that on a year-on-year basis those are up by 7%. on a quarter-on-quarter basis only 1.6%. This is because the strong seasonality of the second quarter is not impacting average balances. But in any case, the most interesting here is that our balances for non-interest-bearing deposits are increasing significantly, over 5 billion in a single quarter and set to continue increasing in coming quarters. At the same time, We keep the wave of interest-bearing balances almost unchanged, but are actually gradually trending down now 26.9%, and the peak being in the fourth quarter last year at 27.2%. On the chart on the right-hand side, this is the yield. of our interest-bearing deposits sharply down to 1.92% from 2.28%. And you know that we have approximately 50% of those interest-bearing deposits that are fully indexed. The major part to the overnight rate, below you have precisely the quarterly evolution of the overnight rate, the EURSDR, So you may see that the cost of our interest bearing balances is tracking to a large extent precisely that evolution. An additional slide on market rates and ALCO. On the left, you have the same chart we disclosed last quarter, obviously updated. On the upper left chart, you have the deposit facility rate yield curve. In blue, it's the current deposit facility rate, and in gray, you have that yield curve as of September 25, which was the base case for our strategic plan projection. So you may see that clearly there is And the steepening of the yield curve, you may see this more clearly on the chart below that one. Here you have the yield of, as an example, a 10-year European Union bond versus 12-month arrival. You may see that there is a steepness of over 1 percentage point. And while this is a very positive backdrop for the bank, so you know that we basically lend long and borrow short, and also it offers plenty of opportunities for alcohol management, which actually is what we have done this quarter, you may see. that we have added to the portfolio. We have taken advantage of the strong market volatility to add to the portfolio over 5 billion in the quarter. You may see that the legacy yield is gradually improving. It's a quarter where we have not added additional deposit hedges, but that continues to be a key tool to manage NII sensitivity, so you can expect us to be active on that front also in the future. With that, we change here and we move to revenue from services. For the first half, up by over 5%. As commented before, the main driver, wealth management, up by 14% for the first six months of the year. Also, protection doing well when adjusting for those positive extraordinaries we had. Thank you very much. and then successfully being able to stabilize our banking fees, less pressure on recurring banking fees in some areas, maintenance fees on current accounts, debit cards, et cetera, with a little bit less pressure and, in any case, with really strong performance from CIB and being more and more recurrent source of revenue for the bank. With all this backdrop, We are improving our guidance for revenues from services to meet single digit growth from low to meet single digit growth. A few words on costs. Actually, no news at all. You may see that for the first half, costs are up by 5%, and this is where we are planning to be by the end of the year, so meeting our guidance. On the right-hand side, you may see the evolution of our cost-to-income ratio. You may see that we have been hovering in the 37, 38 area since early 24, and this is clearly a much better level than the average of our peers in Europe. A few words also on asset quality. First on MPLs, a sharp reduction of MPLs this quarter, approximately 500 million euros. That results into an MPL ratio of 233% in the month of June. We have been active this quarter. You know that MPL portfolio disposals is part of our business as usual. It has been the case this quarter successfully. And in terms of the different segments, you may see that there is nothing to worry about at all. And you may see that the NPL ratio is really not far off. from the average, so a really benign environment in terms of asset quality. If you combine this with high coverage at 70% and also at the same time keeping our unassigned provisions unchanged at 341 million, So this is resulting into a clear reduction of cost of risk, so 24 basis points for this second quarter. You will see that actually the loan loss charges this second quarter have been the lowest in the last 18 months. With this backdrop, we are improving our guidance for cost of risk, now expected to be 25 basis points. Liquidity, no news, which is very good news. We continue to hold a really comfortable position, 228 billion of liquidity sources in A liquidity cover ratio 217%, net stable funding ratio 150%, I think it's record high. And you may see that this compares extremely well with the peer average. And this is on the back of a really strong and stable deposit base with a strong wave of stable retail deposits and wholesale operational deposits. We have the bulk of our funding plan almost completed. Still something to be done in the last part of the year, but the bulk is already done. With that, we update you on our MREL structure with an MREL ratio at 28-24%, really with an ample buffer above requirement, 382 basis points actually. And we are complying, actually, with this requirement with subordinated instruments. As I said, a successful delivery in terms of funding, 7.2 billion issued in year-to-date across all asset classes. I would remark here a really successful delivery. 3 billion U.S. dollars with really huge demand. We have on the right hand side you have the breakdown per currency and 36% of the funding this year in U.S. dollars. Finally, capital. We have really strong capital accretion in the quarter, 69 basis points. That includes net income plus the DTA comp sanction. We have then... minus 33 basis points from organic risk-weighted assets. It's the first time we disclosed this bridge this way. On the appendix, you have the same disclosure for the first quarter, just for the record. Then we have minus 40 basis points for dividend accrual at cash payout at 60%, as you know very well, and 81%. And then we have small over-impacts, and that results into a CT1 ratio at 1247%. This is already over 500 million above the threshold for an acceleration of capital devolution. And I mentioned that it has been a strong quarter in terms of lending, but in any case profitable with return on requested assets at 2.3%, clearly above the average of recent times. We keep executing our six-year buyback that was launched in June, and also we are today announcing an interim dividend to be paid in November and finally approved by the Board in October ahead of our third quarter resource presentation, and it will be a dividend between $885 million and $1,181,000,000. And bottom right, well you know that we don't have an impact from the output floor, but clearly as everyone has been disclosing those impacts, you may see that in our case we are approximately 12 percentage points above the level of the output floor, which is a small group of banks we have this position. It's not the case for others. In our case, to comply with this regulatory requirement, we don't need to set aside capital in coming years or not being any kind of constraint for growth, as I say, to comply with this requirement in coming years. And a final slide, which is the recap of the improved guidance on revenue from services, just to recap, up to now expected to be up by mid-single digit, cost of risk circa 25 basis points and return on tangible equity as a consequence over 16%. So thank you very much, and I can imagine we may face a few questions.