Caixabank Sa Unsp/Adr

Good morning and welcome to Cashabank Results presentation for the fourth quarter and the full year 2025. We are joined today by our CEO, Gonzalo Gortazar, and by Matias Bulag, our Chief Accounting Director. a management control and capital officer who also sits at the management committee. Our CFO, Javier Pano, is temporarily away on sick leave, but he's recovering well and expected to return shortly. In terms of logistics, same as usual, we plan to spend about 30 minutes with the presentation and about 45 minutes to one hour with the Q&A. The Q&A is live and you should have received instructions by email how to participate. Needless to say, 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, and good morning, everybody. Thanks for taking the time. And I will start with the highlights, as it should be the case. A very good year for us, I think. When I look back, it's probably the best year of the last 12, 13 years since the great financial crisis. And it is because we're really seeing a very balanced growth in the activity. Obviously, NAI has recovered from... from June and this quarter you see again a 1.5% growth. But when I see a balanced growth it is really that we are seeing volumes pretty much at 7% both in the customer funds and on the lending side. well above what we were expecting for this year, which was even at the time, you may remember when we presented the plan, it was seen as on the sort of too optimistic side. And in the end, fortunately, the economy has proved that actually that was possible. And we have a bit... We have made our targets with some ease and not just because the economy is growing, also because we're gaining market share. Revenue from services are up, as we say, in line with improved guidance. We started with low-to-meet single deeds growth for the year, and in the end we have that 5.4% with a stronger fourth quarter. Asset quality has been a trend for some time now, but the fourth quarter has shown an acceleration in terms of the reduction of non-performing assets, and cost of risk has ended up at these 22 basis points. So when you look at it, it's been sort of very round in terms of capital creation, also a fairly positive year. It's allowing us to set a dividend per share, which is growing 15%, and I really establishing the payout at the upper limit of our 50% to 60% range. Very complete. And it also feels a year that is not just one-off, but is part of a trend and a year which we want to capitalize on to 2026, which has started, I'd say, with very good conditions and basically continuation of what we have been Return on tangible equity at 17.5%. With all what I've said, we obviously have reconsidered our targets for now next year, for 2027. I'm sure by this time now you're all familiar with the new targets, but I think it's important to reiterate which they are. Return on tangible equity at 20%, give or take. That compares to the above 16% that we set a year ago. So it's obviously a remarkable one year, allowing us to increase four percentage points, our guidance for return on tangible equity. And for the average of the period, now we expect it to be above 18%. So obviously that's probably the headline. But the other important targets for us, cost income from low 40s to 50s. High 30s, NII now seeing $12.5 billion as the reference figure for 2027, which means a 4% annual growth versus a flat. We had said in November last year revenue from services and cost in both cases were maintaining our guidance, mid-single-digit growth for services and 4% area for costs. Volume growth, we said 4% in the case of lending and above 4% in the case of customer funds. We're now rounding all that up to around 6% compared to that above 4%. And again, I think we have a pretty good traction here to be not necessarily just at or around 6%, but possibly slightly above that level. Non-performing loans below 1.75% compared to below 2% and most importantly cost of risk, which we feel confident now can stay below the 25 basis points number compared to 30 basis points that we said a year ago. So this is our revised ambition for 2027 or for the three-year period. In terms of capital, no real change. Same payout, 50 to 60. Same capital targets of 11.5 to 12.5 and the threshold for additional distribution, which for 2025 is 12.25%, and obviously we're clearly above that level. And for 2026 and 2027, it will stay at 12 and a half. So this is a revised ambition. I'd say the strategy is very similar. It's just that we can do more, and we're obviously going to try to make it happen. Macro, we should be seeing there may be public already, because I think it was expected at around 9 o'clock, the GDP figure for Spain. We are expecting 2.9 percent for this year, 2.1 percent for 2026. I have to say this is a relatively old projection, and based on the most recent data, I think it's likely that this figure will be revised at work, but that's subject the information that we get on the fourth year economy for Spain. Portugal is doing fairly well, again, with pretty strong dynamics, also in the Portuguese case, so we feel there's clearly some upside. In any case, And since the pandemic, you see both Portugal and Spain as very much leading growth in the Eurozone. And the factors behind that are still there, you know, population growth, employment growth. We had 600,000 new jobs created last year, 2.8 percent growth in employment, pretty impressive. finally the unemployment rate becoming a single digit one hopefully will continue to go that way at least that's what we are seeing an economy that is now powering ahead on the back of private consumption and investment so the domestic strength is pretty relevant and hence it also gives us some protection of international environment, which, despite all the risk, still doesn't look that bad either. High saving rates, growth in disposable income, and a very low private sector leverage, which is still, as you see, 31 percentage points below the eurozone. All of that gives us sort of room to grow, also comfort if our cash-in if at some point news are not as good. And the rate of Ironman is obviously more positive than we have at the year – or not at year end because our strategic plan was based on September figures, as you see there, but obviously the current yield curve is more attractive, is higher and steeper. And from that point of view, it's obviously a tailwind for our NIA, you know. So I started seeing growth and a very strong year for us compared to the previous decade, I would say. And this is why. When you look at clients growing 390,000 in the year, look at market shares, and there you have time penetration up to 40.4%. customer lending and customer deposits, in both cases, 14, 12 basis points growth in market share. These are not huge growth, but with our size and also with our prudent approach, this is exactly the kind of market share gains that we're looking for, savings insurance. And then on the life risk, you can see 158 basis points market share gains on the non-life risk. We've also had very significant market share gains across the board, really, in health, in motor, and in household. Non-payroll deposits, very important, also up 27 basis points. So it's not only what you can see on the right-hand side, which is volumes doing very well, close to the sort of 7% area versus the 4% in general, case by case, but I won't go through it because it's pretty – visual for you, but it's not just volumes, it's also relative performance and market share that indicates that the organization is in really full shape with all engines working. Imagine continues to be a key part of our growth strategy, particularly in terms of number of clients. Clients that bank with Imagine, they're not clients that just do one or two specific transaction categories, but have Imagine as their bank, and you can see that because when you look at business volume, it's actually fairly balanced and ample. Transformation, talk about growth, but transformation was the other pillar of our three-year plan. And obviously, it's a bit more difficult to measure. Growth is easier from that point of view, but just a few highlights. The new app, which we have deployed during the year actually gradually through small improvements rather than sort of a big one-off. And it's worked out very well because it hasn't created turmoil. The app is rated now number one in Spain, and that includes sort of established banks and And UN Trust makes us obviously very happy with that, but we need to continue and we are continue working daily to make sure we keep improving it. And some of the onboarding and digital sales. that you see there are clearly results of that strategy. AI, we are making major efforts in adopting AI throughout the organization. Every employee has access to AI tools, namely co-pilots. But we have obviously developed use cases throughout the organization in all areas. I would just highlight that we have, I think, an important progress this year when we get all commercial managers through the Salesforce platform. to access AI, and that is going to lead, one example, to a 75% reduction in the prep time for client interviews, which is obviously a very significant productivity improvement. The quality, the depth of the interviews will also be improved, obviously have more information. I didn't want to go through a very long list of things we're doing because obviously this is affecting back office, it's affecting IT, client claims, client support, all areas in the organization. But some of these I think are going to bring results sooner. IT professionals remember in this transformation we wanted to internalize and insource many capabilities and that's what we have been doing expanding our digital capabilities during last year it's remarkable to have been able to hire 650 new IT professionals when there's obviously strong competition for talent they like to come and work with us and new solutions You've seen the development of Facilitea Coches and on the car side of Facilitea Casa during this year. Both are, I think, very significant successes for us, working very well. And some of the results you see there in financing for vehicles has increased 30% this year. And we have developed this new portal with 1.6 million visits already. The cashback that we launched just in November already has 1.3 million clients. So certainly a pretty significant sort of development of new solutions. So this is obviously something to continue for us. Lending growth, 7% on the performing side. You can see residential mortgages, 6.5%. Consumer lending, 12.4%. Business loans, 7.6%. Very strong growth across the board, very balanced. That 7.6% is both in Spain and internationally, but Spain is at 5.5%. Again, basically gaining market share and defending profitability across the sector. And on the custom fund side, again, almost 7% growth, 6.8%. You can see that finally market effect has been positive, almost 10 billion, 9.7%, but net inflows and growth of on-balance sheet deposits have been very significant as well. So again, outperforming, growing market share, and I'll get into some more detail, but obviously this is key strength and key attraction of our business going forward. Wealth management, we have grown net inflows almost 40%, a lot of it multiple pension funds, but also strong performance in savings insurance with market share gains, as I said before, and basically a business that keeps doing very well. The figure for AUM at the end of December is already 7% higher than the average AUM during the year, so it gives you an indication that we're clearly seeing good potential. and the market in January have been positive certainly for our AUMs. Protection in insurance has been stellar, 13% growth, and you can see that both life risk with very strong mortgage market but also with very strong – and our sort of stand-alone life risk products doing very well. But non-life is a big gap to 11.7% as well. And you see on the right-hand side precisely the gains in market share that I mentioned before in non-life, you know, and in life risk even more significant. But it's a pretty good outcome for the year. The speed at which we continue to grow this business is remarkable. And obviously, as you know, it adds quite a lot to our bottom line. And with that, a comment on shareholder value creation and shareholder remuneration. Earnings per share up 5%, dividend per share up 15%, round number 50 cents per share. Look at growth in book value per share and dividends in the year, basically 16%. And obviously, on the share-by-back front, we are not even half through the seventh share-by-back with $0.5 billion. And obviously, as well, our capital is at 12.56%. Our threshold for 2025 is at 12.25%. We have excess capital, again, to continue with this share-by-back program, which, as It is formally approved by the ECB and on the board. In the meantime, we still are at halftime before we conclude our seventh share buyback. Distribution plan for next year stays the same. The only difference is while the threshold for this year was $12.25 in capital, as you know, because of the counter-cyclical buffer, it will move to $12.50 in 2026 and beyond. So that's my part, and with that, Matthias, the floor is yours.

Thank you very much, Gonzalo. Good morning to everybody. Today it's up to me to guide you through a little bit more detail on the income statement and on the main caption of the balance sheet. Starting with the income statement for fiscal year 2025, as Gonzalo said, 5.9 billion of net income up 1.8% in the year. and actually checking on all the boxes of what was our guidance that we gave out and updated throughout the year 2025. NII down 3.9% in line with the minus 4% guidance. Revenue from services in line with the mid-single-digit guidance up 5.4%. Expenses up exactly 5.0% in line with the guidance and cost of risk. We guided for below 25 basis points, and we are closing with 22 basis points, so clearly below that guidance, with return on tangible equity standing at 17.5%, so on the higher end of the around 17% guidance that we updated. Looking into Portugal, Portugal net income reported of 473 million on the back of very strong commercial dynamics. Business volume up 7.5% and actually with a stronger dynamic than the group as a whole, gaining market shares across the products, but specifically on the liability side on deposits and on savings insurance, another year with strong market share gains. helping bringing down efficiency all the way to 42% on very solid levels. Profitability up to 19.2%, also above overall group levels, and already significant characteristic of BPI with very strong asset quality, 1.5%, almost half of the sector average, and with very strong coverage ratios. And that is also taken into consideration by the rating agencies, which are upgrading throughout the year or putting us in outlook positive in BPI. Moving to the typical quarterly income statement analysis, and we will be getting into the details of some of the income lines, obviously. NII up 1.5% in the quarter, another quarter of strong NII recovery. Results from services, revenues from services with a very strong quarter, up 6.3% Q&Q and 4.7% year-on-year. both on the back of a strong wealth management contribution, but this quarter specifically on protection insurance, which is up 7.5% on the quarter. The expenses line down on the quarter, 0.2% to meet that 5% guidance on the fiscal year 2025. And net income pro forma, the accrual of the banking levy of 2024 of a linear accrual up 5.5%. Maybe a couple of comments here on the tax line. The tax levy on the banking industry, we registered $611 million throughout the entire year, which is a little bit higher than the $600 that initially we guided for, basically on the back of stronger performance both in NII and in fees. And, you know, that is the basis for the calculation of that levy. And on DTAs, we rode up $171 million in the fourth quarter for a total of $420 million of DTA write-up throughout the year, basically giving the better visibility and the full visibility that we had in the last quarter, both on pre-tax income for the year as well as on future profitability, which is the basis of those write-ups. So a certain acceleration of the pace to an overall year of $420 million. Going line by line, looking into NII, as I said, a strong quarter again, consolidating our recovery, leaving clearly behind the trough of NII in the second quarter of 25 at 1.5%, still obviously impacted by client yields and loan yields, which are still reducing. but on a less intensity, I would say, than the last quarters. So a fading impact from client yields compensated, more than compensated, both by a strong evolution of business volumes, both in the asset and the liability side, as Gonzalo was pointing out, and an increase of the contribution of the ALCO to 45 million. We increased hedges on the quarter by almost $10 billion to stand at $68.4 billion, and the ALCO book was stable Q&Q to stand at $76 billion by the end of the quarter. Customer spread down by just four basis points to 302 basis points if we adjust for hedges. And this is on the back of a positive evolution of our client fund costs, which go down two basis points from 49 to 47 basis points, again, ex-hedges. And the reduction of the loan yield, as I said, is fading. Six basis points down in the quarter to 349, and that compares to 20 basis points down last quarter. So clearly fading impact from negative loan rate resets. Looking at the crown jewel of our balance sheet and hence the supporting factor of the NII evolution of our non-interest bearing deposits. up 17 billion in the year, 2.2 billion in the quarter, with respect to or with contrast to interest-bearing deposits that are just up 5.6 over the year, 2.2 over the last quarter. The total average share of interest-bearing deposits is stabilizing at around 27%, and that is at lower levels than we initially expected in the strategy plan when we were guiding for around 30% of that of their share, which is now clearly stabilizing below those levels. I would like to point out also the reduction of 10 basis points of our deposit costs. In that, in a quarter, and I think this is remarkable, where the overnight rate actually was stable on average levels in the quarter, and still the deposit cost is coming down. That means that 50% of index rates was pretty stable, but the other part, which is term deposits, we still have been able to reprice them down by almost 20 basis points, leading to this 10 basis points of reduction of overall cost. So there's still some room of positive repricing downwards of our term deposit base. Moving to revenue from services, as I said, a very strong quarter and a very strong evolution year on year, focusing on the year on year 5.4% up on the bank of wealth management with 11% growth protection insurance, 4.8% up. And if we adjust for an extraordinary impact from BPI last year in 2024, that would be actually up 6.3%. And banking fees still subdued at 0.6%, but supported by CIB fees that are up actually 33% year-on-year on the full year number. So if we take only these driving forces and our growth engines, wealth management, protection, and CIB revenues, actually that composition would be up almost by 11% year-on-year. So putting a clear sign on the strength of our growth engines here. Costs, not much more to add to what was said already. Q and Q stable down by 0.2 percent. Cost to income remains at very low levels and is now below 40 percent at 39.4, clearly below peer average in European peers and also with a much stronger evolution over the last five years. outperforming the evolution of European peers by 10 percentage points, as you see on the bottom right side of the page. Moving to the balance sheet, asset quality very, very strong again in this quarter, down 20 basis points, our NPR ratio to 2.07. And this is bringing forward actually by two years what was our target set in the strategic plan, where we wanted to be at around 2% by the end of 2027. So we're bringing forward the completion of that target by approximately two years. A nice reduction across all the segments, as you see on the bottom left part. So there's no single segment, there's no single part of the portfolio actually that is not experiencing that positive evolution. Coverage up by 8 percentage points in the year. to 77% and remarkable that we are still holding 311 million of unassigned collective provisions. That is down 30 million in the quarter and also in the year as in the end of the year we've been assigning part of that provisions to specific provisions but the bulk of it still available and still available to protect into the future and into 2026 our cost of risk. Cost of risk down to 22 basis points in this last quarter, down from 24 basis points in Q3, and that is basically on the back of slightly lower seasonality this quarter of provisions than we experienced last year, and hence cost of risk standing at those 22 basis points clearly below the 25 basis points that we guided for. Liquidity I think already very structurally a message here, very strong LCR above 200%, NSFR just below 150, Loan to Deposit stable at 87% as both loans and deposits are growing approximately at the same speed and hence Loan to Deposit is still very comfortable. 226 billion of liquidity sources with very positive comparison to peers and to peer levels, as well as a very strong and stable deposit base based on transactional retail deposits and with a very high percentage of them being insured by the Deposit Guarantee Fund. And moving typically to the annual review that we share on the MREL position, MREL standing at 28.18%, and that is 327 basis points or 8 billion of MMDA buffer over requirement, mainly covered by subordinated MREL instruments. Actually, subordinated MREL stands above the total MREL requirement. After a year of very intense activity in the markets, 9 billion of issuances across all the asset classes, and two-thirds in euro, but one-third also in currencies that are not euro, specifically in dollars. We started 2026 already very successfully with a senior non-preferred issue combined with a tender offer, 1.25 billion of issue and 0.5 from the tender offer. And that is supported by the positive and strong view of our rating agencies, which are similar to what I explained in Portugal, actually upgraded us throughout the year or put us in outlook positive as the case of Fitch. And coming to capital, Gonzalo already went into some detail, 1256, 13 basis points up in CET1 and clearly above this 1225 threshold that is in place for the end of year 2025. Capital increase in positive of 63 basis points. Organic RWA increase just five basis points and this is supported by three SRT transactions, significant risk transfer transactions that we executed actually in this fourth quarter impacting positively by just below 15 basis points on that caption. So positive evolution supported by market activity. Dividend approval and 81 coupons, obviously, then distracting the eight basis points. And markets and others are coming down eight basis points. And here, as every fourth quarter, we are updating our operational risk RWA models. That is a yearly update, and that impacts also just below 15 basis points on that part. That means that the remainder moving parts of this market and other bucket are slightly positive. On shareholder value creation distribution plan, nothing to add to what Gonzalo has been pointing out. And fiscal year 2016 guidance, you've seen that all this morning already. Gonzalo mentioned 2027 view, and just to say that the 2026 view is fully consistent, obviously, in this journey towards 2027 targets. NII expected to be above $11 billion, and that is bringing forward by one year that initial target that we had for the fiscal year 2027, clearly on the way then to move up to that around $12.5 billion target for 2027. Revenue from services up 5% within that mid-single-digit range that we also are envisioning for the entire three years horizon. Operating costs up by approximately 4.5% after a 5% increase in 2025, 4.5 in 2026, and clearly on track. And we reiterate our commitment and our guidance of 4% CAGR for the entire three years of the strategic plan horizon. Cost of risk below 25 basis point on the back of the very strong asset quality and return on tangible equity at around 18% to fulfill that around 18% average return on tangible equity over the three-year horizon and the approximately 20% in 2027. On capital targets and distribution, nothing more to add. This is all well known to you. And with that, I think we are ready for questions.