Caixabank Sa Unsp/Adr

Good morning and welcome to Casabank results presentation for the first quarter of 2026. We are joined today by our CEO, Gonzalo Gortazar, and our CFO, Javier Pano. As usual, we plan to spend about 30 minutes with the presentation and about 45 minutes to an hour with the Q&A. The Q&A is live and you should have received instructions Questions by email on how to participate. Needless to say, at the end of the call, my team and I will be at your full disposal. And without further ado, Gonzalo, the floor is yours.

Thank you, Marta. Good morning, everybody. And let's get into substance. So, first quarter of the year, and... We feel quite happy with the way things are progressing, particularly in light of the unstable environment that we have outside of Spain and particularly in the Middle East and its consequences. So you see volume growth, 7% year-on-year. Revenues, you saw... The NII, which is in line with our expectation and our guidance in the quarter, still affected by negative repricing, as we had explained in the last presentation. Very positive figure from services, insurance and fees and commissions, 7.5% year-on-year. Quite remarkable in terms of the speed at which we continue to see asset quality improvement coming down to just below 2% in terms of MPLs and maintaining a very attractive cost of risk, which we see sustainable for quite some time. Good capital creation. We decided to, as in line with our policy, to affect another share by back, which we are Announcing today, return on tangible equity close to 18%, and in fact we are improving our guidance for the year from, as you say, tweaking from around 18% to above 18%, and we'll get into the reasons for that. We reiterate our guidance and... positive spirits about what we're seeing, despite the very concerning environment in the Middle East. So I'll start with the economy, not on this slide, but just learn the figures for GDP in Spain, 0.6%. growth quarter-on-quarter, which is higher than our expectations. Our economics team was expecting somewhere between 0.4%, 0.5%, and embedded into our current estimate of 2.4% GDP for the year was 0.5% growth. So something better than expected. And I think this is remarkable because the first quarter not only has Iran, but also in Spain we had some heavy rains in February and problems with particularly a train infrastructure. And to be honest, seeing 0.6% growth in the first quarter is very good news. We still have to incorporate into this 2.4% growth that we have for this year forecast growth. We need to incorporate the impact of the situation in the Middle East and the measures that the government in Spain has taken to offset at least partially what may come from increasing crude and oil prices and gas and fossil fuels and the consequences. But now we have... again, positive data from this first quarter. So quite good. Eurozone numbers have been a bit more mixed between the strong Germany and weak France and Italy, so-so. But in overall... The environment, again, is very resilient. And if you look at what's driving growth, which I'm not going to go through the list because you know what's happening in Spain in terms of very positive dynamics, very strong inertia, and some of the factors that... I wouldn't say prevent us from having an impact from the Middle East, but certainly moderate any negative impact from the Middle East, particularly the lower reliance on fossil fuels thanks to renewables in Spain. And now we're seeing... The last few weeks, remarkably low prices in Spain relative to most other European countries. A potentially positive, as we're seeing already, impact on tourist base on the spending of cards for tourists. We've already seen in these weeks better dynamics for tourism in Spain. We'll obviously have to continue monitoring the situation. But all in all, to be honest, within all the conservatism and prudence that one has to have in such a volatile environment, we see both Spain and ourselves in a very good relative position. Even Bank of Spain is saying, even in an adverse scenario, they still see growth in Spain at 2%. Time will tell. Obviously, the impact of rate movements, which is, again, very volatile, but clearly is suggesting increases in rates by the ECB and already increased rates in the markets are also positive. As you know, our NII sensitivity, I'm sure that Javier will discuss that in some detail. So with that kind of background which is in this case is very very relevant because really is critical what we see is our performance being I'd say above expectations above our internal expectations in terms of client acquisition 372,000 in the last 12 months and relational clients, volume growth of 6.6%, and then market shares with some delay, but we continue to see sustained, continuous increase in market shares across most of our product range. Transformation, technology, AI, we're spending a lot of money and a lot of time in making sure that we adapt to what the new technologies offer to our clients and to ourselves, so that as far as we can, we not only adapt, but that we lead. Here are some of the initiatives. Basically, they have to do with how the clients interact with clients, ourselves through the app mostly, how our employees interact with the bank, and this is aliens helping employees in various forms. Most relevant that we're deploying out to the whole network is for the preparation of commercial meetings with customers, which is bringing down preparation time by 75%, AI freeing up a lot of capacity to grow. And then there's a lot of AI and technology we're implementing, looking at how we run operations, how we sort of review processes end-to-end and how we make them work. much more efficient. We are very happy with the fact that this is not just plans, but actually things are happening and starting to have an impact as we speak in these quarters. Going back to financial performance, lending, 7.2 percent growth year on year for the Performing portfolio, growth quarter on quarter in a quarter that is obviously seasonally difficult. We have 1.1% growth. It's quite notable. And then you see residential mortgages, 6.7%, consumer lending, 12.3%, and business lending, 8.8%. It's very strong across the board and comparing to previous years. the traction and the pickup of activities is very remarkable. And obviously at some point we'll stop growing even faster than the previous 12 months, but the ability to maintain those levels is what's embedded in our guidance and certainly the first quarter. has surprised us on the upside. Customer funds, again, similar story, 6.3% growth in wealth management, in deposits, and market movements. But we also wanted to share with you what was the last quarter, because obviously that's when we had the negative market effects in March in particular. you can see that despite those effects of negative 3 billion, actually in April we're up by more than 7 billion, so we're recovering those impacts very easily. Again, subject to markets, but so far so good. And then most remarkable net inflows have stayed positive in the first quarter and continues to accelerate in the month of April, as you see the run rate at one and a half billion. So pretty good performance despite the events in Iran makes us quite satisfied with where we are and obviously that we can continue in that direction. You have some more details on wealth management. You can see how net inflows have been relatively well balanced between mutual and pension funds and savings insurance. the end of the first quarter, end of period AUMs are at the same level under the average, and as you can imagine, after what I said of the April performance, this is going up, so it obviously looks good for the rest of the year if the market does not deteriorate again. Now, the story of our potential on this part of the business is well known to you, our preeminent position, what we've done, and what we see is another quarter that vindicates that potential. a position and opportunity. Similar reasoning applies to protection insurance, 12% premium growth, very balanced between life risk and non-life. My box continues to be a great success and here is probably the area where we're gaining market share more rapidly across the business lines. You can see the last 12 months in life and non-life and Here you have some delay in the data. Some of it is still from December, but it's actually working well across the board, health, auto, household, good performance, gaining market share in line with what we've done for the last 10 years and a lot more in front of us because there's clearly much more potential in Spain and generally the Eurozone. And I'd like to finish with just a summary of what I said. You see what we're saying for the environment, the economy in Spain. We have lower... We're better shielded from Middle East crisis. Our clients are less levered than ever. And the financial sector generally is in a position to support the economy. So similarly or to the opposite of what we saw in the great financial crisis, where Spain was badly hit and the financial sector collapsed, not us, I have to say, but the finance sector overall obviously had some trouble. Here we have the opposite. The finance sector is going to help the economy, which is quite nice. And on our side, our scale, our balance sheet, our limited risks give us a lot of coincidence. We think that we have a good period ahead of us, hence the reaffirmation of our guidance and that slight increase for short-term return on tangible equity, which I'm sure we'll discuss later on. And with that, I guess, Javier.

Okay, thank you. Thank you, Gonzalo. Well, from my side, as always, the additional details on the P&L and the balance sheet, starting with the consolidated income statement, as you know very well, Net income at 1,572,000,000. This is up by 7% year-on-year, more than 5% quarter-on-quarter. Moving upwards, first NII, moving to revenues, is up by 0.6% year-on-year. Quarter on quarter down by 2%. You know that this quarter affected by seasonal impacts, mainly a larger day count and larger negative, still negative, loan industry success, although I'm pretty sure it's the last quarter to have those negative impacts. Then on revenue from services, pretty good news. As Gonzalo was saying, strong commercial activity here. mainly on protection, up by 7.5% year-on-year. Quarter-on-quarter, slightly negative, as we are comparing with the fourth quarter last year. You know the fourth quarter always strong positive seasonality, so that is why it's slightly negative. Below, all the revenues doing well, also up by 6% year-on-year. Dividends, I would remark that we have the dividend from Angola, from BFA, slightly smaller than last year. You know that we sold part of the stake. This is why we have a slightly smaller dividend on that front. Equity accounted up by more than 10%. Year-on-year, strong contribution from Seward Cash Adeslas. Other operating income and expenses and trading pretty much in line with last year. Total operating expenses also in line with guidance, moving up by 4.6%. Impairments along those charges, although higher in euro terms, If you look at the cost of risk on a 12-month trailing basis, it's currently 23 basis points. So this is down by two basis points versus last year. Good performance on other provisions and gains and losses. And my final comment here would be that on taxes, we are including a write-up of DTAs for 135 million euros. A few words on Portugal. Here we are disclosing what we call the BPI segment. That is, for the first quarter, 89 million net income. You know that the BFI dividend is in the corporate center. Well, here also a really strong performance in terms of business volume, up by 5.5% year on year. Since we took control back in 2017, business volume up by 43% versus 26% the rest of the industry. So a remarkable performance that results into broad-based market share gains, as you see here, on key products, even on a year-on-year basis, we are gaining market share in Portugal. High profitability, ROT 17.4% in line with the group. And it's a really strong balance sheet with MPLs at 1.6%, coverage 82. And on the right-hand side, you have several KPIs on the transformation process on IT and digital in Portugal. And we are going to be able to follow up as BPI has its own program on that front also. With that, let's move to the usual details on NII. On the central part, you have the usual quarterly NII bridge. You have a negative impact here from day count, minus 28 million. This is larger than last year as the size of the balance sheet and volumes in general are also larger. We have positives from business and alcohol. On ALCO, you may see that we have increased the size of our hedging portfolio and the fixed income portfolio, but this has been done late into the quarter, so the impact in the quarter is not that much. But once you have, let's say, a longer-term view on the upper left bridge, you may see the evolution on a year-on-year basis. You may see that business volume on ALCO is clearly offsetting the negative impact from client yields. As I was saying, on ALCO, basically what we have done is to front-load hedging activity for the second quarter, taking advantage of the significant increase in market rates. At some point, even the market pricing for rate hikes from the CV. What we have done is to front-load part of our, let's say, regular hedging activity. And here you have hedges up by close to $6 billion, the fixed income book, by close to 2 billion on top of like 3 billion of maturities that we have had in the quarter. Below you have margins and yields. I would remark that net interest margin is already starting to move up to 163 basis points, a trend that is expected to gradually continue in coming quarters. The customer spread at 300 basis points, X hedges on deposits, And you see that it's down by two basis points. The pace of reduction is clearly coming down and set to stabilize and start increasing again soon. And on the right-hand side, bottom right, you have the back book yield of the long book, 345 basis points, down by four basis points. This is also set to stabilize and start growing soon. And cost of deposits, six hedges at 45 basis points. Precisely on deposits, let's zoom in on the composition. Here you have, remember, the average quarterly balances for interest-bearing and non-interest-bearing. The most remarkable in my view here is that the relentless growth of non-interest-bearing deposits up by 6% year-on-year, also with positive evolution in the quarter, as you may see. We have a reduction on interest-bearing balances. This is basically outflows from the public sector. And the weight of those interest-bearing deposits at 26.4% pretty much stable since already a few quarters. The cost of those interest-bearing balances stable in the quarter at 156%. And this is despite the fact that, as you may see, 12-month rates are already starting to move up, starting to price rate hikes later into the year. Moving to revenues from services, really good performance here, up by 7.5% year-on-year. The remarkable, in my view here, is that the combination of wealth management, protection insurance, and CIV revenues is growing by 12% year-on-year, much more than offsetting the underlying, let's say, deflationary pressure that the industry is feeling on fees, on... lower added value products or more basic fees on certain products. You know, maintenance fees on current accounts, debit cards, etc. But the whole thing is that the key engines are really fighting on all cylinders and much more than compensating that. You may see wealth management up by 9.4% year on year, a strong growth despite the volatility in markets in March. Protection insurance up by 13.5% year-on-year. Strong commercial activity here, mainly on life insurance and health insurance, and also on the back of all the cross-selling attached to new mortgage production. Moving to costs, here everything according to plan, up by 4.6% year-on-year. Depreciation costs, as you may see, moving up by 7.4%. This is the result of the IT and AI transformation drive that is going on. But everything according to our planning. Cost to income, 39.6%, which compares extremely well with the peer average that is above 50%. Asset quality, as good as ever. So we have been able to reduce our MPLs by circa 300 million euros fully organically, 8.3 billion the stock of MPLs. That is an MPL ratio of 198% below our peers here in Spain. You may see that the evolution across the different segments is really a good one, even on a quarter-on-quarter basis, so not any sign of deterioration in any portfolio. Record high coverage, 79%, and with the unassigned collective provisions that have remained unchanged this quarter over 300 million. Cost of risk, as I said before, 23 basis points on a 12-month trading basis, even lower if we annualize the first quarter at 22 basis points. Liquidity, also a sample as always, 220 liquidity sources, LCR 194%, NSFR 145%. a really solid loan-to-deposit ratio, really stable, 87.6%. That compares extremely well with peers, as you know very well, and this is on the back of really stable retail deposits and corporate operational deposits. A few words on MREL and funding. We are ending the quarter with an MREL ratio at 28-26%. This is an M-MDA buffer at 336 basis points, pretty much the same as the MDA buffer, slightly one basis point below 340 basis points. And on the right-hand side, you have our funding activity. 60% of our three-year plan already executed, circa 40% in foreign currency. Remarkably, a few weeks ago, $2 billion in non-preferred with very big demand. And also a few days ago, new ratings upgrade by Moody's, upgrading our baseline credit assessment to A3. That results into an upgrade on 81%. Tier 2s and senior non-preferred, stable senior preferred, but this is already taking into account the incoming impact of the full deposit preference, which is actually very good news. And finally, capital. We are already deducting the 8,500 million share buyback from our CT1 ratio. That is a negative impact of 20 basis points. capital accretion plus 65 basis points, organic risk-weighted assets minus nine basis points. This is basically new lending. minus 41 basis points from dividend accrual and 81s, and then just a few negative two basis points from other impacts. So we are ending the quarter with a 51 ratio of 12.51%. And then on the right-hand side, you have the evolution of the book value per share, obviously adjusted by the DPS of 50 cents up by close to 15%. And finally, just a recap of our usual guidance slide. Here we are upgrading our ROT to more than 18% from circa 18% as we have better visibility into the year and some improvements here and there. So thank you very much and ready to take questions.