Unicaja Banco, S.A.

Good morning to everyone. Welcome to Nicaja Banco first quarter 2021 results presentation. Let me start confirming, as usually, that we have published the quarterly financial report and this same presentation this morning before market opens in the CNMV website. Pablo González, our Chief Financial Officer. We'll go through the slides, and then we will answer all your questions. This quarter, we have split the presentation in four sections. The first one is a quick update of the merger with LiberBank. The second section includes the main highlights of the quarter. The third section includes the quarterly results and details. And, as usually, we will finish with an update of our solvency, liquidity, and asset quality.

Pablo, whenever you want. Thank you, Jaime. Good morning to everyone. Before in slide four, on the top of the slide, you can find the main terms of the transaction presentation. So I won't repeat them this quarter. However, in the bottom of the slide, you have the transaction calendar where you can see the following transactions. that following the announcement at the end of December, we held extraordinary general meetings for the merger approval the 31st of March, to 75% with 99.99% of the shares represented voting for largest banking groups in Spain, and more important, a process that, as you all know, will enable the bank to improve its in a very material way its profitability and shareholder returns, which are the main targets ahead. We are now waiting for all the formal regulatory authorizations, It doesn't depend on the beginning of the third one. Something that will enable us to report how... So if everything evolves as we are currently expecting and there isn't any unexpected delay, we will provide final details and impacts of the merger next quarter that will be the first quarter reporting results together with LiberBank as a single bank. If we move now to the quarterly results, I will start the second section in page 6 with the main highlights of the quarter. Year-on-year, with balance sheet funds growing almost 9% year-on-year. Total performing loans were flat in the quarter. New loan production improved significantly and remained positive. Core income, that is net interest income plus fees, grew almost 3% quarter on quarter. NII was 3.6% above the previous year, owing to the lower cost of deposits, among others. Fee income also showed a positive trend, growing 1% compared with first quarter 2020 than the reported trend. Total cost continued to improve and fell an impressive 6.1% compared with 2020, with savings amounting to 9 million. In terms of impairments, we have anticipated additional 25 million in the quarter, which is 3 million below first quarter 2020, despite reporting 14 million lower trading gains. On asset quality, liquidity and solvency, NPAs continue to decrease in the quarter, falling 1%. In year-on-year terms, NPAs fell 8%, with NPLs decreasing 11% and gross foreclosed assets by 5%. It is also worth noting that the NPAs' coverage level continued to grow one more quarter to a level close to 66%, which is all a liquidity point of view. The loan-to-deposit remained low at 64%, and our LCR at 286%. Finally, our seed, one fully loaded, reached 15.1%, with regulatory total capital at 18%. We have started 2021 as we were expecting, confirming the previously anticipated investments continue to be conservative but decreasing compared to the previous quarter. and NPA's balance continued to decrease while coverage was further reinforced, quite positive trends ahead of the merger with LiberBank, which will enable us to further improve future returns through the crystallization of synergies. Starting with the quarterly trends, as I already mentioned, both NII and fees reflect deposit guarantee FAD, in the fourth quarter of 2020, leaving gross margin 23.5% above last quarter. Total cost fell 2% quarter-on-quarter, more than 20%, leaving net income well above the previous quarter. From an annual point of view, I would highlight that the net interest income and fees improved 3.6% and 1% year-on-year respectively. leaving core income almost 3% above last year. Gross margin fell 5%, mainly owing to the lower trading gains that were quite high in the first quarter of 2020 of the higher contribution from one of our insurance affiliates included in this P&L line. Total costs showed a very positive trend once again, falling almost 6% compared with 2020, And finally, we decided to book additional 25 million of COVID-related provisions this quarter, leaving total impairments in line with the previous year and net income at 43 million, slightly below the 46 of the first quarter of 2020. If we move now to slide 9, you can see that total customer funds grew 9.6%. This was explained by strong growth in deposits that grew almost 10% year-on-year, but also an improvement of asset under management and of balance sheet funds that have been growing each of the last four quarters almost 9% above last year. In slide 10, you have credit and loans details where you can see that these quarters, they were stable. Gross loans were flat in the quarter by segment loans to individuals fell 0.3%, while corporate loans grew 0.9%. On the right-hand side, we include the performing loans trends that were also pretty stable. As you can see, total performing loans were flat quarter-on-quarter, In terms of segments, corporate performing loans grew 0.7% in the quarter, while consumer loans fell a bit more than 2%. It is worth noting that mortgages showed a small increase in the quarter for the first time in quite some time, something that was supported by a significant improvement of the new mortgage loan productions as you can see in the next page. In slide 11, here you can see that private sector new loan production improved significantly in the quarter. New loans grew 38%. compared with the previous quarter. As you can see in the bottom left side of the slide, new loans to individuals grew 39%, with new mortgages growing at that same rate of 39% quarter on quarter. If we compare with the third quarter of 2020, new loans to individuals grew 72% and mortgages 87%. New mortgage trends is, under my view, one of the positives of the quarter because it has been the first quarter in a long time that new mortgages are above amortizations, leading to a quarterly growth, changing a loan trend that started many years ago. New corporate loans also grew 36% compared with the last quarter of 2020. The improvement in private sector new loans compensated the lower public sector production and left total loans pretty flattish in the quarter. In slide 12, we start with the regular P&L review with net interest income. As you can see in the top right, interest income from loans and the debt portfolio fell in the quarter, something that together with the calendar effect explains the quarterly decrease, although partially compensated mainly by lower cost of deposits, because we still have deductions of costly customer deposits. In the bottom of the slide, you can see that the front book customer spreads continues to be above the back book that in the first quarter of 2021 was 155 basis points. Only one basis point below the previous quarter, but still above the second and third quarter of 2020. In slide 13, you have the debt portfolio details. As you can see, there are very little changes in this quarter. Overall balances reached 22.6 billion with an average yield of 93 basis points and most of the exposure still being sovereign debt classified in the amortized cost portfolio. If we move to slide 14, you have fee income trends that continue to show a positive trend despite the seasonality of the quarter. Total fees grew almost 1% year on year, despite including a one-off last year from a small deal related to our insurance business. Something that explains the decrease in non-banking product fees. On the other hand, payments and collections continue to improve and grew almost 10% year on year. If we move to slide 15, you have the total expenses evolution that again continue to reflect a positive trend as a result of our cost-cutting measures. Total costs fell more than 6% in the first quarter of 2021 compared with the first quarter of 2020, with personal expenses falling 5% and general expenses decreasing by almost 15%. Finally, it is worth noting that branches and employees continue to fall, a historical trend that, as you can see on the right-hand side of the slide, since 2016 has been decreasing at a run rate of 7% for branches and 4% for employees. In slide 16, you can see the regular details of our impairments. In first quarter 2021, we booked 25 million of additional provisions for COVID-19 potential future impacts. In the right of the slide, you can see that excluding these impairments, the recurrent cost of risk represented 16 basis points, increasing to 52 basis points when included all COVID provisions, which is well below the 85 basis points reported in 2020. We can now move to slide 18, where we have the regular NPL information. As you can see, NPL balances were more stable this quarter, and this was partially explained by the transfer of almost 60 million loans considered unlikely to pay into Stage 3. The NPL ratio remained at 4.2%, as we show in the table in the bottom of the slide. Quarterly gross entries were a bit higher this quarter, something explained by the mentioned reclassification of the 58 million considered unlikely-to-pay loans that we call subjective NPLs. Following a prudent review formalized in this quarter. In slide 19, we have updated the eco-loans and the moratoria balances. In the left of the slide, you can see that we have granted almost one billion of credit and loans guaranteed by the state of which the drone down balance was $6,656 million in March. This represents 9% of total corporate loans and 2% of total performing loans. In the right-hand side of the slide, we show the moratoria details, which are mainly mortgages, As you can see, out of the 863 million formalized, only 580 million are currently outstanding, meaning that one third of them have already finished, with the outstanding balance representing 2% of total performing loans. If we move now to slide 20, you have our regular credit risk exposure and NPL coverage details. Overall NPL coverage continues to grow one more quarter. At the end of quarter, the NPL coverage reached 68.4%, almost one percentage point above the previous quarter and 12.5 percentage points above the previous year. This is very conservative coverage level, especially considering that 85% of our NPL balances are secured. NPLs, as you can see in the right-hand side of the slide. In slide 21, you have the foreclosed assets details. As it happens with NPL coverage, foreclosed assets coverage also continued to increase to 63.1% in the first quarter of 2021, one of the highest of the sector. Gross balances fell 2% quarter-on-quarter and 5% year-on-year. In net terms, foreclosed assets fell 2.5% quarter-on-quarter from $405 in Q4 2020 to $396 million in Q1 2021. In slide 22, you can see how overall NPAs continue to decrease one more quarter, reaching 2.3 billion in gross terms and 769 million net of provisions, representing only 1.2% of total assets with a coverage at almost 66%, one of the highest of the sector. In slide 23, we update our liquidity position that, as you can see, it remains extremely comfortable with the loan-to-deposit ratio at 64, the LCR, the liquidity coverage ratio, at 286%, and the NSFR at 143%. And finally, we include our solvency position in the slide 24. Our regulatory seed one reached 16.5% in March. and our total capital was 18%, representing almost 1.3 billion buffer over our SREP requirement. In fully loaded terms, the ratio grew 12 basis points in the quarter, mainly owing to a small decrease in risk-weighted assets, reaching 15.1%. Finally, and until we receive news from the ECD, Let me remind you that our solvency ratios continue to be calculated in full under the standard approach, although we expect to change that in the very short term. So, that was the quarterly summary. Under my view, very positive trends ahead of the merger with LiberBank. Our core income grew compared with last year, total costs continued to fall, and impairments were below the previous quarters. From a balance sheet point of view, very little to add. One of the highest coverage of MPAs and one of the highest C1 ratio of the sector that have enabled us to merge with LiberBank, a merger that will bring us plenty of upside, hopefully, from next quarter onwards.

Thank you, Pablo. Thank you. We move now to Q&A. Let's start with those ones related with the merger with LiberBank. The first one is, Pablo, when it's more or less clarified. It was clarified throughout the presentation, but just in case. When do we expect to receive the formal authorizations for the merger? And when do we expect to report for first-time results together, Pablo?