Unicaja Banco, S.A.

Good morning and thank you for attending Unicaja Banco first quarter results. Today, before market open, we have published this presentation and the rest of the quarterly financial information in the CNMV and our corporate website. We know that these are busy days with a lot of results coming out, so we will try to finish in no more than one hour. Pablo González, our chief financial officer, will do a quick presentation and afterwards we will hold the usual Q&A. Pablo, whenever you want.

Thank you, Jaime. And good morning to everyone. I will start in slide four with the main highlights of the quarter. Regarding business activity, total customer funds were very stable at the beginning of the year with private sector deposits growing 0.1% quarter on quarter and year on year. of balance sheet funds grew a bit more at 2.7% compared with the first quarter of 23. On the other hand, private sector loans continued to fall, but at a slower pace compared with previous quarters. However, customer spread continues to grow one more quarter, reaching 2.91% in March which is 17 basis points above the previous quarter and 90 basis points higher than in the first quarter of 2023. In terms of profitability, the beginning of the year has confirmed the expected improvement that we announced last quarter. Net interest income grew 32% year-on-year and 2.7% quarter-on-quarter. The banking margin was 36% above the previous year, something that also was reflected in the cost to income ratio that remained slightly below 49% in March. All these trends led to a net income of 111 million in the quarter, which is more than three times the one in the first quarter of last year. Asset quality trends were also very positive. Stage 3 loans fell an additional 7% in the quarter and 23% in the last 12 months. Foreclosed assets also continued to fall in the quarter, leaving its gross balance 33% below the previous year and representing only 0.3% of total assets. NPA's coverage remained high at 70% and cost of risk fell to 25 basis points. Total provisions, including legal and real estate assets, fell 39% compared with 2023. All of them very positive trends that we will see in more details afterwards. Finally, in terms of solvency and liquidity, it is worth noting that despite the negative impact in the quarter from the share buyback, Our seed one was 14.5%, implying an MDA buffer close to 680 basis points. Total MREL grew above 28%. In liquidity, as you all know, we continue to have very comfortable position with one of the highest LCR of the sector at 294% and a loan-to-deposit ratio of 74%. All in all, as you can see, first quarter 24 trends are very positive and confirm the expected improvement that we anticipated at the end of last year. In slide six, you have the customer funds trends. As you can see, total customer funds were very stable, above $88 billion. Regarding unbalanced sheet funds, public sector deposits continued to fall in the quarter. However, private sector trends were very stable. The mix between site accounts and term deposits continue to grow this quarter, explaining the small increase in the cost of deposit that we will see later. Of balance sheet funds grew 1.6% in the quarter to 21.4 billion owing to a 3.7% increase in mutual funds. If we move to lending on slide seven, you can see how the performing loan book continued to fall in the quarter, but at a much slower pace than in previous quarters. One more quarter, public sector loans were the ones decreasing relatively more. However, private sector trends, despite still decreasing, were falling just a bit, more than 1% in the quarter. This compared with a quarterly drop above 2% in the fourth quarter of 2023 and above 3% in the third quarter of 2023. The mentioned drop, despite improving, it is partially explained by an active risk-reward commercial strategy to maximize offered spreads. It is worth noting that under current environment with more normalized rates, the profitability impact of negative commercial gap is not the same as the one we used to have with negative rates. By segments, corporate loans fell 2.4% in the quarter, still a bit more than loans to individuals that fell 1% in that same period. All in all, total performing loans fell 1.6% in the quarter. On the next slide, we show private sector new lending trends. New lending volumes in corporate loans and mortgages were positive in the first quarter of this year. Total private sector new lending was very similar to the first quarter, 23, but 18% above the previous quarter. On slide nine, a little bit of color on our digital business that continues to improve, partially supported by the new app that we launched some months ago, with an increase in the percentage of digital customers and strong figures in overall digital activity. 43% of the customer new lending, the consumer new lending, and almost one third of our mutual funds come through remote channels. Moving to slide 10, we have an update on sustainability. We continue to make significant progress in the different areas. This is one of the priorities for the whole entity. Let me quickly enumerate some of the recent developments. On the governance front, as we anticipated last quarter, the renewal The board has now been completed and ratified at the AGM. An optimal structure aligned with best practices and a committed and united board. We are also committed to society as we have historically demonstrated, and we continue making progress, always pushing for financial inclusion, keeping our agreements, but thinking about new engagements. On the environmental front, as part of our commitment with the future of our planet, we currently have 1.3 billion in green bonds representing 60% of the total outstanding senior and senior non-preferred bonds. In addition, we continue to develop and improve the way we incorporate sustainability issues with our clients and in our day-to-day credit risk management. Moving now to slide 13, we show the regular P&L details. Net interest income is up 32% in the year and almost 3% in the quarter. As we will see later, the growth is driven by additional repricing of loans and the improved liquidity position, which, as I said before, it is now something profitable again, thanks to the normalized rates levels. Fees fell 2% in the quarter in line with our current guidance and driven by the launch of commercial campaigns that have relaxed on part of the transactional fees to more loyal customers and more competitive mutual funds structures. Other revenues include 79 charge from the banking sector tax. Total costs grew 3.4% in the quarter. The expected increase in personal expenses was partially compensated by lower general costs and stable amortizations. Gross margins improved 4.5% in the quarter and almost 24% in the year. Loan loss charges improved more than 10% year-on-year and quarter-on-quarter with the cost of risk of only 25 basis points. Other provisions confirm the expected improvement announced last quarter following the provision effort made in 2023 Real estate provisions have become non-material, while other provisions fell in line with the expected guidance. All this led to a pre-tax profit of 184 million and a net income that reached 111 million. which is more than three times higher than the first quarter of 23, confirming the improvement in profitability that we announced last quarter. Now we will start reviewing in more details the P&L starting with the net interest income in slide 13. As you can see on the slide, the ongoing repricing of the loan book and a contained cost of deposits improved the customer spread one more quarter. long yield grew 24 basis points in the quarter while the cost of deposits only grew eight basis points as a result the customer spread improved by an additional 17 basis points in the quarter to 2.91 percent which is 90 basis points above one year ago if we move to slide 14 we have the main moving parts of the NII in the quarter. First, and driven by what we were explaining in the previous slide, lending contribution offset the higher cost of deposits. The fixed income portfolio contribution fell 4 million in the quarter. However, this was more than offset by the positive impact of improved liquidity position of the bank. All these explain the almost 3% quarterly improvement. In slide 15, as you can see, total fees fell 2% quarter on quarter, mainly driven by two factors. On one side, as I mentioned before, we have implemented some commercial campaigns to adapt transactional fees to current interest rate environment. the other hand asset under management fees were lower because of the increased demand for mutual funds with a lower risk but also relatively lower fees these two factors were partially mitigated by the strong insurance fees that are usually higher at the beginning of each year if we move now to slide 16, we have the breakdown of other income that includes income different to NII and fees. Here I would like to clarify that income from associates presents a significant improvement compared with the previous year and this is mainly because of an extraordinary impact related to IFRS 17 in our main insurance affiliate unicorp vida which offset the higher banking tax paid that grew from 64 million to 79 million this year moving to slide 17 you have total cost details While administrative costs fell in the quarter and amortizations were stable, personnel costs grew to 135 million, reflecting the impact from the new collective agreement, among others. Total operating expenses grew to 225 million in the quarter, which is the run rate implied in our mid-single-digit growth guidance for 2024. On the right hand side, you have the evolution of our cost to income. It is worth noting that despite higher costs and the banking tax, the positive income trends enabled to improve the efficiency of the bank with the cost to income ratio slightly below 49% compared with 57% of the first quarter of last year. In the next slide, we show the evolution of the cost of risk and other provisions. Regarding long-lost provisions, it has improved further at the beginning of the year to 31 million that represented 25 basis points of cost of risk. This is even slightly below the low range of our guidance that was between 30 and 35 basis points for the whole year. such a positive performance is explained by the low risk profile of our book and its coverage levels in the right hand side of the slide we have included the evolution of total provisions here the most important news is that we are also delivering to what we said last quarter we expect real estate provision to become not material going forward. Regarding the rest of provision, as you can see, they have also fell towards a level in line with our guidance. Total provisions should decrease significantly in 2024, being one of the main drivers of the expected improvement in our profitability from now onwards. On slide 19, We have included our quarterly net income evolution. As you can see, first quarter 24 shows a significant improvement despite the impact of the banking tax. The banking margin that includes NII plus fees plus total cost grew 36% in the first quarter 24 compared with the first quarter of 23. On the right side, you can see that the return on tangible equity grew from around 4% last year to the current 5.4% or 6% when we adjust the excess capital over 12.5%, seed one. fully loaded it is important to take into consideration that we use the last 12 months net income to calculate the return on tangible equity as you can see this trend leaves us on the way of improving return on tangible equity above nine percent as we expect for the full year Let's move now to asset quality, where we have continued our progress during one more quarter. Starting with NPLs, in slide 21, you can see how stage three balances fell an additional 7% this quarter. The NPL ratio fell below 3% despite the drop in loans, with the coverage growing from 64 to 66%. a very comfortable level considering that the big bulk of our NPLs are residential mortgages. In page 22, we have the foreclosed assets and overall NPA's details. Foreclosed assets decreased further to 314 million or 1.2 billion in gross terms. Quarterly sales of 66 million more than offset the 50 million entries. The NPA exposure fell farther this quarter while we kept coverage at the relatively high level. As you can see on the right, total NPAs with a 70% coverage continue falling this quarter another 6% and almost 30% when we compare them with the first quarter of 23. And gross NPA Fail ratio fell to 5.3 or to 1.7 when considering net balances. All in all, the significant decrease in MPS continued during one more quarter. Let's move now to solvency, page 24. Seed 1 fully loaded fell 21 basis points in the quarter to 14.5 percent. On the positive side, retained earnings and lower risk-weighted assets had a combined positive impact of 46 basis points. However, the 34 basis point impact from the share buyback and the mark-to-market of EDP stake through Opidum left seed 1 at 14.5. On slide 25, you have our MREL position. As you can see, our MREL liabilities represented 28% of our risk-weighted assets, a level that includes a comfortable buffer of over our 24.9% requirement. In the right-hand side, you have some additional info, including our MDA buffer that has grown to 679 basis points, a level that implies that we will continue to have comfortable buffers, even if a kind of countercyclical buffer is finally requested in Spain in the future. In the next slide, we have the fixed income portfolio details. As you can see in the slide, there are very small changes in the quarter. The size and the yield were very stable. However, we have increased a little bit the duration from 2.2 year to 2.4 years in order to preserve its contribution going forward. Finally, in slide 27, we update our liquidity position. As you can see, we continue to have a very strong liquidity position with a huge balance of liquid assets, a loan to deposit ratio of 74%. the nsfr at 157 percent and lcr once we have repaid fully repaid the tltros at a significant 294 percent all of them very strong liquidity metrics So that's all from my side. As a final remark, I think it is worth to highlight that the first quarter 24 trends are very positive. Our structural Profitability is improving. We continue to reduce our MPAs at a very good pace. Our solvency position remains very strong despite the negative impacts of the quarter, and we have one of the strongest liquidity position on our peers. All in all, a good set of results that we expect to continue to improve in the coming quarters.

Thank you, Pablo. We will now move to the Q&A. Please remember to ask, if it's possible, only two questions each one, and also remember to mute your line after the questions. Operator, please open the line for the first question.