Unicaja Banco, S.A.

Good morning everyone and thank you very much for joining us today for the result presentation of the fourth quarter 2024 at UNICAJA. We will be presenting a summary of our strategic priorities for 2025-27 as well. The presentation today has been uploaded to our corporate website prior to the opening of the market, and it's also on the CNMV website. There are five sections today. Our CEO, Isidro Rubiales, to my right, and Pablo Gonzalez, our CFO, is also present. They will be going through the presentations. Isidro will start with a brief summary of the year. Pablo then will give a bit more color on the financial key figures. And then Isidro will take the floor again to share a bit more information about our ambition going forward at the new strategic plan for the next three years. And then we will conclude the presentation and open the Q&A round. We will first give the floor to people asking questions here in person, and then we will give the floor to questions over the phone, first in Spanish and then in English. And if there are any further questions after that, we will check via the Zoom link whether there are any questions. Without further ado, Isidro, you may take the floor. Muy bien.

Thank you, Jaime, for the introduction. Good morning. Thank you for attending this recent presentation. Given the fact that closing the fiscal year and a period was particularly relevant, we decided to hold this presentation in this press room in order to share this event with all of you, those who are here on site and those who are connected remotely. Let me start out with a quick introduction that shows where we are standing and where we come from. We have embarked. upon a process after completing the integration of a corporate transaction with Iberbank. after going through a number of difficulties, but we have come to the end of that process. We wanted to change our image and our logo, therefore placing our odds on the process of changing our culture in the organization while preserving the values that have accompanied us throughout the process. Therefore, we now have 40% of female senior managers in our board of directors, and there are also independent directors right now. We have completed our senior management team. We are fully satisfied with the final composition of our team because we have brought on board A lot of outside talent, Luis Colorado, Juan Medina, and Estrella Bota, have joined senior management of Unicaja in order to develop our strategic plan. We are also leveraging ourselves upon some key strengths. We continue to be close. to customers in the territories with financial ratios that are very sound, which from a capital perspective and liquidity perspective enable us to face our strategic plan standing on sound grounds in order to carry out different actions. So we have been prudent in managing risk, as you know, and after the presentation you will see that we have been able to keep cost of risk at a moderate level. From that standpoint, we're now ambitious and we are embarking upon a new scenario going forward in the next three years with a special focus on our commercial activity with two key strategic pillars, transforming retail banking on the one hand and also transforming corporate banking. Our goal is to reach sustained structural profit. Our income statement in 2024 reflects that. Some of these results after a number of steps taken in 2023, you can see our structural profitability always adjusting our results to the credit profile of the institution. Now that we have set out the solvency levels of the organization, our structural profitability target, we want to increase shareholder remuneration. One of the highlights of 2024 is our capacity to fulfill our shareholder remuneration target. So that is where we are coming from, and this is where we are heading to. This is a picture of 2024 and our results by year end, which show how we have established structural profitability, aiming at sustainable profitability over time. These are some figures. We have paid out an interim dividend last year that accounted for six cents per share. Now, the Board of Directors will approve a final share of 7.4 euros per share, therefore If we compare this with the $0.05 per share that we paid the prior fiscal year, we are multiplying the shareholder remuneration by 2.7 times year-on-year. We have been able to do this thanks to increased profitability and an increased payout. Therefore, in 2024, dividend will account for 60%. credit book quality and the capital ratios achieved over the year. As for shareholder remuneration, this accounts for a profitability of 11% in terms of payment in cash. If we add $100 million as a result of the share buyback program, remuneration for shareholders will reach $444 million. 344 for dividends and 100 million as a result of the share buyback. Therefore, we will be reaching 100, actually this will be 14% higher compared to 132 million paid in 2023. Therefore, we are talking about an increase of 14 year on year and 77% as for shareholder remuneration and dividend payout for 2024. Now, after this quick introduction, We are going to discuss the business activity during fiscal 2024. And here we have four key headlines showing the highlights achieved during 2024 as for business activity. Customer business volume improved by 2% over the period, mainly leveraged by Increased deposits by nearly 5% of balance sheet funds reached 7.1% year-on-year. A new lending in the private sector afterwards. Pablo will give you more color on this. This accounted for an 18% growth year-on-year. However, credit volumes came down slightly, even though there was some stabilization in terms of private lending. From a profitability perspective, we reached a net profit of $573 million. We two-folded 2023 results, and we believe that... As of 2023, and thanks to actions taken in 2024, we have been able to reach sustainable results for the medium and long term. $573 million, that was the net profit, 115% more vis-a-vis 2023, therefore exceeding our guidance. Our OTE adjusted at 12.5% is now higher, and therefore the cost to income is now 44%, therefore 4%. less gear on gear. We have been able to achieve all these results, providing positive credit quality at the same time. We have been reducing MPAs for a long time. In 2024, we were able to reduce MPAs by 18% and foreclosed assets by 28%. We have done this through MPA coverage, which have grown up to 71% vis-a-vis 68%. Q4 2023, and the cost of risk has been controlled, therefore falling to 23 basis points. We have been able to do this, boosting solvency and liquidity with a CET1FL ratio accounting for 15.1% plus 40 basis points vis-a-vis Q4 2023 with a total remuneration in 2024 of 77%. We have been doing this by keeping liquidity ratios, which account for some of the best in the European banking system. And now let me hand over to Pablo, who will give you more details about 2024 results. This is our guidance performance except for commissions and costs. We can say that most of our financials performed according to guidance with net interest income standing at 14%. We were able to improve our guidance by year end. Growth eventually was 14%. Commissions fell by 4%, as you know. During 2024, we were particularly focused on retaining customers and writing off any commissions that do not add value. As for costs, they grew by 5%. As you know, in this case, there are several agreements that were particularly important, talking about agreements with individuals. The cost of risk. reached 23 basis points by contrast with 30 to 35 basis points, which was the guidance. As for ROTE, it stood at 10.4%. Now, Pablo, I give you the floor. Thank you. Isidro?

Let us now go through the commercial activity. We're going to start with customer funds. And I would highlight, as a strength of our franchise, the increase by more than 5% of total customer funds. This is broken down in 4.7% growth in balance customer funds and 7% of balance sheet funds. Moving on to wealth management and insurance. I would highlight a 12% increase in assets under management since 2022 and a 20% if you consider mutual funds exclusively, which is our main line of work. I would highlight that if you look at net subscriptions, we've been growing steadily for two years, and this year we have grown by 1.7 million. The boost we've given to asset management is actually very relevant, It's starting to yield fruit, and we see our market share improve as well. Thanks to this, we've improved our revenue from assets management and insurance by more than 10%, and it now accounts for 17% of the gross income. If you look at lending, following on Isidro's remarks, I would highlight... a stable drop this quarter, slightly above 1% and 4% for the year. This is basically half of the drop that we had last year. I would like to highlight that if you look at corporate loans, 8%, Well, half of that is the amortization of the ICO loans. We have some 940 million left out. This will make the book very stable. And starting next year, we can have a very positive outlook, even growth, consider growth of the lending book. This stabilization of lending, which we have observed for two quarters now, is driven by the growth in new subscriptions. And this happens across all lending books at around some 20%. And I would highlight particularly corporates and freelancers who grow by 30% this year. Moving on to the P&L. So I would highlight the growth this quarter. I would highlight how the margins, the NII is very stable at 8%. This yields a 14% year-on-year growth, basically. We were foreseeing a slight increase. It's eventually become a significant increase of our net income, and this proves our capabilities to create margin. Fees have increased by 4.7 this quarter, and thanks to that, we've been able to offset the 5% drop we mentioned earlier. All this drives the gross margin up by 15%, and the operating margin, taking into account the 5% increase of operating expenses, is at 14%. All in all, profit before taxes is at 120%, $816,573,000 after taxes, which is more than double the net income last year. Now, if we go into the details of the P&L, let's start digging into the NII as we normally do. I would highlight that through the year, from the end of 23 to date, the EUR has dropped by 140 basis points over 12 months, and it's the main rate used in our portfolios, particularly our mortgage portfolio, and as a result, This has yielded a 13-point drop in the yield from customers. Twelve points are accounted by the fact that This all happens earlier on in the year, so we've been able to stabilize the cost of deposits through the year. And then there is one relevant point I would like to highlight, which is that if we want to look at the real picture of the margin we get from our clients, we need to look at the cost of deposits and lending. And we've added also all the assets and the liabilities as cost and income. as could be, for example, fixed income portfolio, the loan to deposits, to duly reflect the margin that some clients generate, particularly liability clients. We need to take into account all investments, right? So I think that the improvement of this margin is quite telling. If you look at the evolution of the interest rate, we've been able to make our customer yield stable at around 80%. Now, if we move on to the bridge and the evolution this quarter, I would say the cost of deposits is more expensive at around 1 million. This is due to greater deposits in balance. The average cost, as you can see, has not increased, but the 1 billion additional deposits that we have have impact. because they are deposited, let's say, in the central bank, that would be the $7 million in impact. meaning the evolution of deposits, you might think it's negative, but it is positive because it's a greater ability to get revenue. And you can see this in the liquidity line. There's $11 million in recoveries. The more significant negative impact is the reappreciation of loans. And you see a $23 million drop in lending. $18 million out of that is due to the price and the rest due to the volume, the fact that our lending book drops. smaller. Additionally, I would mention two more points that offset the drop. Mission issuances are done at a better cost. We not only need to see at the impact on clients because the way to partially offset less revenue from the lending book is done through issuances which are issued at a variable rate so they offset further $7 million. And then with excess liquidity, we've been able to beef up our fixed income portfolio by $2 million. So beyond the customer spread, there are other variables to make the NII stable, I would say. in a nutshell. If you look at fee income, it's positive through the quarter, 4.7. Basically, this is driven by the non-banking fees, particularly mutual funds and insurance. And I would also mention that payments and accounts have progressed in a very steady manner. We've been making an effort through the year, as Isidro has mentioned, to manage fees from these services, and we've tried to steer them towards higher added value services, such as non-banking fees. That's the outcome of that 8% in the year in... that you see. Because of this, the evolution and the contribution of non-banking fees amounts to 41 and 45% respectively. They're slightly below the fees we get from transactional fees, but starting next year, we do think that the weight of non-banking fees will be greater. We assume this trend will continue into 2025 and beyond. Moving on to other income, I would highlight a significant improvement this year driven by less contributions to the deposit guarantee fund amounting to $88 million in Q4 2023. There are none this year. And the contribution to the SRF have also dropped. This is partially offset by an increase of the windfall tax up to $68 million in 2023 and $88 in 2024. And we've been doing and the other operations we've been doing this year. If you look at operating expenses, I would highlight that growth is fairly in line at 5.5%. That's the increase in operating expenses, and this is driven by personnel expenses. We've reached agreements with the... the representatives of our headcount and we have updated the remuneration of our employees and we also see a better because we have a better profitability we've been able to offer variable pay to part of our employees so this increase in operating expenses comes along with a better cost-to-income ratio. We've moved from 48 to 44 percent. Another silver lining, the cost of risk this quarter. It's at 24 basis points that I can't, 20 basis points, sorry, and 23 basis points for the year. We're actually considering 35 basis points, and this is basically driven by the high quality of the assets. If you look at the total provisions and its evolution, they have improved significantly from 546 to 319. This is basically driven by less, well, extraordinary provisions that we had to do for foreclosed real estate. We've gone from 286 to 15 million only. And if you look at loan loss provisions, they are less than what we had to provision last year. And if you look at other provisions, there is a slight increase there, driven by two facts. First, the nine millions, the adjustment of the tax that took place last year, and then the restructuring costs that we've registered this quarter to... renew the headcount. Now, moving on to profitability, I would highlight a significant improvement in profitability, basically driven by bigger income, 15% bump up in revenues and provisions have dropped by 42%, which more than offset that 5% increase in costs that I mentioned. We've moved from 371 million to 816 million, in profit before taxes and 573 after taxes as mentioned as a result. This is all reflected in our regular profitability ratios. The return on tangible equity is moving up to 9% from a 4% adjusted to a 12.5% CET ratio. It yields a 10.4% ROTE. well above our initial guidance. Now, another piece of good news is regarding non-performing loans. This has been a focus of our management in-house. We've been able to reduce non-performing loans and also for closed assets. So there's an 18% reduction year-on-year and 4% quarter-on-quarter in NPLs. And then the NPL ratio is down at 2.7%. We compare very well vis-a-vis our peers. And the NPL Coverage has increased by 2% this quarter and 4% year-to-date. This NPL coverage is very cautious, particularly taking into account that more than 50% of our NPLs are asset-backed. And if you look at non-performing loans... particularly foreclosed assets, the reduction is even greater. It stands at 28%. And the total reduction of non-performing assets and foreclosed assets is 22%. And the incoming flow is relatively low, I would add. The net accounting value, meaning the outstanding risk of foreclosed assets, is at 220 million, and the coverage ratio is 77 percent. Now, if you look at the whole picture, we're going from 1.8 million to 1.2 million approx, and we've increased coverage. We've gone from 74% to 71%. So the net NPA ratio, the actual real risk we have on balance is at 1.4%. These numbers give us peace of mind, and this removes the legacy we have with all those corporate operations in the past. Looking at solvency, I think Isidro has touched upon this already. This year, we've distributed more than 150 basis points in capital, and also we've been able to improve our fully loaded capital ratio by 40 basis points. says that we're very capable of creating value for shareholders sustainably. We have 40 basis points in improvement this quarter. If you look at the fully loaded ratio, this has been offset in the dividend payout. We were paying out 50%. And as the policy has changed, or rather the board has proposed to increase the payout to 60%, once we've made the adjustment for the year, it has absorbed the capital income for this quarter. The reason why there is a 30 basis point drop this year is a result of the valuation adjustments and the drop that has taken place this quarter. Now, moving on to the embryo ratios, they're up this year slightly at 26.9, and we still have a reasonable buffer in the CET1 and the MDA buffer. I don't want to go into the details of liquidity, as Isidro has mentioned already. We remain one of the financial entities with the best liquidity ratios. Loan-to-deposit is at 67%, and the NSFR at 159%. The request is at 100%, so we are very much accustomed to very high levels, and we don't really see the operational leverage capacity that UNICAHA has. If you look at the fixed income portfolio, we've increased the portfolio slightly, and we've generated liquidity. We've gone from 27.3 to 27.8. Remember that 85% of this portfolio is at an amortized cost, meaning it's a structural portfolio that manages the returns. We obtain from managing our clients' liabilities. The performance has increased slightly at 2.6%. That's the yield evolution, and we manage the interest rates actively to maximize as much as possible the yield. I will just mention that... Well, the makeup of the portfolio is basically public debt, and the risk profile is very low. And with that, I will give the floor back to Isidro. He will discuss the main lines of our strategic plan and conclusions. Thank you, Pablo.