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The major Malaga-based Unicaja bank in Spain achieved a net profit of 294 million euros in the first half of this year, almost double (98.6% more) than in the same period last year. As the bank informed the Spanish National Securities Market Commission (CNMV) of its half-yearly results on Tuesday morning, this outcome is mainly due to the increase in income, which grew 21% year-on-year to more than one billion euros. This is because, on the one hand, customer spreads increased by 57 base points compared to just a year ago to 2.83%, with net interest income up 25.7% to 774 million euros, which offset the fall in fee and commission income (256 million euros, 5% less than in the first half of last year, which is attributed to the strengthening of customer linkage to the zero commissions plans). Operating expenses remained steady at around 225 million euros per quarter.
In any case, it should be noted that customer spread fell from 2.91% in the first quarter to 2.83% in the second quarter, as a result of a slight decline in the yield on loans from 3.59% to 3.55%, while the cost of deposits rose slightly from 0.68% to 0.72%. Net interest income amounted to 390 million euros in the first quarter, while in the second quarter it fell to 383 million. Regarding this issue, Unicaja's CEO, Isidro Rubiales, told a press conference that, from now on, the improvement in this area will come from volumes rather than in price or interest rates. He added for clarification that analysts have been informed of an upward revision of margins for the year as a whole.
Still, for the time being, this performance of revenues and expenses during the first half of the year as a whole has led to an improvement in the cost/income ratio by 7 percentage points to 44.6%. Meanwhile, the return on tangible equity (ROTE) improved by 2.5 percentage points from just under 4.1% to just over 6.5% year-on-year. The banking group has raised its adjusted profitability target for the year and now believes it will exceed 10%.
Moreover, Unicaja's figures for the first half were helped by the lower need for provisions, which fell by 30%, without this affecting coverage levels. These still remain among the highest in the sector, with 66% in doubtful assets and close to 75% in the case of foreclosed assets.
2.9% is the current default rate
Unicaja's total at the end of the first half of the year was seven-tenths of a point lower than the 3.6% a year earlier
In fact, the bank highlighted in its half-year accounts the improvement in its balance sheet: its volume of non-performing assets has fallen by 30.9% compared to a year ago, due to the reduction in the stock of foreclosed assets and also in doubtful assets. The NPL (non-performing loans) ratio stood at 2.9% at the end of June, down from 3.6% a year ago. As regards solvency, top quality capital stood at 15.1%, a year-on-year improvement of 130 base points from 13.8% in June 2023 thanks to the organic generation of earnings and the reduction in risk-weighted assets, and an excess of capital over regulatory requirements of 6.9 percentage points, equivalent to almost two billion euros.
All in all, the stock market reaction to the bank's accounts has been downward - at the end of the morning its shares were down around 5%. On this issue, at the press conference, the bank's senior executives said they were not worried about this stock market performance, as the bank's shares are coming off a very high rise and Unicaja is, after Sabadell, the most profitable stock on the Ibex-35 so far in 2024. "We keep an eye on the share price, but not for one day," they said.
15.1% capital adequacy ratio
This is the ratio of capital to risk-weighted assets at the end of the first half of 2024. It is 130 base points above the 13.8% it was 12 months earlier. It also exceeds the regulatory requirements by a proportion equivalent to close to two billion euros.
With regard to Unicaja's balance sheet, its performing loans portfolio stood at 48.22 billion euros in June 2024, up 1.5% in the quarter, although in year-on-year comparison (June 2024 compared with the same period last year) there was a fall of 5.9%. But, as stated by the bank, the balance of non-performing loans to individuals rose by 1.9% in the second quarter and 0.9% in the year to 33.321 billion euros due to the increase in consumer finance, although the year-on-year comparison is negative, with a decline of 4.1%. At the same time, the outstanding balance of the corporate loan portfolio declined by 3% in the quarter and by 13% year-on-year.
If we move from balances to pure activity in the first half of the year, Unicaja reports that between January and June it granted 4.131 billion euros in new loans and credit, of which almost a third (29%) were mortgages to individuals. In mortgages Unicaja's market share is now 4.6% across Spain although it is higher in the provinces of Malaga, Seville and Madrid.
The reverse side of how the loan portfolio is looking is the trend in customer funds under management. Retail customer funds amounted to 89.598 billion euros, 1.1% more than at the end of the first half of 2023. Excluding the evolution of deposits from public administrations, to which it attributes a more unstable nature, the growth in customer funds was 2.5%.
On-balance sheet funds amounted to 68.177 billion euros, up 0.8% year-on-year, after a 21% fall in those of public administrations (to 4.404 billion at the end of June) and a 2.7% rise in those of the private sector (to 63.773 billion). In the latter, demand deposits fell by 4.4% year-on-year, while time deposits grew by 48.5%, exceeding 11.75 billion euros.
From the comparison of loans and deposits emerges another measurement indicator: liquidity, i.e. the extent to which the banking group can respond to funding with the funds that customers have deposited with the bank. At the end of the first half of 2024 it stood at 72.8%.
Off-balance sheet funds - for example, mutual funds or pension plans - rose 2% year-on-year to 21.422 billion. In particular, the bank attributes this improvement to the 7.1% rise in mutual funds due to the appreciation of net asset values - the increase in the value of the assets - and also to positive net subscriptions (greater inflows of customer money than redemptions made). The accumulated assets in mutual funds amounted to almost 12.170 billion euros, while in pension funds they amounted to 3.655 billion (down 1.7% year-on-year).
70% of the bank's customers
are digital and take out 41.4% of new consumer loans online, as well as 28.4% of investment fund subscriptions.
In addition, Unicaja also reveals that as of June more than 70% of its customers are digital and that this translates into the contracting of new consumer loans through digital channels accounting for 41.4% of the total, while the proportion in the case of investment fund subscription is 28.4%. Similarly, non-face-to-face transactions - those carried out at ATM cash machines and through e-banking (internet and mobile app) - account for 82%, while the Bizum instant payments platform is now used - or at least customers have registered to use it - by 60.7% of active digital customers.
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