4 th Quarter Quarterly Report

Transcription

1 4 th Quarter 2016 Quarterly Report

2 Index 1. Banco Popular Group 2. Business 2.1 Main business 2.2 Real estate and related business

3 1. Banco Popular Group

4 Main business ratio Business volume Total assets managed 179,431, ,050,719 On-balance sheet total assets 158,649, ,925,728 Own funds 12,719,992 11,364,901 Customer deposits 85,420,921 84,641,529 Lending to customers (gross) 107,085, ,296,718 Net return and efficiency Average total assets 158,337, ,809,076 Average risk-weighted assets (RWA) 78,880,371 74,096,705 Average total equity 12,727,360 13,960,799 ROA (%) 0.07 (2.25) RORWA (%) 0.13 (4.70) ROTE (%) 1.20 (47.33) Operating efficiency (%) banco popular group (12Q16 in thousands and %) Risk management Total risks 142,582, ,162,738 Non-performing loans 18,339,525 19,601,578 Allowances for credit losses 7,793,422 10,243,088 % non-performing ratio % coverage of non-performing loans and written-off loans NPL Coverage Ratio ex Write-Offs (%) % coverage with guarantees NPL and REO Coverage Ratio* NPA Coverage ratio Ear nings Net interest income 2,251,236 2,096,588 Gross operating income 3,430,911 2,825,752 Profit before provisions 1,689, ,801 Profit before tax 114,184 (4,888,482) Consolidated profit for the year 105,934 (3,485,361) Net profit attributed to the Group 105,432 (3,485,366) * The NPL and REOs (ex-rentals) coverage ratio includes mortgage floor clauses provisions. This ratio excluding mortgage floor clauses provisions would be of 38.06% in 2015 and 44.12% in Does not include rentals. The NPA coverage ratio excluding mortgage floor clauses provisions would be of 38.38% in 2015 and 44.81% in

5 Main highlights (Amounts in euro thousand) Variation % Business volume Total assets managed 179,431, ,050,719 (6.3) On-balance sheet total assets 158,649, ,925,728 (6.8) Own funds 12,719,992 11,364,901 (10.7) Customer deposits 85,420,921 84,641,529 (0.9) Lending to customers (gross) 107,085, ,296,718 (2.6) Solvency CET 1 ratio (%) Tier 1 ratio (%) Total capital ratio (%) Phased-in Basel III Leverage ratio (%) Risk management Total risks 142,582, ,162,738 (5.9) Non-performing loans 18,339,525 19,601, Allowances for credit losses 7,793,422 10,243, % non-performing ratio % coverage of non-performing loans and written-off loans NPL Coverage Ratio ex Write-Offs (%) % coverage with guarantees (%) NPL and REO Coverage Ratio* NPA Coverage ratio* Ear nings Net interest income 2,251,236 2,096,588 (6.9) Gross operating income 3,430,911 2,825,752 (17.6) Profit before provisions 1,689, ,801 (52.8) Profit before tax 114,184 (4,888,482) < Consolidated profit for the year 105,934 (3,485,361) < Net profit attributed to the Group 105,432 (3,485,366) < Net return and efficiency Average total assets 158,337, ,809,076 (2.2) Average risk-weighted assets (RWA) 78,880,371 74,096,705 (6.1) Average total equity 12,727,360 13,960, ROA (%) 0.07 (2.25) RORWA (%) 0.13 (4.70) ROTE (%) 1.20 (47.33) Operating efficiency (%) Per share data Final number of shares fully diluted (thousands) 3 2,165,075 4,196, Average number of shares (thousands) 3 2,152,184 3,186, Adjusted share closing market price ( ) (66.4) Market capitalization 5 6,588,325 3,852,716 (41.5) Book value per share diluted ( ) (53.9) Net earnings per share ( ) (1.094) < Price/Book value Price/Earnings (0.84) Other data Employees 15,079 11,948 (20.8) Spain: 13,480 10,671 (20.8) Men 8,318 6,083 (26.9) Women 5,162 4,588 (11.1) Abroad: 1,599 1,277 (20.1) Men (23.8) Women (14.9) Branches: 2,124 1,739 (18.1) Spain 1,936 1,604 (17.1) Abroad (28.2) ATMs 2,554 2,368 (7.3) 1. Phase-in Basel III Leverage Ratio CRR. 2. Coverage ratio including the maximum amount of the guarantees according with the FINREP criteria. 3. Calculated on average number of diluted shares. 4. Share price prior periods adjusted by rights issue effect. 5. Calculated on shares outstanding. 6. Does not include rentals *The NPL and REOs (ex-rentals) coverage ratio includes mortgage floor clauses provisions. This ratio excluding mortgage floor clauses provisions would be of 38.06% in 2015 and 44.12% in Does not include rentals. The NPA coverage ratio excluding mortgage floor clauses provisions would be of 38.38% in 2015 and 44.81% in The consolidated financial statements as of 31 December 2016 included herein have not been audited albeit are being prepared in accordance with the accounting principles and methods established by the International Financial Reporting Standards as adopted by the European Union (IFRS-EU), and are consistent with those used in the preparation of the audited financial statements in the 2015 Annual Report. 5

6 Salient aspects In an environment in which interest rates remained low and the deleveraging of credit continued, in the fourth quarter of 2016 the sector was impacted by the regulatory changes introduced by Bank of Spain Circular 4/2016 and the publication of the judgement on the retroactivity of the mortgage floor clauses. At Popular this quarter was marked by the non-recurring balance sheet clean-up exercise and the conclusion of the operating optimisation plan, one of the objectives of which was to reduce costs. These events had an impact on earnings, NPA volumes, and therefore on the resulting capital and coverage levels, which were slightly lower than the expected ones. The plan for optimising productive capacity came to a successful conclusion and will bring annual cost savings of c. 200m. The transformation of the operating model, with the focus on efficiency and centralised operations, will result in greater agility and sales time being freed up. The real estate business has set up a specialised real estate network that is beginning to produce results. The Main business continued to perform well and achieved a high level of recurring profitability, with higher credit volumes and front book rates than in previous quarters. Earnings for the quarter The year ended with losses of 3,485m after the provisions that amounted to 5,692m and included, among others, non-recurring provisions for NPLs and REOs, mortgage floors and Targobank s goodwill impairment. Excluding these non-recurring items, there would have been a profit of 185m, with the Core Business recording a profit of 998m, and the Real Estate Business recording losses of 813m. Noteworthy was the good performance of the net interest income and fees and commissions in the quarter, with increases of 3.4% and 5.5%, respectively. Although the low levels of interest rates continue to have an adverse effect on the net interest income due to the repricing effect, this has been offset by the lower costs of wholesale and retail funding and by the increased profitability of the new business. The good performance of the eligible loans portfolio for funding via TLTRO2 has allowed to apply a saving of 40 basis points in the quarter. Fees and commissions, began to improve with the support of other specialised businesses such as Insurance, and Asset Management. The income from entities accounted for using the equity method was up by 26.3% year on year, despite the negative impact of Targobank s losses ( -71m), as a result of its non-recurring allocations to provisions. Income from investee companies and joint ventures with specialist businesses performed well. Allianz (insurance, mutual funds and pension plans) and WiZink (revolving credit) are the investee companies that make the biggest contribution to Popular s profits. During the quarter sales were made of a number of positions in the fixed income portfolio that had a low contribution and a negative market value, leading to a loss on financial assets and liabilities in the quarter of 94m. The reinvestment of these positions at the current debt interest rate levels will signify an increase in the net interest income in the coming years of approximately an additional 60m per year. Excluding the costs of the successfully completed restructuring process, general expenses continued to fall quarter by quarter throughout the year. The restructuring process will bring annual savings of c. 200m in the coming years ,254 5,692 The level of provisions in the quarter was high, with provisions allocated in the year amounting to 5,692m, most of them non-recurring, and partly as a result of the new Bank of Spain Circular 4/2016, the judgement on floor clauses and the 100% impairment of Targobank s goodwill. 6

7 Commercial activity Market shares rose in the year to 7.75% in credit (+7 bps YoY) and 6.13% in deposits (+18 bps YoY). Disregarding non-recurring variations, profitable lending was stable year on year, in line with the system. Profitability continues to be the focus of Banco Popular s commercial activity. Despite the 15% increase in the volume of lending, the front book rates rose by 7 bps in the quarter, maintaining a differential of +32 bps with the average front book rate of the sector, and increasing the differential between the front book and back book rate by 38 bps. Additionally, the term deposits front book rate was down by 7 bps from the previous quarter, closing the gap with the sector rate and placing it 33 bps below the back book rate. There was good performance of the volume of total deposits year on year which remained stable, whilst retail deposits grew 2% in the same period. The LTD ratio stood at 103.5% and the LCR ratio at 135%, well above the regulatory requirements. Banco Popular continues to lead in SMEs, with a market share of 17.7% (up 120 bps year on year) and a front book rate in this segment that is 47 bps higher than that of the Bank s competitors. SMEs continue to account for over 63% of new business in the year. The Popular Consumer business, which includes Wizink, increased its lead in revolving credit when it integrated Barclaycard in November Risk management Popular performed a non-recurring reclassification exercise that will normalise non-performing entries in the future. This exercise led to a year-on-year increase in NPAs which, together with the non-recurring provisions for the year, took the NPA coverage ratio to 46%. 16,074 Analysis of the ordinary variations reveals the normalisation of non-performing entries (down by 27% from the previous quarter) and an increase in recoveries (up by 88%). In addition, the specialised management of the real estate business is beginning to produce results, with sales in December of 621m, of which 584m were doubtful portfolios. Retail sales of properties continued the positive trend observed in the previous quarter, and were up by 8% in the year. Solvency At the end of 2016 the CET1 phase-in ratio was 12.12%, giving an ample margin over the SREP regulatory level. Due to the exceptional nature of the quarter, the fully-loaded ratio was 8.17% at year end. 7

8 Consolidated income and profitability (Amounts in euro thousand) (% of ATA) Variation % Variation % Interest and similar income 3,508,688 2,929,747 (16.5) (0.38) - Interest expense and similar charges 1,257, ,159 (33.7) (0.31) =Net interest income 2,251,236 2,096,588 (6.9) (0.07) +Return on equity instruments 13,138 10,731 (18.3) (0.00) +Share of results of entities accounted for using the equity 47,422 59, method 595, ,671 (9.5) (0.03) +Fees and commissions, net 517, ,728 (61.2) (0.20) ±Gains or losses on financial assets and liabilities (net) 45,564 41,950 (7.9) (0.00) +Exchange differences (net) 196, ,499 (29.4) (0.03) ±Other operating results 227, , Assets under reinsurance and insurance contracts income - Assets under reinsurance and insurance contracts expenses 33,241 33, ,119 34,426 (16.3) (0.00) =Gross operating income 3,430,911 2,825,752 (17.6) (0.34) - Administrative expenses: 1,603,687 1,887, Personnel expenses 935,833 1,237, Other general administrative expenses 667, ,791 (2.7) (0.00) - Depreciation & amortisation 137, , =Net operating income 1,689, ,801 (52.8) (0.55) - Financial asset impairment and provisioning (35,028) 193,224 > (0.02) Impairment of other assets 1,425,587 3,863,618 > =Net operating income 298,912 (3,259,041) < 0.19 (2.11) (2.29) - Impairment or (-) reversal of impairment on nonfinancial assets + Gains or (-) losses on derecognition of non financial assets, net + Profit or (-) loss from non-current assets and disposal groups classified as held for sale not qualifying as discontinued operations (21,648) 381,404 > (0.01) ,875 70,341 (45.0) (0.04) (334,251) (1,318,378) < (0.21) (0.85) (0.64) =Profit before tax 114,184 (4,888,482) < 0.07 (3.16) (3.23) -Income tax 8,250 (1,403,121) < 0.01 (0.91) (0.91) +Gains/losses on discontinued operations (net) =Consolidated profit for the year 105,934 (3,485,361) < 0.07 (2.25) (2.32) - Profit attributed to minority interests (99.0) (0.00) =Profit attributed to the controlling company 105,432 (3,485,366) < 0.07 (2.25) (2.32) Net return on risk-weighted assets (RORWA) (%) 0.13 (4.70) (4.84) Operating efficiency ratio (%) In million Average total assets 158, ,809 (3,528) Average risk-weighted assets (RWA) 78,880 74,097 (4,784) Average equity 12,727 13,961 1,233 8

9 Quarterly Consolidated Income (Amounts in euro thousand) Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 Interest and similar income 935, , , , , , , ,571 - Interest expense and similar charges 373, , , , , , , ,929 =Net interest income 562, , , , , , , ,642 +Return on equity instruments +Share of results of entities accounted for using the equity method 521 7,764 1,595 3, ,251 2,164 2,611 15,491 18,794 19,121 (5,984) 24,319 41,390 23,652 (29,466) +Fees and commissions, net 146, , , , , , , ,516 ±Gains or losses on financial assets and liabilities (net) 187, , ,586 88,318 98,899 93, ,726 (94,054) +Exchange differences (net) 11,778 10,799 11,582 11,405 7,711 11,899 8,579 13,761 ±Other operating results 31,008 40,164 38,679 86,370 37,414 31,441 28,891 40,753 ±Other operating expenses 23,821 35,242 29, ,847 30,629 87,890 35, ,300 + Assets under reinsurance and insurance contracts income - Assets under reinsurance and insurance contracts expenses 13,643 6,527 6,648 6,423 6,696 6,574 13,192 7,039 17,370 9,084 7,400 7,265 7,073 6,789 13,286 7,278 =Gross operating income 927, , , , , , , ,224 - Administrative expenses: 388, , , , , , , ,618 Personnel expenses 229, , , , , , , ,684 Other general administrative expenses 158, , , , , , , ,934 - Depreciation & amortisation 33,211 34,657 35,006 34,879 35,099 34,997 35,216 35,383 =Net operating income 505, , , , , , ,023 (294,777) - Financial asset impairment and provisioning (24,556) 246 (7,784) (2,934) (2,425) (547) 27, ,106 - Impairment or (-) reversal of impairment on financial assets not measured at fair 288, , , , , , ,588 3,074,004 value through profit or loss =Net operating income 242, , ,719 (348,225) 213,790 23,711 41,345 (3,537,887) - Impairment or (-) reversal of impairment on non-financial (25,327) 33,943 6,907 (37,171) (23,618) 21,617 (28,159) 411,564 assets + Gains or (-) losses on derecognition of non financial (5,581) 71,952 4,907 56,597 10,711 68,654 (1,532) (7,492) assets, net + Profit or (-) loss from noncurrent assets and disposal groups classified as held (139,690) (119,591) (69,930) (5,040) (123,874) (86,678) (77,499) (1,030,327) for sale not qualifying as discontinued operations =Profit before tax 122, , ,789 (259,497) 124,245 (15,930) (9,527) (4,987,270) -Income tax 31,347 30,861 33,864 (87,822) 30,634 (15,893) (10,509) (1,407,353) =Consolidated profit for the year 91,136 96,548 89,925 (171,675) 93,611 (37) 982 (3,579,917) - Profit attributed to minority interests (300) 34 (161) 929 (181) (159) 566 (221) =Profit attributed to the controlling company 91,436 96,514 90,086 (172,604) 93, (3,579,696) 9

10 Quarterly Profitability Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 Interest and similar income Interest expense and similar charges =Net interest income Return on equity instruments Share of results of entities accounted for using the equity method (0.02) (0.08) +Fees and commissions, net ±Gains or losses on financial assets and liabilities (net) (0.25) +Exchange differences (net) ±Other operating results ±Other operating expenses Assets under reinsurance and insurance contracts income - Assets under reinsurance and insurance contracts expenses =Gross operating income Administrative expenses: Personnel expenses Other general administrative expenses Depreciation & amortisation =Net operating income (0.78) - Financial asset impairment and provisioning (0.05) - (0.02) (0.01) (0.01) (0.00) Impairment or (-) reversal of impairment on financial assets not measured at fair value through profit or loss =Net operating income (0.89) (9.37) - Impairment or (-) reversal of impairment on nonfinancial assets + Gains or (-) losses on derecognition of non financial assets, net + Profit or (-) loss from non-current assets and disposal groups classified as held for sale not qualifying as discontinued operations (0.06) (0.08) (0.06) 0.06 (0.07) 1.09 (0.01) (0.02) (0.35) (0.30) (0.18) (0.01) (0.32) (0.22) (0.20) (2.73) =Profit before tax (0.67) 0.32 (0.04) (0.02) (13.21) -Income tax (0.23) 0.08 (0.04) (0.02) (3.73) =Consolidated profit for the year (0.44) 0.24 (0.00) 0.00 (9.48) - Profit attributed to minority interests =Profit attributed to the controlling company =Profit attributed to the controlling company (0.44) (9.48) Net return on risk-weighted assets (RORWA) (%) (0.90) (20.35) Operating efficiency ratio (%) In million Average total assets 161, , , , , , , ,044 Average risk-weighted assets (RWA) 79,747 79,761 78,977 77,037 75,487 75,630 75,634 70,374 Average equity 12,785 12,756 12,714 12,675 12,643 13,022 14,939 14,875 10

11 Yields and Costs (Amounts in euro thousand) Average balance Distribution (%) Income or expense Average rate (%) Average balance Distribution (%) Income or expense Average rate (%) Financial system 6,161, , ,770, ,432 (0.14) Loans and discounts (a) 96,195, ,083, ,930, ,549, Securities portfolio 32,070, , ,038, , Other earning assets 185, , , , TOTAL EARNING ASSETS (b) 134,613, ,508, ,923, ,929, Other assets 23,723, ,885, TOTAL ASSETS 158,337, ,508, ,809, ,929, Financial system 32,217, , ,012, , Customer funds (c) 89,100, , ,632, , Demand and savings accounts 36,255, , ,759, , Time deposits 43,473, , ,735, , Savings and time deposits 9,371, , ,137, (0.28) Marketable debt securities & other 18,232, , ,307, , Other interest-bearing liabilities 313, , , , TOTAL INTEREST-BEARING FUNDS (d) 139,863, ,257, ,229, , Other funds 5,746, ,618, Equity 12,727, ,960, TOTAL FUNDS 158,337, ,257, ,809, , Customer spread (a-c) Spread (b-d) Net interest income

12 Quarterly Yields & Costs TOTAL ASSETS Financial system Customer funds (c) Demand and savings accounts Time deposits Savings and time deposits (0.02) 3.83 (0.01) Other interest-bearing liabilities Other interest-bearing liabilities TOTAL INTEREST-BEARING FUNDS (d) Other funds Equity TOTAL FUNDS Customer spread (a-c) Spread (b-d) Net interest income Q15 2Q15 3Q15 4Q15 (In %) Distributiotiotiotion Rate Distribu- Rate Distribu- Rate Distribu- Rate Financial system Loans and discounts (a) Securities portfolio Other earning assets TOTAL EARNING ASSETS (b) Other assets Q16 2Q16 3Q16 4Q16 (In %) Distributiotiotiotion Rate Distribu- Rate Distribu- Rate Distribu- Rate Financial system (0.38) 4.19 (0.27) Loans and discounts (a) Securities portfolio Other earning assets TOTAL EARNING ASSETS (b) Other assets TOTAL ASSETS Financial system Customer funds (c) Demand and savings accounts Time deposits Savings and time deposits 3.22 (0.09) 1.91 (0.31) 1.27 (0.44) 1.69 (0.52) Marketable debt securities & other Other interest-bearing liabilities TOTAL INTEREST-BEARING FUNDS (d) Other funds Equity TOTAL FUNDS Customer spread (a-c) Spread (b-d) Net interest income

13 Net Fee and Commission Income Distribution % (Amounts in euro thousand) Variation % Portfolio administration 100,666 99,652 (1.0) Securities portfolios 9,620 9,408 (2.2) Asset portfolio management 5,045 6, Mutual funds 77,261 76,168 (1.4) Pension plans 8,740 7,926 (9.3) Other banking services 494, ,019 (11.2) Securities and foreign currency purchase and sale 8,105 4,228 (47.8) Demand account administration 109, , Provision of collateral and other guarantees 130, ,629 (5.0) Asset transaction services 105,641 90,784 (14.1) Collection and payment handling 74,535 59,858 (19.7) Other 67,239 50,179 (25.4) Insurance sales fees 25,197 30, Advisory on singular transactions 21,608 7,714 (64.3) Other 20,434 12,102 (40.8) Total 595, ,671 (9.5) (Amounts in euro thousand) 1Q16 2Q16 3Q16 4Q16 Portfolio administration 25,525 24,593 24,893 24,641 Securities portfolios 2,260 2,369 2,564 2,215 Asset portfolio management 1,277 1,188 1,789 1,896 Mutual funds 20,185 19,006 18,501 18,476 Pension plans 1,803 2,030 2,039 2,054 Other banking services 115, , , ,875 Securities and foreign currency purchase and sale 1, Demand account administration 29,671 28,217 26,042 26,411 Provision of collateral and other guarantees 30,463 30,254 31,673 31,239 Asset transaction services 23,925 23,082 21,025 22,752 Collection and payment handling 16,269 15,992 13,666 13,931 Other 13,358 12,703 9,553 14,565 Insurance sales fees 8,629 7,380 6,461 7,893 Advisory on singular transactions 1,534 1,890 1,499 2,791 Other 3,195 3,433 1,593 3,881 Total 141, , , ,516 13

14 Personnel and general expenses (Amounts in euro thousand) Distribution % Variation % Personnel expenses: 935,833 1,237, Wages and salaries 692, ,057 (3.9) Social security charges 180, , Other personnel expenses 29, ,501 > Pensions 33,605 34, General expenses: 667, ,791 (2.7) Rents and common services 137, , Communications 22,157 27, Maintenance of premises and equipment 72,638 66,791 (8.0) IT and outsourced services 144, ,028 (7.1) Stationery and office supplies 5,963 6, Technical reports and legal expenses 54,775 58, Advertising and publicity 21,325 17,498 (17.9) Insurance 6,195 4,828 (22.1) Security and fund transport services 17,076 17, Travel 9,887 10, VAT and other 135, ,521 (3.8) Other general expenses 40,035 35,747 (10.7) Total 1,603,687 1,887, (Amounts in euro thousand) Q16 2Q16 3Q16 4Q16 Personnel expenses: 225, , , ,684 Wages and salaries 165, , , ,496 Social security charges 45,191 45,453 48,267 44,845 Other personnel expenses 7,041 9,552 5, ,515 Pensions 8,270 8,523 8,530 8,828 General expenses: 153, , , ,934 Rents and common services 35,345 35,812 36,228 32,814 Communications 6,467 7,065 6,851 7,303 Maintenance of premises and equipment 13,965 13,555 16,151 23,120 IT and outsourced services 35,575 28,735 31,525 38,193 Stationery and office supplies 1,623 1,483 1,615 1,745 Technical reports and legal expenses 12,381 14,980 15,552 15,265 Advertising and publicity 3,806 4,472 4,630 4,590 Insurance 1,210 1,472 1, Security and fund transport services 4,163 4,764 4,416 4,488 Travel 2,319 2,662 1,989 3,048 VAT and other 27,254 26,123 34,653 42,491 Other general expenses 8,931 12,205 8,537 6,074 Total 378, , , ,618 14

15 Balance (Amounts in euro thousand) Variation % 12 months ASSETS Cash and cash balances at central banks 5,465,713 3,278,808 (40.0) Financial assets held for trading 1,285,883 2,103, Financial assets designated at fair value through profit or loss 535, , Available-for-sale financial assets 25,193,155 15,384,097 (38.9) Loans and receivables 105,076,291 99,104,146 (5.7) Deposits at credit institutions 4,301,561 4,159,264 (3.3) Of which interbank deposits 253, ,510 (20.0) Loans and advances to other debtors 99,637,769 94,342,915 (5.3) Fixed Income 1,136, ,967 (47.1) Held-to-maturity investments - 4,583,511 - Derivatives Hedge accounting 443, ,219 (33.4) Fair value changes of the hedged items in portfolio hedge of interest rate risk 233, , Investments in subsidaries, joint ventures and associates 1,794,009 1,865, Assets under reinsurance and insurance contracts 17,524 17, Tangible assets 1,697,785 2,195, Intangible assets 2,571,879 2,612, Tax assets 3,604,163 5,082, Other assets 1,685,928 1,691, Non-current assets and disposal groups classified as held for sale 9,045,928 8,891,678 (1.7) Total assets 158,649, ,925,728 (6.8) LIABILITIES Financial liabilities held for trading 1,043,063 1,643, Financial liabilities designated at fair value through profit or loss 599, , Financial liabilities measured at amortised cost 140,508, ,184,666 (6.6) Liabilities of credit institutions 33,376,386 30,190,707 (9.5) Of which interbank deposits 2,728,852 1,881,236 (31.1) Deposits from other creditors 88,335,415 82,840,947 (6.2) Debt certificates including bonds 15,989,048 15,024,126 (6.0) Subordinated liabilities 2,066,951 2,039,472 (1.3) Other financial liabilities 740,724 1,089, Derivatives Hedge accounting 2,013,974 1,201,865 (40.3) Fair value changes of the hedged items in portfolio hedge of interest rate risk Liabilities under insurance and reinsurance contracts 486, ,284 (0.5) Provisions 383, , Tax liabilities 513, ,348 (22.6) Share capital repayable on demand Other liabilities 586, , Liabilities included in disposal groups classified as held for sale Total liabilities 146,135, ,838,115 (6.4) EQUITY Total equity 12,719,992 11,364,901 (10.7) Capital, reserves and retained earnings 12,656,947 14,850, Profit attributed to the controlling company 105,432 (3,485,366) < Interim dividends (-) (42,387) - (100.0) Other comprehensive income and accumulated (221,743) (289,278) 30.5 Minority interests (non-controlling interests) 16,376 11,990 (26.8) Net asset value 12,514,625 11,087,613 (11.4) Total liabilities and equity 158,649, ,925,728 (6.8) 15

16 Commercial GAP (Amounts in euro thousand) Lending to customers 99,637,769 94,342,915 Asset repos (valuation adjustments included) 6,504,071 6,701,640 Total net lending to customers (ex asset repos) (a) 93,133,698 87,641,275 Current accounts 35,953,703 39,794,472 Term deposits 41,882,347 38,079,083 Valuation adjustments 62, ,872 Subtotal customer deposits (ex repos, ex-treasury) 77,898,618 77,996,427 Retail Commercial paper 128, ,728 Mediation loans 1 6,362,208 5,458,505 Securitizations sold to third parties 237,507 50,824 Marketable securities distributed through the branch network 2 467, ,589 Tax collection accounts 326, ,456 Total customer deposits (b) 85,420,921 84,641,529 GAP (a-b) 7,712,777 2,999,881 LTD (a/b) 109.0% 103.5% 1. ICO and EIB funding directly received for loans to companies. 2. Including convertible notes, preference shares and subordinated debt distributed via the branch network 16

17 Funds Managed (Amounts in euro thousand) Variation % Customer deposits: General government 10,845,109 6,168,921 (43.1) Other private sectors: 72,498,678 72,498,046 (0.0) Residents 63,714,521 63,480,589 (0.4) Nonresidents 8,784,157 9,017, Valuation adjustments (±) 62, , Subtotal customer deposits and General Government 83,406,355 78,789,839 (5.5) Deposits at central counterparty entities 4,929,060 4,051,108 (17.8) Total customer deposits 88,335,415 82,840,947 (6.2) Unadjusted debt certificates including bonds: 15,798,519 14,919,835 (5.6) Bonds and other securities outstanding 15,043,679 14,094,885 (6.3) Commercial paper 754, , Valuation adjustments (±) 190, ,291 (45.3) Total debt certificates including bonds 15,989,048 15,024,126 (6.0) Subordinated liabilities 2,066,951 2,039,472 (1.3) Total on-balance sheet funds (a) 106,391,414 99,904,545 (6.1) Mutual funds 11,493,462 10,948,963 (4.7) Asset portfolio management 1,683,649 1,639,617 (2.6) Pension funds 5,314,996 5,150,871 (3.1) Insurance premium 2,289,255 2,385, Total other intermediated funds (b) 20,781,362 20,124,991 (3.2) Total funds managed (a+b) 127,172, ,029,536 (5.6) 17

18 Retail Funds (Amounts in euro thousand) Variation 12 months Demand deposits (ex-treasury) and Other accounts 35,953,703 39,794, Time deposits 41,882,347 38,079,083 (9.1) Asset repos 1,244, ,412 (76.2) Other accounts and valuation adjustments 62, , Subtotal customer deposits and General Government (ex-treasury) 79,143,355 78,292,839 (1.1) Retail Commercial paper 128, , ICO Mediation loans 1 6,362,208 5,458,505 (14.2) Securitizations sold to third parties 237,507 50,824 (78.6) Marketable securities distributed through the branch network 2 467, ,589 (2.8) Tax collection accounts 326, , Asset repos (1,244,737) (296,412) (76.2) Total Retail Funds 85,420,921 84,641,529 (0.9) 1. ICO and EIB funding directly received for loans to companies. 2. Including convertible notes, preference shares and subordinated debt distributed via the branch network 18

19 Lending to customers (Amounts in euro thousand) Variation % Lending to general government 5,327,992 4,820,339 (9.5) Lending to other private sectors: 101,560,271 99,246,316 (2.3) Residents 90,373,136 87,605,926 (3.1) NonResidents 11,187,135 11,640, Total lending to customers 106,888, ,066,655 (2.6) Other loans 196, , Total credit to customers 107,085, ,296,718 (2.6) Valuation adjustments (±) (7,447,441) (9,953,803) 33.7 Total 99,637,769 94,342,915 (5.3) Lending to customers by type (Amounts in euro thousand) Variation % Trade loans and discounts 4,140,855 4,175, Secured loans 38,648,708 35,664,946 (7.7) Mortgage 37,701,706 34,750,814 (7.8) Other 947, ,132 (3.5) Repos 6,504,071 6,701, Term loans and other lending 37,411,824 36,219,963 (3.2) Leasing 2,237,495 2,172,968 (2.9) Doubtful assets 18,142,257 19,361, Total lending to customers 107,085, ,296,718 (2.6) 19

20 Risk Management (Amounts in euro thousand) Variation Amount % NON-PERFORMING loans Balance at 1 January 20,172,032 18,339,525 (1,832,507) (9.1) Additions 3,776,371 5,354,553 1,578, Recoveries 4,626,577 3,503,673 (1,122,904) (24.3) Other variations 1 324,719 - (324,719) (100.0) Net variation (525,487) 1,850,880 2,376,367 > % increase (2.6) Writeoffs (1,307,020) (588,827) 718,193 (54.9) Balance at 31 December 18,339,525 19,601,578 1,262, Non-performing loans 100% provisioned (Amounts in euro thousand) Variation Amount % Credit loss allowances Balance at 1 January 8,357,863 7,793,422 (564,441) (6.8) Annual provision: Gross 5,361,080 7,889,309 2,528, Recoveries (3,940,553) (3,916,427) 24,126 (0.6) Net 1,420,527 3,972,882 2,552, Other variations (717,060) (1,033,531) (316,471) 44.1 Writeoffs (1,267,908) (489,685) 778,223 (61.4) Balance at 31 December 7,793,422 10,243,088 2,449, Of which sub-standard risk provisions 414,848 - (414,848) (100.0) (Amounts in euro thousand) Specific General Country risk Total Balance at 1 January 7,792, ,793,422 Net provisions 3,624, ,231 (232) 3,972,882 Amount used 489, ,685 Other variations and transfers (1,033,268) - (263) (1,033,531) Balance at 31 December 9,894, , ,243,088 *Including doubtful off-balance sheet risks and country risk and the related risk allowance (Amounts in euro thousand) Variation Amount % Risk quality measures Total Risks ( thousand) 142,582, ,162,738 (8,420,239) (5.9) Non-performance (Non-performing loans/total risks) Credit risk premium

21 Risk Management (Amounts in euro thousand) Coverage by type of non-performing balance Non-performing balances without mortgage guarantee or pledge guarantee 5,513,008 Non-performing balances with mortgage guarantee or pledge guarantees 14,088,570 Value of guarantees 10,438,801 Total non-performing balances 19,601,578 Loans fully written-off 5,192,989 Non-performing balances+loans fully written-off 24,794,567 Total value of guarantees* 10,438,801 Provisions for insolvency 10,243,088 Provisions for insolvency with written-off loans 15,436,077 Coverage for non-performing loans and written-off loans Coverage for non-performing loans Coverage with guarantees * Does not include written-off loan guarantees (Amounts in euro thousand) Variation Amount % asset impairment Financial assets 1,390,559 4,056,842 2,666,283 > Credit risk and provisioning 1,347,889 4,040,470 2,692,581 > Of which: write-offs recovered 128,267 97,149 (31,118) (24.3) Investments 42,670 16,372 (26,298) (61.6) Non-financial assets and property 224,105 1,465,882 1,241,777 > Total 1,614,664 5,522,724 3,908,060 > (Amounts in euro thousand) Variation Amount % Foreclosed Assets REOs ex-rentals 15,285,355 16,073, , Rentals 1,504,319 1,733, , REOs 16,789,674 17,807,271 1,017, REOs provisions (ex-rentals) 5,462,575 6,253, , Rentals provisions 463, ,565 53, Total REOs provisions 5,926,359 6,771, , REOs coverage ratio (ex-rentals) % Rentals coverage ratio % (1.0) REOs coverage ratio %

22 Solvency Group (Amounts in euro thousand) Capital 8,831,237 7,148,627 Reserves 3,861,877 4,176,959 Of which additional distributable items 3,524,210 3,832,387 Minority interest 9,502 4,264 Capital deductions (2,874,743) (3,529,017) Ordinary Tier 1 Capital 9,827,872 7,800,832 Phase-in CET 1 ratio (%) 13.14% 12.12% Convertible perpetual debt 1,336,580 1,284,216 Deducciones aditional capital (1,336,580) (1,284,216) Tier 1 capital 9,827,872 7,800,832 Tier 1 capital ratio (%) 13.14% 12.12% Tier 2 capital 493, ,376 Tier 2 capital ratio (%) 0.66% 1.02% Total Capital 10,321,795 8,456,208 Total capital ratio (%) 13.80% 13.14% Total risk weighted assets 74,777,640 64,375,286 of which credit risk 68,837,682 58,905,421 of which operational risk 5,368,606 5,321,961 of which market risk 571, ,904 Additional distributable items 3,524,210 3,832,387 Leverage Tier 1 capital 9,827,872 7,800,832 Exposure 157,798, ,828,220 Phase-in Basel III Leverage Ratio (%) (1) 6.23% 5.31% (1) Phase-in Basel III Leverage Ratio CRR. Equity (Amounts in euro thousand) Capital & Reserves Valuation adjustments Minority interests Net asset value Balance at 31/12/ ,719,992 (221,743) 16,376 12,514,625 Capital increase 2,418, ,418,147 Variation in treasury stock (168,872) - - (168,872) Gain on treasury stock transactions (9,581) - - (9,581) Actuarial differences Remuneration of mandatory convertible debentures (83,564) - - (83,564) Consolidation operations and other (net) (25,855) - (4,391) (30,246) Value adjustments - (68,248) - (68,248) Net profit at 31 december 2016 (3,485,366) - 5 (3,485,361) Dividends paid/announced in Balance at 31/12/16 11,364,901 (289,278) 11,990 11,087,613 22

23 Banco Popular share Share price data Number of shareholders 270, ,251 Number of shares outstanding (thousands) 2,165,075 4,196,858 Closing price ( ) (1) Market capitalization (thousand ) (2) 6,588,325 3,852,716 Maximum price ( ) Minimum price ( ) Trading volume Daily average number of shares traded (thousands) 15,362 35,009 Daily average trading volume (thousand ) 61,864 49,417 Stock market ratios Net earnings per share ( ) (3) (1.094) Dividend per share paid in the year ( ) Book value per share diluted ( ) (4) Price/Earnings (annualized) (0.84) Price/Book value (1) Share price prior periods adjusted by rights issue effect. (2) Calculated on shares outstanding. Shareholders and share price The number of shareholders on the 31st of December of 2016 was of 303,251, which implies an increase of 33,137 shareholders year-on-year. In 2016, the equity markets have been marked by volatility, having been constantly influenced by economic and geopolitical factors. In this context, there have been mixed balances on the indices. The selective Spanish Ibex 35, after having recovered 7.64% in December, stood at a loss of 2.01%. At a sectorial level, the financial sector was one of the most punished ones, with the Stoxx Europe 600 Banks index closing with a loss of 6.77%. At the end of the quarter, Banco Popular s share capital was composed of 4,196,858,092 ordinary shares with a nominal value of 0,50 each. On the 30th of December, Banco Popular s share price was 0.918, which placed its market capitalization at 3,852,715,728.. Trading volume The average trading number of shares stood at 35,009 thousand in The average trading volume stood at 49,417 thousand. Banco Popular s shares are included in the Madrid Stock Exchange general index (Índice General de la Bolsa de Madrid) weighting 0.66% and in the Ibex-35 index with a weight of 0.796%. 23

24 2. Business 2.1 Main business

25 Main business ratio Total banking business excluding the real estate and related business scope, including mainly Retail Banking and its sub-businesses (SMEs, consumer, asset management and insurance etc), Private Banking, Wholesale banking, Fixed Income Portfolio and Markets Financing (assets and liabilities operations with credit entities, derivatives coverage and wholesale funding). Business volume Net lending to customers (ex Repos) 76,479,166 76,214,569 Customer deposits 85,106,022 84,341,655 LTD 89.9% 90.4% On-balance sheet funds 106,269,524 99,850,991 Profitability and efficiency Net interest income/ata 1.9% 1.7% Gross operating income/ata 2.8% 2.3% Net Operating Income (Pre-provision Profit)/ATA 1.7% 1.0% Average Total Assets 130,202, ,555,902 Operating efficency ratio 37.6% 55.0% ROA 0.86% -0.24% ROTE adjusted(*) 15.8% -5.3% RWA FL 47,950,259 44,252,505 RORWA 2.34% -0.70% MAIN BUSINESS (12M16 in thousands and %) Risk management Total risks 121,670, ,065,032 Cost of risk 0.46% 1.55% Gross non-performing loans 6,495,012 7,130,646 Net non-performing loans 2,959,610 3,558,558 NPL coverage ratio % 50.1% Non-performing ratio 5.3% 6.1% Allowance for credit losses 3,535,402 3,572,088 Results Net interest margin 2,416,931 2,213,542 Gross operating income 3,682,836 2,960,897 Net Operating Income (Pre-provision Profit) 2,183,857 1,217,111 Profit before tax 1,522,234 (364,168) Profit after tax 1,121,195 (306,738) (*) Adjusted by the payment of AT1 interests and calculated over CET1 FL at the end of The NPL coverage ratio includes mortgage floor clauses provisions. This ratio excluding mortgage floor clauses provisions would be of 49.0% in 2015 and 42.9% in

26 Main business income statement (Amounts in euros thousand) Variation % = Net interest income 2,416,931 2,213,542 (8.4) + Net fees and equity method income 147,850 98,590 (33.3) ± Gains or losses on financial assets and liabilities (net) 573, ,256 (7.6) ±Net other operating income 517, ,928 (64.2) ± Other income 26,872 (66,419) < =Gross operating income 3,682,836 2,960,897 (19.6) -Administrative expenses 1,383,464 1,629, Depreciation & amortisation 115, ,844 (1.4) = Net Operating Income (Pre-provision Profit) 2,183,857 1,217,111 (44.3) -Impairment losses and provisions 719,300 1,666,378 > ±Gains / (Losses) on assets held for sale (net) 57,677 85, =Profit before tax 1,522,234 (364,168) < ± Income tax 401,039 (57,430) < =Profit/ Loss attributed to the controlling company 1,121,195 (306,738) < Quarterly main business income statement (Amounts in euro thousand) 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 Variation % = Net interest income 592, , , , , , Net fees and equity method income 43,235 30,130 35,745 50,894 33,260 (21,309) < ± Gains or losses on financial assets and liabilities (net) 141, , , , , , ±Net other operating income 109,586 88,318 98,899 77, ,726 (94,054) < ± Other income 22,835 (35,680) 13,343 (36,673) 7,010 (50,099) < =Gross operating income 909, , , , , ,538 (35.6) -Administrative expenses 344, , , , , ,760 > - Depreciation & amortisation 30,541 29,464 29,773 28,620 28,641 26,810 (6.4) = Net Operating Income (Pre-provision Profit) 534, , , , ,673 (162,032) < -Impairment losses and provisions 31, , ,779 71, ,740 1,313,920 > ±Gains / (Losses) on assets held for sale (net) (361) 57,594 15,264 72,540 (104) (2,601) < =Profit before tax 502,844 38, , , ,829 (1,478,553) < ± Income tax 139,277 (7,482) 104, ,706 90,761 (354,965) < =Profit/ Loss attributed to the controlling company 363,567 46, , , ,068 (1,123,588) < 26

27 Main business balance sheet Variation % (Amounts in euro thousand) months ASSETS Cash and cash balances at central banks 5,462,817 3,276,385 (40.0) Financial assets held for trading 1,280,330 2,100, Financial assets designated at fair value through profit or loss 535, , Available-for-sale financial assets 25,090,920 15,384,097 (38.7) Loans and receivables 88,421,759 87,677,440 (0.8) Deposits at credit institutions 4,301,561 4,159,264 (3.3) Of which interbank deposits 253, ,510 (20.0) Loans and advances to other debtors 82,983,237 82,916,209 (0.1) Fixed Income 1,136, ,967 (47.1) Held-to-maturity investments - 4,583,511 - Derivatives Hedge accounting 443, ,219 (33.4) Fair value changes of the hedged items in portfolio hedge of interest rate risk 233, , Investments in subsidaries, joint ventures and associates 1,490,468 1,458,069 (2.2) Assets under reinsurance and insurance contracts 17,524 17, Tangible assets 774, ,017 (1.6) Intangible assets 2,570,501 2,611, Tax assets 3,105,251 3,896, Other assets 602, , Non-current assets and disposal groups classified as held for sale Total assets 130,028, ,617,325 (4.9) LIABILITIES Financial liabilities held for trading 1,043,063 1,643, Financial liabilities designated at fair value through profit or loss 599, , Financial liabilities measured at amortised cost 140,111, ,802,285 (6.6) Liabilities of credit institutions 33,163,322 30,027,582 (9.5) Of which interbank deposits 2,728,852 1,881,236 (31.1) Deposits from other creditors 88,150,957 82,664,520 (6.2) Debt certificates including bonds 15,989,048 15,023,810 (6.0) Subordinated liabilities 2,066,951 2,039,472 (1.3) Other financial liabilities 740,724 1,047, Derivatives Hedge accounting 2,013,974 1,201,865 (40.3) Fair value changes of the hedged items in portfolio hedge of interest rate risk Liabilities under insurance and reinsurance contracts 486, ,284 (0.5) Provisions 367, , Tax liabilities 503, ,489 (25.0) Share capital repayable on demand Other liabilities 565, , Liabilities included in disposal groups classified as held for sale Net intra-segment funding (1) (25,187,717) (21,712,372) (13.8) Total liabilities 120,502, ,652,910 (4.9) EQUITY Total equity 9,754,992 9,188,605 (5.8) Other comprehensive income and accumulated (236,247) (233,883) (1.0) Minority interests (non-controlling interests) 6,444 9, Net asset value 9,525,189 8,964,415 (5.9) Total liabilities and equity 130,028, ,617,325 (4.9) (1) The real estate and related businesses assets are funded with the surplus retail and wholesale deposits of the Main Business through a transfer pricing system under which a financing cost is charged to the real estate and related business. The financing cost includes the market interest rate plus a liquidity premium and, in the case of real estate developers and non performing assets, the cost is the same as that of senior debt issuances of the entity. 27

28 Main business commercial GAP (Amounts in euros thousand and %) Variation % and p.b Net lending to customers 82,983,237 82,916,209 (0.1) Reverse repos (valuation adjustments included) 6,504,071 6,701, Total net lending to customers (ex repos) (a) 76,479,166 76,214,569 (0.3) Current accounts 35,832,037 39,659, Term deposits 41,838,345 38,038,113 (9.1) Valuation adjustments 62, , Subtotal customer deposits (ex repos, ex Treasury) 77,732,950 77,820, Retail Commercial paper 128, ,275 > Mediation loans (1) 6,214,860 5,337,947 (14.1) Securitizations sold to third parties 237,507 50,824 (78.6) Marketable securities distributed through the branch network (2) 466, ,273 (2.6) Tax collection accounts 325, , Total customer deposits (b) 85,106,022 84,341,655 (0.9) GAP (a-b) (8,626,856) (8,127,086) (5.8) LTD (a/b) 89.9% 90.4% 50 p.b.s. (1) ICO and EIB funding directly received for loans to companies. (2) Including convertible notes, preference shares and subordinated debt distributed via the branch network - 28

29 Main business funds managed (Amounts in euros thousand and %) Variation % Customer deposit: 88,150,957 82,664,520 (6.2) Valuation adjustments (+/-) 10,845,109 6,172,135 (43.1) Total customer deposits 77,305,848 76,492,385 (1.1) Residents 68,522,215 67,472,062 (1.5) NonResidents 8,783,633 9,020, Valuation adjustments (+/-) 62, , Customer deposits 88,213,525 82,787,393 (6.2) Unadjusted debt certificates including bonds: 15,798,519 14,919,835 (5.6) Valuation adjustments (+/-) 190, ,291 (45.3) Total debt certificates including bonds 15,989,048 15,024,126 (6.0) Subordinated liabilities 2,066,951 2,039,472 (1.3) Total on-balance sheet funds (a) 106,269,524 99,850,991 (6.0) Mutual funds 11,482,702 10,934,262 (4.8) Asset portfolio management 1,683,649 1,639,617 (2.6) Pensions funds 5,313,985 5,150,062 (3.1) Insurance premiums 2,289,255 2,385, Total other intermediated funds (b) 20,769,592 20,109,480 (3.2) Total funds managed (a+b) 127,039, ,960,471 (5.6) 29

30 Main business lending to customers (Amounts in euro thousand) Variation % Total gross lending to customers (ex repos) 79,586,341 79,497,372 (0.1) Retail banking 66,329,446 64,803,167 (2.3) Households 21,492,404 21,679, SMEs and self-employed 39,602,255 39,123,841 (1.2) Other corporates and public sector 5,234,787 4,000,220 (23.6) Wholesale banking 13,256,895 14,694, Corporate Banking 9,476,064 10,053, Institutional Banking 3,780,831 4,640, Valuation adjustments (+/-) (3,107,175) (3,282,803) 5.7 Total net lending to customers (ex repos) 76,479,166 76,214,569 (0.3) 30