Quarterly Earnings Report. June 2011

Transcription

1 Quarterly Earnings Report June th July 2011

2 The Bankia Group records a profit of 205 million Euros, and following its flotation strongly reinforces its solvency by reaching a Core Capital of 9.9% The Group demonstrates its capacity to obtain recurrent profits with an attributed Profit () of 205 million Euros, 114 million Euros of which were generated during the second quarter. Increased capitalisation levels following the Initial Public Offering (IPO) process completed recently, that has allowed the Group to increase its financial strength significantly and increase Core Capital by 190 basis points to 9.9%, positioning the Bankia Group as one of the most capitalised Spanish entities. Reduces leverage and improves its funding structure. The improvement of the commercial gap results in a loan to deposit ratio of 120%, a decrease of 16 basis points with respect to December In turn, customer depositss represent 74% of the funding structure compared to 70% in The Group reaches a business volume of more than 427,000 million Euros. Total customer funds increase by almost 7,500 million Euros in the year, to 235,000 million Euros. Customer loans total 191,700 million Euros. At 30 th June, 476 branches have been closed and the headcount has been reduced by 2,880 employees, fulfilling 72% and 77% respectively y, of the planned objective in the Integration Plan. 2

3 GLOBAL ECONOMIC OVERVIEW The international macroeconomic scenario has worsened during the second quarter of Global growth has been the weakest since its recovery started two years ago, particularly, in USA and EMU where there has been moderate growth of less than 2% (estimated). In principle, this deceleration of global activity is temporary, being a consequence of multiple negative factors (climatological, disasters in Japan and increased inflation), and not a premature end of growth. Nonetheless, the risk of this downturn is greater than normal as the EMU sovereign debt crisis has coincided with increased fiscal uncertainties in USA and with a change of direction of economic policies in a large number of countries (more intensive in developed countries). In the EMU, the sovereign debt crisis intensified in July, and Italy and Spain weree most affected. Their 10 year risk premiums increased significantly. In Spain the risk premium rose to 370 basis points, whereas the government 10 year bond yield increased to 6.36%, both reaching maximumm levels since the Euro was introduced. The situation lead to an extraordinary European Summit on the 21 st July wheree there were significant advances to resolve the crisis. The most notable being the reform of the European Financial Stability Fund, the approval of a second Greek rescue programme with the private sector voluntarily taking part. The financial markets have responded very positively to these measures. Regarding monetary policy, the end of the Federal Reserve s programme to buy US public debt and the two interest rate rises by the ECB have been the most relevant measures. In the case of the USA, there has not been any significant impact on the interest rate curve, since the Federal Reserve has insisted that interest rates willl remain unchanged in the medium term. In the EMU, the BCE has left interest rates at 1.50%, after increasing 25 basis points in April and in July, provoking a significant increase in the Euribor, situating the 12 month Euribor at close to 2.20%. In Spain, given recent figures, limited growth activity lost intensity during the second quarter. The modest GDP growth rate continued to depend on dynamic external demand, which counteracts prolonged weak internal demand. There continues to be a lack of solid signs of recovery in the labour market. Inflation altered its growing trend of recent months: after having reached the maximum level during the previous two and a half years, it has fallen 0.6% to 3.2% in two months, fundamentally due to a fall in energy costs. The housing sector has continued to adjust. The sale and purchase of houses has decreased to 480,000 houses per annum, after an increase was registered at the end of 2010 due to fiscal advantages during thatt period. Price adjustments have intensified and registered a year on year decrease of 4.7% in Q ( 2. 6% inter annually), registering the strongest decrease of the previous year. The financial sector has continued the restructuring and recapitalisation process. Bankia s flotation has been an important part of this process. Once the process is finalized existing uncertainties should be reduced and investor confidence should return to our banking system. In this context, the key margins have been characterised by the deleveraging of the private sector on the asset side and increased competition to raise funds through deposits given the difficulties to access funding in the capital markets. 3

4 BANKIA INITIAL PUBLIC OFFERING Bankia started trading on 20 th July at 12:00h on the stock exchanges in Madrid, Barcelona, Valencia and Bilbao. Its success has been achieved in record time and during particularly complicated market conditions. Bankia commences a new phase convinced about its enormous potential and its role in making the Spanish economy more dynamic. In this respect, the entity is focused on growing and generating sustainable profitability, which in turn, creates value for shareholders through improved customer service and a solid foundation for the economy to grow. Bankia s flotation will strengthen the bank and consolidate its leadership role. Bankia is the fourth largest Spanish financial entity by market capitalisation, with more than 6, 530 million Euros at the IPO price, 347,338 individual shareholders and more than 300 institutional shareholders that have subscribed capital of almost 3,100 million Euros. The Initial Public Share Offering of Bankia has been the most important one to have taken place in Spain during recent years. Bankia has concluded a process that has allowed it to fulfil all the objectives initially set: to create a bank that is the leader in domestic business, to adapt the entity to the new regulations, to create one of the most capitalised European entities, with a Core Tier I greater than 9.9%; and to conclude the flotation process which has becomee the reference in the Spanish and European banking sector. 4

5 GROUP KEY FIGURES Balance Sheet (million euros) Total assets Dec , ,188 Variation w.r.t. Dec 10 (2.3%) Net customer loans and advances 191, ,316 (2.3%) Loans to private sector residents in Spain 168, ,269 (3.8%) Secured loans 123, ,502 (3.6%) On balance sheet customer funds 214, , % Customer deposits 159, , % Marketablee debt securities 55,181 62,104 (11.1%) Subordinated liabilities % Total customer loans under management Business volume Equity Risk Management ( million euros) Total qualifying credit risk 235, , , ,263 13,297 13,260 Dec , , % 0.7% 0.3% Variation w.r.t. Dec 10 (2.8%) Non performing loans 13,226 11, % Loan loss reserves 7,172 7,446 (3.7%) NPL ratio 6.35% 5.52% p.p. NPL coverage 54.2% 62.9% (8.7) p.p. Solvency (%) Mar 11 Variation w.r.t. Mar 11 Core Capital 8.0% 7.8% p.p. BIS II ratio 8.2% 8.0% p.p. Earnings (million euros) 1H 2011 Q Q Net interest income 1, Gross margin 2,085 1,037 1,048 Net operating income Profit before tax Net profit Profit attributed to the Group Profitability and Efficiency (%) Recurrent efficency (1) Additional Information Branches H % Q % Dec 10 3,593 4, Variation w.r.t. Dec % Variation w.r.t. Dec 10 (12.4%) Empolyees 21,834 24,644 (10.0%) (1) Administrative expenses and amortisations to gross operating income 5

6 BANKIA GROUP CONSOLIDATED PROFIT & LOSS ACCOUNT (PRO FORMA) (million euros) 1st Semester 2011 Q Q Net Interest Income 1, Dividends Income from companies accounted for by the equity method Net fee and commission income Net gains on financial transactions Net gains on foreign exchange transactions Other operating income Grosss Income Operating expenses (4) (21) 2,085 1,037 (1,209) (697) 17 1,048 (512) General and Personnel expensess (1,051) (619) (432) Depreciation and amortisations (158) (78) (80) Other provisions (net) Impairment losses and provisions on financial asssets (net) (624) (100) (524) Net operating income Impairment losses and provisions on non financial asssets (net) (22) (25) 3 Other gains and losses 19 (62) 81 Profit Before Tax Corporate taxes (79) (42) (37) Profit from continuing operations (net) Profit/loss from discontinued oeprations (net) Net Profit Profit attributed to minority interests (4) (1) (3) Profit Attributed to the Group

7 CONSOLIDATEDD EARNINGS PERFORMANCE Given that Bankia was constituted with effect from 1 st January 2011, it is not possible to comment on the performance of the first semester s results with respect to the same period during On the other hand, with the objective of providing a view of Bankia s results had the perimeter defined in the reorganisation come into effect on the 1 st January 2011, a consolidated profit and loss account for the Group has been generated for the 1 st half of 2011 and has been adapted to the new structure between Banco Financiero y de Ahorros and Bankia, incorporating a series of transactions that were mostly formalised during the month of June, amongst which it is worth noting: - Elimination and incorporation of earnings generated from certain equity investments that have been subject to purchase and sale between Banco Financiero y de Ahorros (BFA) and Bankia. - Consolidation by global integration of Grupo Banco de Servicios Financieros Caja Madrid Mapfre following the purchase of an additional stake up to 100%. - Revenues and expenses from integrating the assets and liabilities incorporated into Bancaja Habitat as a result of the split from CISA, the real estate portfolio. Significant differences are not expected between the real and profit and loss account during the second semester on a quarterly basis. On this basis, the Bankia Group obtained net interest income of 1,269 million Euros, of which 634 million Euros were registered during the last three months, in line with the previous quarter. These results incorporate the progressive improvement of the differential between the customer loan yield and the customer deposit cost, as well as an increased contribution from the ALCO portfolio that has been reinforced by a deleveraging of the balance sheet and smoothened by the evolution of the interest rate curves. During the first half of the year, the gross customer spread was 1.20%, with a customer loan yield of 3.05% and an averagee customer deposit cost of 1.85%. Customer Spread 3.01% 3.05% 1.70% 1.31% 1.85% 1.20% Customer loans yield Customer deposits cost Customer spread Q H

8 8 Quarterly Earnings Report June 2011 (million euros) Q2 Q1 Risk related and contingent liabilities Collection and payment services Collections Debit and credit cards Payments Other Brokerage services Product Commercialisation Mutual Funds Pension Funds Insurance Brokerage & other Other FEE & COMMISSION INCOME Commissions and fees paid Commissions on transactions Other FEE & COMMISSION EXPENSEE NET FEE & COMMISSION GROUP Net fee and commission income contributed 572 million Euros to the profit and loss account during the first six months of the year, contributing 283 million during the quarter, in line with the previous quarter. Commissions from equity services performed well. With regards to the previous quarter, commissions from recovery management reported an inferior contribution. Net gains on financial and foreign Exchange transactions recorded an aggregated balance of 210 million Euros during the first six months, of which 107 million were generated during the second quarter. This figure includes earnings obtained from operations related to customers, as well as from portfolioo management, in particular from the sale of positions in the available for sale portfolio. These earnings, together with income from companies accounted for by the equity method and other operating income that totalled 34 million Euros at the end of June (of which 13 million were generated during the second quarter of 2011), increased the Group s gross income to 2,085 million Euros (4) 2,085 1, Net Interest Income Net Fee & Commission Income Trading & FX Results Investments Other Results Gross Margin

9 Operating expenses, which include administrative expenses and amortisations, reached 1,209 million Euros during the semester. Operating expenses are not comparable on a quarterly basiss as they are not homogenous. During the first quarter, operating expensess were 512 million Euros, and include the releasee of extraordinary provisions related to personnel expenses of 153 million Euros. Excluding this extraordinary provsision release, operating expenses would have reached 665 million Euros. During the second quarter, operating expenses totalled 697 million Euros, including 47 million Euros of non recurrent of the new group. Excluding this costs related to the incorporation impact, administrative costs would have totalled 650 million Euros during the second quarter reflecting a slight decrease with respect to the first quarter on recurring terms. Consequently, the Group s recurring efficiency ratio was 55% at June 2011 (63% including amortisations) Q Q 2011 Reported Recurring At 30 th June 2011, the Integration Plan continues advancing satisfactorily with an accumulated closure of 476 branches, fulfilling 72% of the total objective and a headcount reduction of 2,880 employees, reflecting 77% of the objective, and noting positive advances with respect to the previous quarter. The majority of the headcount reorganisation measures took place and effect by 31 st March Thus, its impact in the profit and loss account will be reflected progressively during the course of the year, along with other synergies and economies of scale resulting from the integration process (branch reorganisation and renegotiated supply contracts, etc.) ). According to the technological integration calendar established, as from the second half of the year the seven savings Banks will integrate into Bankia progressively until the first quarter of It is important to highlight that 90% of the customer base will be integrated by April

10 In the current economic context, the Bankia Group is concentrating its efforts on maintaining prudent policies by allocating non semester to reinforce the level of provisions. Thus, total provisions including provisions for recurring earnings obtained during the first impairment lossess on financial, non financial and foreclosed assets (incorporated in other gains and losses in the profit and loss account) together totalled 701 million Euros, of which 172 million weree made during the second quarter, with the majority corresponding to the previous quarter where the majority of non recurring earnings were obtained. Regarding other gains and losses from the profit and loss account, 118 million Euros are incorporated due to profit obtained from the sale of investments and sale and lease back transactions formalised during the first half of 2011, the Bankia Group s Profit before tax at 280 million Euros. In an adversee macroeconomic environment with importantt changes in the financial sector, the Group maintains a good level of attributed profit which reached 205 million Euros, after deducting corporate tax and profit attributable to minority interests, and of which, 114 million Euros were registered in the previous three months, in line with the first quarter. Without taking into account adjustments, the Bankia Group s consolidated profit and loss account during the first semester of 2011 recorded an interest margin of 1,164 million Euros. The gross margin reached 2,0622 million Euros and the profit attributed to the Group was 201 million Euros. Key Financial Indicators June 2011 (real vs ) 2,0622 2,085 1,164 1, Net Interest Margin Grosss Margin Net Profit Real Pro forma 10

11 BANKIA GROUP CONSOLIDATED BALANCE SHEET variation w.r.t. Dec 10 (million) Mar 11 Dec 10 Importe % Cash and deposits with central banks 5,807 3,537 6,521 (714) (11.0%) Financial assets held for trading 14,279 13,692 17,591 (3,312) (18.8%) Available for sale financial assets 19,911 18,452 13,860 6, % Debt instruments 18,430 16,624 11,741 6, % Equity instruments 1,481 1,828 2,119 (638) (30.1%) Loans and advances 212, , ,970 (10,211) (4.6%) Loans and advances to credit institutions 15,212 17,332 17,439 (2,227) (12.8%) Loans and advances to customers 191, , ,283 (4,606) (2.3%) Other 5,870 5,636 9,248 (3,378) (36.5%) Held to maturity investments 10,513 10,538 9,087 1, % Hedgi ng derivatives 2,630 2,515 3,618 (988) (27.3%) Non current assets held for sale 3,774 2,025 1,851 1, % Investments 2,857 2,715 2, % Tangible and intangible assets 4,540 4,654 4,668 (128) (2.7%) Tax assets, accrued and other assets 8,408 9,995 9,441 (1,033) (10.9%) TOTAL ASSETS 285, , ,188 (6,709) (2.3%) Financial liabilities held for trading 11,735 11,890 15,084 (3,349) (22.2%) Financial liabilities at amortised cost 255, , ,397 (2,735) (1.1%) Deposits from Central Banks 11,526 9,706 20,277 (8,751) (43.2%) Deposits from Credit Institutions 27,191 29,059 29,219 (2,028) (6.9%) Customer depostis 159, , ,715 14, % Marketable debt securities 55,181 58,239 62,104 (6,923) (11.1%) Subordinated liabilities % Other financial liabilities 2,103 1,656 1, % Hedgi ng derivatives % Liabilities under insurance contracts (6) (1.7%) Provisions 1,571 1,891 2,310 (739) (32.0%) Tax liabilities, accrued assets and other assets 1,968 1,770 1,975 (7) (0.3%) TOTAL LIABILITIES 272, , ,775 (6,766) (2.4%) Minority interests % Valuation adjustmentss (146) 79 0 (146) Equity 13,297 13,276 13, % TOTAL SHAREHOLDERS' EQUITY 13,471 13,582 13, % TOTAL LIABILITIES AND EQUITY 285, , ,188 (6,709) (2.3%) 11

12 GROUP BUSINESS PERFORMANCE The consolidated balance sheet presented at June 2011 practically reflects the complete and full Bankia Group perimeter. At the end of the first semester of 2011 certain real estate loans as well as foreclosed and acquired assets were pending to be transferred to Banco Financiero y de Ahorros. These transfers will not affect the profit and loss account. In order to allow for a homogenous comparative analysis of the Group s activity, a consolidated balance sheet has been elaborated at March 2011 and at December 2010, in which the same conditions and transactions detailed in the consolidated earnings performance of the current report have been included. The Bankia Group has concluded the first half of 2011 with total assets of 285,479 million Euros, and a business volume that exceeds 427,000 million Euros. CUSTOMER FUNDS At the end of June 2011, on balance sheet customer funds recorded a balance of 214,841 million Euros, reflecting a quarterly increase of 3. 7%, 7,721 million Euros more than in December The on balance sheet customer funds market share reached 10.57% in May (last available information), improving 12 basis points during the quarter. Deposits from the Spanish Public Sector reached a balance of 8,190 million Euros, and increased by 3,514 million Euros during the previous six months due to increased repo transaction with the Spanish Treasury. Deposits from the resident private sector fell during the semester by 1,874 million Euros ( 1. 4%), to 129,,641 million. This performance combines a decrease of 695 million Euros in demand deposits (current and savings accounts), a reduction of 4,188 million Euros from singular covered bond maturities and an increase in repo transactions and other deposits with a value of 2,763 and 246 million Euros, respectively. At May, being the last date of available information, the market share of customer deposits to the resident private sector was %, 60 basis points more than in December 2010 and 50 basis points more than in March (million euros & %) Public Sector Other resident sector Current accounts Savings accounts Time deposits and others Repo transactions Singular mortgage backed securities Others Non resident sector Repo transactions Debt securities Subordinated debt On Balance Sheet Customer Funds 8, ,641 17,180 29,199 83,263 4,222 16,017 63,023 21,518 17,922 55, ,841 variation w.r.t Dec 10 Mar 11 Dec 10 Amount % 10,219 4,676 3,, % 131, ,515 (1,874) (1.4%) 18,023 18,622 (1,442) (7.7%) 27,984 28, % 85,070 84,441 (1,179) (1.4%) 1,688 1,459 2,, % 16,785 20,205 (4,188) (20.7%) 66,597 62, % 12,181 8,524 12,, % 11,488 6,852 11,, % 58,239 62,104 (6,923) (11.1%) % 212, ,120 7,, % Mutual Funds 8,623 9,000 8,939 (315) (3.5%) Pension Funds 5,401 5,178 5, % Insurance Brokerage 6,549 6,697 6,695 (146) (2.2%) Off Balance Sheet Customer Funds 20,573 20,874 20,827 ( 254) (1.2%) Customer Funds Under Management 235, , ,947 7,, % 12

13 The balance of deposits from the non resident sector has recorded an important increase, 12,993 million Euros in six months, fundamentally due to changes in repo operative as a consequence of intensified repo activity through European repo platforms. Excluding repo transactions and singular mortgage backed securities, customer deposits totalled 115,104 million Euros at the end of the first half of This figure was slightly below the balance registered in December 2010, of 115,663 million Euros. During the first six months of the year, retail time deposits, from the resident and non 2,1000 million Euros. More specifically, during this quarter the first unified product has been commercialised across the Bankia network has resident sector, raised funds of more than been launched. The product, Pr1mia, is a combined deposit that brings together, in a single investment a guaranteed variable fund and a one year deposit with quarterly interest payments and a 4% yield. This guaranteed investment fund has raised more than 150 million Euros in only one month since it was launched. In turn, it is worth noting the recent launch of the first structured deposit commercialized by Bankia, the Depositoo 3D+, with a three year term that guarantees 100% of the capital invested. Marketable debt securities noted a balance of 55,181 million euros, recording a decrease of 6, 923 million Euros since December A notable fall in the commercial gap of more than 5, 150 million Euros has reduced the dependence on this source of funding, meaning that issues thatt have matured have not had to be refinanced. 13

14 CUSTOMER LOANS Net customer loans of the Bankia Group totalled 191,706 million Euros, reflecting a fall during the year of 4,628 million Euros, in line with the Group s current deleveraging policies. This fall is mainly due to secured loans, which contracted by more than 4,576 million Euros during the semester, as well as secured loans that reduced by 2,,837 million Euros during the same period. This performance includes decreases in practically all segments. However, in May (last available information) the market share of loans to the resident public sector had increased by 28 basis points during the year, to 11.32%. Excluding the transfer pending to BFA, of 1,105 million Euros, incorporated in the December 2010 and March 2011 accounts, loans to real estate developers and construction totalled 32,117 million Euros at the end of the semester, 833 million Euros less than in the previous quarter. Of the total amount, 80% were secured loans. At 30 th June 2011 these loans represented 16.5% of the gross loan portfolio. variation w.r.t Dec 10 (million euros) Mar 11 Dec 10 Amount % Loans to Public Sector Spain 6,453 6,479 6, % Other resident sectorss 168, , ,269 (6,712) (3.8%) Secured loans 123, , ,502 (4,576) (3.6%) Personal loans 26,942 27,433 29,778 (2,837) (9.5%) Commercial credit and other loans 17,689 15,804 16, % Loans to non residentss 8,879 8,903 9,358 (479) (5.1%) Other financial assetss 1,702 1,427 1, % Other valuation adjustments % Doubtful loans 12,889 11,542 11,403 1, % GROSS CUSTOMER LOANS 198, , ,465 (4,840) (2.4%) Loan loss reserves (6,919) (7,217) (7,149) 212 (3.0%) NET CUSTOMER LOANS 191, , ,316 (4,628) (2.4%) 14

15 FUNDING & LIQUIDITY STRUCTURE AND NON CURRENT ASSETS AVAILABLE FOR SALE FUNDING & LIQUIDITY STRUCTURE At the end of the first semester of 2011, it is worth noting the remarkable improvement of the Group s funding structure with respect to December 2010, through the substitution of wholesale funding with increased retail funding. In this respect, the loan to deposit ratio at the 30 th June 2011 was 120%, a decrease of 15 percentage points with respect to December 2010, resulting from the Group s deleveraging policies. debt issuance capacity of 15,000 million Euros and liquid assets (pre OPS) of 15,919 million Euros, which exceed by almost 4,240 million Euros wholesale maturities during the following two and a half years. On the other hand, 56% of the Group s issues mature beyond 2014, providing stability to the bank s maturity profile. It is worth noting that 63% of the existing debt consists of mortgage covered bonds that can be discounted at the European Central Bank. At 30 th June 2011 the Group maintains a comfortable liquidity position with an available Loan to Deposit Ratio 136% 125% 120% 196, , , , , , Q Q Customer Loans Customer Depostis 15

16 NON CURRENT ASSETS AVAILABLE FOR SALEE At the end of the second semester of 2011 the balance of acquired and repossessed real estatee assets totalled 4,586 million Euros, with a coverage ratio of 27%, taking into account provisions. Almost three quarters of these assetss are fully constructed. Acquired and foreclosed assets are being actively managed, to the extent that during the first six months of 2011 more than 2,0300 units have been sold, reporting more dynamic sales during the second quarterr with the sale of 1, 269 units. Units sold, foreclosed and acquired 1, Q Q (million euros) Real estate assetss from construction and real estate development lending Of which completed buildings Of which buildings under construction Real estate assetss from residential lending Other real estate foreclosed / acquired assets TOTAL Net Book Value Coverage (%) 1,971 29% 1,664 29% % 2,450 26% % 4,586 27% Evolution of foreclosed / acquired assets ( mn) 4,478 4,586 (1) Mar-11 Jun-11 (1) Adjusted for the sale of land assets from Bankia to BFA considered in the pro forma financials 16

17 BUSINESS DEVELOPMENT The integration of the seven savings Banks businesses that together make up Bankia will allow the Group to improve productivity, to obtain significant cost synergies, mainly through the rationalisation of the branch network, headcount reduction, technological integration and the unification of services and purchase management, which in turn will lead to a reduction of costs and added value generation. Throughout this quarter, the integration process of the savings banks different products has continued, leading to new products being launched and commercial actions being made that are common to all. Bankia Personal (Personal Banking) offers, through more than 1,600 specialised commercial agents, a service with added value that is aimed at high net worth individuals that require personalised services to manage their savings according to their preferences and expectations. Bankia Banca Personal manages close to 9% and 50% of total funds under management. Bankia Joven, is the internet website where young segment users can find the home properties they are looking for, the job they desiree and the training programmes that most interest them, or even find updated information about leisure activities such as the cinema, music or sports, etc. Bankia Joven s main objective is to achieve customer loyalty by offering products that are specifically designed for their needs, with attractive advantages for account holders under the age of 26 that are exented from paying commissions. At the same time, Bankia is the Spanish financial institution that manages the highest number of programmes of Carné Joven, with a portfolio of more than 450,0000 Carnés Joven. During the first semester of 2011 Bankia Empresas (SMEs and Corporate Banking) has adhered to the main ICO lines of credit to corporates aimed at financing new projects and to cover their liquidity requirements. Thus at the end of June 2011 Bankia had formalised more than 7,120 transactions under ICO Empresas, for a total amount of 1,248 million Euros, reaching a market share of ICO financing of 12%. Since the Acuerdo de Apoyo Empresarial to SMEs within the Madrid region with the Confederación de Empresarios de Madrid (CEIM) and the Cámara de Comercio de Madrid was initiated, more than 51,800 transactions with 23,416 SMEs from the Madrid region have been formalised, for a total amount of 4,900 million Euros. Under the agreement signed with the Confederación de la Pequeña y Mediana Empresa de Cataluña (PIMEC), 1,626 transactions have been formalised for a total amount of 216 million Euros, benefiting 641 Catalan SMEs. During the quarter, Bankia and the Asociación para el Desarrollo de la Empresa Familiar de Madrid (ADEFAM) have signed an agreement to support family businesses. Bankia facilitates meetings with members of ADEFAM to tackle financial management solutions for the business. Bankia and the Confederación Empresarial de la Pequeña y Mediana Empresa Valenciana (CEPYMEV) have reached an agreement that makes funds of 50 million Euros available to SMEs within the region. In parallel, Bankia will offer the members its catalogue of products and services, with a view to facilitate financial management, improve productivity, efficiency and the growth of SMEs and the self employed. The Agencia de Inversiones y Servicios de Castilla y León (ADE), Iberaval SGR and Bankia have signed an agreement that makes the lines of credit ADE Financia available to SMEs within the Castilla León region. The lines include 17

18 advantages in their conditions and allow corporates to develop their technology, competitiveness and business viability. During this quarter Bankia has adhered to strategic lines of credit for corporates that have been launched by the Instituto Catalán de Finanzas (ICF). These lines are intended to facilitate long term financing to the Public Sector as well as to the Private Sector in order to promote growth, innovation, competiveness and the internationalisation of Catalonian corporates. This agreement is materialised through five lines of credit: Credit, Working Capital facilities, Capitalisation, Investment and Internationalisation + Innovation. In turn, Bankiaa Bolsa has situated itself at the top of the Spanish 2011 ranking of analyst companies, by obtaining the highest success rate in the advice given to investors according to the prestigious consulting company StarMine, and in collaboration with the newspaper Expansión. 18

19 GLOBAL SOLVENCY At the end of June 2011, the Bankia Group s regulatory capital reached 13,412 million Euros, of which the majority, 13,004 million Euros, corresponds to Tier I funds. Thus Core Capital was 8.0% and the solvency ratio was 8.2% The solvency ratio has been reinforced by 190 basis points, due to the successful IPO of Bankia shares which finalised on the 20th July, and has contributed close to 3,1000 to Bankia s shareholder funds Bankia, situating the Core Capital ratio at a comfortable 9.9%. This ratio will allow Bankia to comfortably comply with the new solvency levels required by the Ministerio de Economía y Hacienda through the Royal Decree 2/2011 dated 18th February in order to reinforce the Spanish financial system whichh requires that Bankia have a core capital ratio of 8.0%. Bankia s flotation has allowed the Group to strengthen its balance sheet, increase transparency and improve the international image with a view to increase the Bank s solvency and liquidity, whichh will facilitate access to the international capital markets whichh in turn can be transferred to products and services making them more secure, attractive and with increased advantages for our customers. On the 15th July 2011 the European Banking Authority (EBA) published the results of the stress tests which were carried out across 90 banks in 21 European countries, with Spain being the country with the largest number of banks participating. The BFA Group has successfully passed the stress tests, with a Core Tier I capital ratio of 5. 4%, above the 5% minimum threshold, in a maximum stress scenario that has been defined by EBA for 2012, and taking into consideration the 3,000 million Euros obtained from the IPO. This figure does not take into account the effect of generic and substandard provisions as a first coverage for credit risk losses. If taken into account and given the important levels of provisions (generic and substandard) ), the Group would at December 2010 have more than 4,200 million Euros leading to a Core Capital Tier I ratio of 6..5%. These results confirm the Group s capacity to confront very adverse and unlikely scenarios, without compromising solvency. Core Capital June IPO 1.9% 8.0% 9.9% Core Capital IPO Core Capital Post IPO 19

20 Additionally, Bankia can further reinforce its balance sheet structure, due to the synergies obtained from the integration, and could improve its credit rating following the listingss of its shares on the securities markets. The credit rating agency FitchRatings has recently assigned Bankia a long term credit rating of A, after having valued its presencee in the Spanish market, highlighting its credit quality and its ability to fulfil its financial obligations. The credit rating assigned to Bankia by FitchRatings coincides with the rating assigned by Standard & Poor s in March, and is two notches above the credit rating that was recently assigned by Moody s Investor Service. These ratings reflect the high value of the brand name and Bankia s commercial strength. (million euros) Qualifying capital Core Capital Basic capital Tier I capital Supplementary Capital Tier II capital Risk weighted assets Minimum requirements (post IPO) 16,504 16,096 15, ,267 13,061 mar 111 Pro forma 13,412 13,478 13,004 13,067 12,663 12, , ,237 13,061 13,459 Surplus to minimum capital requirements 3, Core Capital Tier I Tier II BIS II Ratio (%) 9.9% 9.6% 0.5% 10.1% 8.0% 7. 8% 7.8% 7. 6% 0.5% 0. 5% 8.2% 8. 0% At the end of the first half of 2011, the balance of the Group s doubtful risk increased by 1,396 million Euros. The Group s NPL ratio was 6.35%. NPL coverage was 54% at the end of June. At the same date, the Group s loan loss reserves fell by 274 million Euros with respect to December, although generic provisionss have remained stable throughout the year. variation w.r.t Dec 10 (million euro and %) 1 Mar 1pro forma Dec 10 pro forma Amount % Non performing loans 13,,226 11,909 11,830 1, % Total qualifying credit risk 208,, , ,237 (5,981) (2.8%) NPL RATIO 6.35% 5.70% 5.52% Provisions 7,,172 7,492 7,446 (274) (3.7%) Generic 1,,436 1,670 1,442 (6) (0.4%) Specific 5,,711 5,794 5,973 (262) (4.4%) Country risk (6) (19.8%) COVERAGE RATIO 54.2% 62.9% 62.9% NPL: Loans and contingent laibilities / loans and contingent liabilities qualifying risk 20

21 ANNEX: BANKIAA GROUP PROFIT & LOSS ACCOUNT JUNE 2011 (REAL) (million euros) Net Interest Margin Dividends 1, Income from companies accounted for by the equity m 107 Net fee and commission income Net gains on financial transactions Net gains on foreign exchange transactions Other operating income Gross Income General and Personnel expenses Depreciation and amortisation Other provisions (net) (4) 2,062 (1,037) (157) 31 Impairment losses and provisions on financial assetss (627) Net Operating Income 273 Impairment losses and provisions on financial assetss (22) Other gains and losses Profit before Tax Corporate taxes Profit from Continuing Operations Profit/loss from discontinued operations (net) Net Profit Profit attributed to minority interests Profit Attributed to the Group (53) 234 (0) 234 (33) 201 Due to legal reasons related to the segregations and subsequent transactions, the real profit and loss account does not take into account the existing perimeter of the Bankia Group as of the 1 st of January However, the profit and loss account reflects Bankia s results based on a homogenous and definitive perimeter. 21

22 Disclaimer This is an English non binding translation of the results presentation of Bankia, S.A. ( Bankia ), originally prepared in Spanish. In case of differences between both versions, the Spanish version must be considered as the official one and prevails over any other version. This material has been prepared by Bankiaa for information purposess only. It does not constitute a prospectus, offering, or recommendation of investment. This document shall not constitute an underwriting commitment, an offer of financing, an offer to sell, or the solicitation of an offer to buy any securities of Bankia, which shall be subject to Bankia internal approvals. No transaction or service related thereto is contemplated without Bankia s subsequent formal agreement. Bankia does not guarantee the accuracy or completeness of information which is contained in this document and which is stated to have been obtained from or is based upon trade and statistical services or other third party sources. Any data on past performance, modelling or back testing contained herein is no indication as to future performance. No representation is made as to the reasonableness of the assumptions made within or the accuracy or completenesss of any modelling or back testing. The value of any investment may fluctuate as a result of market changes. The information in this document is not intended to predict actual results and no assurancess are given with respect thereto. All opinions and estimates are given as of the date hereof and are subject to change. The distribution of this presentation in certain jurisdictions may be restricted by law. Recipients of this presentation should inform themselves about and observee such restrictions. This document does not disclose all the risks and other significant issues related to an investment in the securities/transactions of Bankia. Prior to transacting, potential investors should ensure that they fully understand the terms of the securities/transaction and any applicable risks. This document is not a prospectus for any securities described herein. Investors should only subscribe for any transferable securities of Bankia on the basis of information in the relevant prospectus (which has been or will be published and may be obtained from Bankia), and not on the basis of any information provided herein. 22