quarterly report 4Q2012 october december november

Transcription

1 quarterly report 4Q2012 october november december

2 Main highlights (Amounts in thousand) Var. % Business volume Total assets managed 172,259, ,388, On-balance sheet total assets 157,618, ,925, Own funds 10,797,878 9,124, Adjusted customer deposits 77,033,956 61,285, Lending to customers (gross) 117,298,902 98,872, Solvency Core capital EBA (%) Tier 1 (%) BIS ratio Leverage Risk management Total risks 155,582, ,301, Non-performing loans 13,976,733 7,323, Allowances for credit losses 9,146,044 2,530,076 > % nonperforming ratio % coverage of non-performing and written-off loans % coverage of non-performing and not written-off loans % coverage with guarantees Earnings Net interest income 2,718,756 2,086, Gross operating income 3,777,816 2,996, Profit before provisions 2,016,374 1,627, Profit before tax (3,491,719) 444,141 Consolidated profit for the year (2,460,943) 483,976 Net profit attributed to the Group (2,461,023) 479,653 Net return and efficiency Average total assets 151,151, ,338, Average total equity 10,694,997 8,738, ROA (%) (1.63) 0.38 ROE (%) (23.01) 5.49 Operating efficiency (%) Per share data Final number of shares fully diluted (thousands) 10,164, ,639,403 > Average number of shares (thousands) 9,125, ,599,741 > Share closing market price ( ) (83.4) Market capitalization 5,956, ,770, Book value per share diluted ( ) (79.0) Net earnings per share ( ) (0.270) Dividend per share paid in the period ( ) (40.0) Price/Book value Price/Earnings (annualized) (2.17) Other data Shareholders 316, ,618 > Employees 16,501 14, Spain: 14,680 12, Men 9,371 8, Women 5,309 3, Abroad: 1,821 1,828 (0.4) Men 1,121 1,124 (0.3) Women (0.6) Branches: 2,475 2, Spain 2,267 1, Abroad (11.9) ATMs 3,120 2, Risk coverage ratio including the value of guarantees after the haircuts defined in Annex IX to Bank of Spain Circular 4/ Including 187,162 thousand debentures necessarily convertible in November 2015; 1,084,576 convertible in April 2018; 399,317 convertible in March 2014; and 85,324 convertible in December Including the necessarily convertible debentures. The Group s consolidated financial statements at 31 December 2012, the audit of which is being finalised, were prepared in accordance with the accounting principles and methods established by the International Financial Reporting Standards adopted by the European Union (IFRS-EU), consistent with those used in the formulation of the audited financial statements in the 2011 annual report. Note: Banco Pastor is included since 17th february

3 Salient aspects Evolution of results in 2012 The fourth quarter of 2012 marked a milestone in the history of Banco Popular after the successful culmination of a 2,500 million capital increase and the booking of massive writedowns that enabled it to maintain the highest level of coverage among its peer banks was overall a very complicated year, during which the Bank had to navigate through the recession in the Spanish economy, with ultra-low interest rates and aggressive competition in retail liabilities, plus constant regulatory changes (EBA, RDL 02/2012 and RDL 18/2012). In this difficult environment it can be stated with satisfaction that the Bank maintains its signs of identity intact because its operating profitability is the highest in the sector, while managing its liquidity very prudently, strengthening its capital base and the Group s solvency up to leadership levels despite having booked massive writedowns. The final outcome was a book result for the year of -2,461 million; however, excluding the recording of accelerated provisions, the Bank would have obtained a profit of 520 million in Excellent performance of income in 2012 Very noteworthy was the performance of net interest income in 2012, which was up 30.3% year on year, partly favoured by the integration of Banco Pastor, although the growth was also very notable excluding the impact of this acquisition (+10.3% year on year with no change in consolidation scope). Thus gross operating income reached 3,778 million in the year (up 26.1%, and 5.3% with no change in consolidation scope). Fourth quarter gross operating income amounted to 861 million, up 15.5% on the previous year. The pillars underpinning this growth in income were: The net interest income for the year amounted to 2,719 million (up 30.3% year on year) as the result of superb management of asset differentials which more than offset the complicated rates environment and the retail liability competitive pressure. In the fourth quarter of 2012 net interest income moderated its growth and declined by 7.9% quarter on quarter to 615 million as a result of downward asset repricing and the higher cost of retail liabilities. This positive evolution of net interest income in 2012 was based on: The positive performance of the return on lending, which grew by 24 basis points during the year to 4.49% thanks both to the Bank s demonstrated repricing capability also in new transactions and the floors positive impact. The evolution of profitability during the quarter was a 12 basis points decline quarter on quarter as a result of the negative movement of interest rates and the increase in non-earning assets. The cost of customer funds during the year rose by 11 basis points to 2.14% basically because of the sharp competition in deposit prices, particularly in the second half of The cost of wholesale funds fell during the year from 2.16% to 2.05%. Foreseeably the cost of retail funds will start to decline during 2013 towards more reasonable levels, and this will undoubtedly benefit the profit, although it will not be until 2014 that the depreciation of retail funds will be complete. The customer spread therefore improved during the year from 2.22% to 2.35%, and the NIM rose to 1.80% from 1.63% a year earlier. Fees and commissions were up 15.8% year on year at 794 million; the increase was 3% with no change in consolidation scope. The result on financial asset and liability transactions and other income was notable for the strong performance of the former ( million in the year) due to the repurchase of debt and other financial transactions. Noteworthy in the other income caption was the sharp increase in the contribution to the Deposit Guarantee Fund which rose from 37 million to 166 million. In 2013 this contribution to the Deposit Guarantee Fund will foreseeably decrease by 85 million as a result of the new regulations. 3

4 Profit before provisions: clear positive evolution in a complicated environment The costs of 1,604.7 million were up 27% following the integration of Banco Pastor. Extraordinary items incurred in 2012 were 50.3 million in general expenses and 20 million of extraordinary amortisation. In 2013, thanks to the synergies arising from Banco Pastor and other cost optimisation measures, the Bank expects to reduce its total costs by 100 million. The strength of income referred to earlier enabled the pre-provision profit to rise by 23.9% to 2,016 million in the year. With this pre-provision profit performance, the efficiency ratio for the year as a whole stood at 42.5%, the highest in the Spanish banking system in which the ratio stands at around 60%. Commercial activity: the positive evolution continues During 2012 loans were up by 19% and retail funds by 26%, thanks to the inclusion of Banco Pastor in the balance sheet. Because of the exceptional effort by the Bank s commercial network to ensure the success of the capital increase in the fourth quarter, this quarter saw a slight decline of 0.6% in lending (mainly due to the decline in non-residents and general government) and of -1% in retail funds. The decrease, however, was lower than in the system as a whole and the Bank therefore again increased its market share in the quarter by 9 basis points in lending (6.55%) and 4 basis points in deposits (5.73%). Also, 90,000 new individual customers and 43,000 SMEs were added during the year. Particularly noteworthy was the fact that despite the enormous effort and total commitment involving each and every one of the Bank s employees in promoting the capital increase, Banco Popular continued to strengthen its SME franchise, with a 14% penetration share. Over one million SMEs now put their trust in Banco Popular, and in the ICO line campaign the Bank continues to be the outright leader in the system with a market share rise of 16 basis points in the quarter to 19.9%. Banco Popular is also committed to international growth and opened new representation offices in 2012 in Casablanca, Dubai, Sao Paolo, Istambul, etc., and its market shares in lending for imports (12.5%) and exports (7.5%) greatly exceed its natural market share. Extraordinary earnings The level of extraordinary earnings obtained by the Bank in 2012 indicates the intrinsic strength of the Group s balance sheet. Capital gains of 195 million and bad debt recoveries of 282 million led to a total of 432 million, better than expected in the 2012 business plan. Specifically, property sales amounted to 122 million, the sale of the POS terminals business to 68 million and the sale of a small technology business to 5 million. The business plan for the coming years envisages the obtaining of additional capital gains with the complete or partial disposal of such businesses as recoveries unit (already sold), the credit card business, the ATM business and the life insurance and pension business in Portugal. Risk management: the Bank accentuates the balance sheet cleansing exercise The non-performing loans ratio stands at 8.98%, 240 basis points lower than that of the banking sector as a whole (11.38%). During the fourth quarter net additions to non-performing loans amounted to 1,979 million, down from the 2,023 million of the preceding quarter; this level of additions was due to a further transfer from substandard to non-performing ( 887 million in 4Q12 vs. 299 million in 3Q12) and by more proactive risk management, as foreseen in the Bank s business plan. A further deterioration of credit quality continues to be expected as a result of the economic situation and very particularly in the development and construction sector, although this source of non-performing balances will have been covered with the early provisions booked by the Bank during In the year as a whole, particularly noteworthy was the enormous provisioning effort carried out, with a contribution of over 9,600 million of provisions by charges to the income statement and direct charges to capital. Because of this effort non-performing loan coverage rose from 35% to 65% and that of foreclosed properties from 32% to 49%. 4

5 Excellent liquidity position: loan-to-deposit ratio of 123% The Bank continued its policy of reducing its dependence on wholesale funding and in 2012, after tactically managing retail funds and on-balance sheet credits, it again successfully reduced the loan-to-deposit ratio from 135% to 123%, thus reducing its commercial gap or wholesale dependence by more than 8,500 million in the year. The Bank has a very comfortable maturities schedule in 2013 of less than 4,300 million, of which 72% are covered bonds reusable at the ECB. It should also be noted that in January 2013 the Bank issued 1,250 million, 29% of total maturities for the year. Additionally there is also a second liquidity line of 14,552 million which improved by nearly 2,000 million the amount at the end of the third quarter, and is 10.4 times higher than the total senior debt maturities, giving the Bank confidence to continue to support lending to our customers. Solvency: soundness after compliance with Spanish legislation and the capital increase In the fourth quarter of 2012 the Bank embarked on a process of recapitalisation and balance sheet strengthening by means a capital increase, without precedent in the history of the Bank, for a total of 2,500 million thus covering in advance with provisions any adverse economic scenario for 2013 and 2014 and also avoiding any kind of State aid. As a result, Banco Popular is now one of the best provisioned and capitalised entities in Spain and Europe, with an estimated cumulative loss coverage at year end of 16% of its balance sheet in Spain. Despite the enormous provisioning effort and thanks to the capital increase and the efficient management of capital funds, the Bank s EBA core capital figure at year end continued to stand at 10.1%. 5

6 Balance Sheet (Amounts in thousand) % variation ASSETS Cash and balances with central banks 2,117, ,205 > Financial assets held for trading 2,096,851 1,316, Other financial assets at fair value through profit or loss 493, , Investment portfolio 21,857,472 17,974, Loans and receivables 114,444, ,741, Loans and advances to other debtors 108,809,293 96,771, Other loans and receivables 4,658,658 3,970, Of which interbank deposits 430, ,536 (27.2) Fixed income 976,182 - Changes in the fair value of hedged items in portfolio hedges of interest rate risk 222,647 19,546 > Hedging derivatives 678,357 1,092,040 (37.9) Non-current assets held for sale 4,896,644 3,601, Investments 811, , Insurance contracts linked to pensions 144, , Reinsurance assets 4,878 3, Tangible assets 1,892,725 1,734, Intangible assets 2,655, ,131 > Tax assets 3,703,759 1,212,610 > Other assets 1,598, , Total Assets 157,618, ,925, (Amounts in thousand) % variation Liabilities Financial liabilities held for trading 1,491,141 1,104, Other financial liabilities at fair value through profit or loss 93,060 93,761 (0.7) Financial liabilities at amortised cost: 141,726, ,279, Liabilities of credit institutions 34,966,637 25,330, Of which interbank deposits 4,093,661 3,496, Deposits from other creditors 79,830,212 68,742, Debt certificates including bonds 23,442,605 20,448, Subordinated liabilities 2,170,454 2,834,927 (23.4) Other financial liabilities 1,316, , Hedging derivatives 2,048,864 1,414, Insurance contract liabilities 814, , Provisions for contingent exposures 508, , Tax liabilities 461, , Other liabilities 519, , Total liabilities 147,662, ,537, (Amounts in thousand) % variation Equity Total equity 10,797,878 9,124, Capital, reserves and retained earnings 13,258,901 8,712, Profit or loss for the period (2,461,023) 479,653 Dividends paid and declared - (68,419) (100.0) Valuation adjustments (886,614) (841,923) 5.3 Minority interests 44, ,999 (58.3) Net asset value 9,955,421 8,388, Total liabilities and equity 157,618, ,925,

7 Commercial GAP (Amounts in million) Lending to customers 108,809 Other lending (233) Repos (6,796) Total lending to customers net (ex repos) (a) 101,781 Current accounts 21,886 Term deposits 45,804 Others and valuation adjustments 797 Subtotal customer deposits (ex repos) 68,487 Retail Commercial paper 6,561 Funding from ICO public credit lines (prefunded) 5,545 Securitizations sold to third parties 575 Marketable securities distributed through the branch network 1,304 Tax collection accounts 454 Total customer deposits (b) 82,926 GAP (a-b) 18,855 LTD (a/b) 123% 7

8 Funds Managed (Amounts in thousand) % variation Customer deposits General government 7,410,601 1,265,191 > Other private sectors: 67,249,082 57,509, Residents 58,802,462 50,092, Nonresidents 8,446,620 7,417, Valuation adjustments (±) 233, ,522 (24.5) Subtotal customer deposits 74,893,259 59,084, Deposits at central counterparty entities 4,936,953 9,657,902 (48.9) Total customer deposits 79,830,212 68,742, Unadjusted debt certificates including bonds: 22,846,880 19,752, Bonds and other securities outstanding 15,740,074 17,318,165 (9.1) Commercial paper 7,106,806 2,433,918 > Valuation adjustments (±) 595, ,855 (14.5) Total debt certificates including bonds 23,442,605 20,448, Subordinated liabilities 2,170,454 2,834,927 (23.4) Total on-balance sheet funds (a) 105,443,271 92,026, Mutual funds 7,271,865 6,138, Asset portfolio management 720, ,063 (6.6) Pension funds 4,914,876 4,098, Insurance premium 1,733,741 1,454, Total other intermediated funds (b) 14,640,920 12,463, Total funds managed (a+b) 120,084, ,489, Customer deposits (Amounts in thousand) % variation Demand deposits 21,886,235 19,287, Time deposits 45,804,485 38,648, Asset repos 6,405, ,887 > Other accounts and valuation adjustments 797, , Subtotal customer deposits 74,893,259 59,084, Marketable securities distributed through the branch network (*) 8,545,883 2,595,766 > Asset repos (6,405,186) (394,887) > Total customer funds ex repos 77,033,956 61,285, (*) Including convertible debentures, preferred shares and commercial paper distributed through the branch network. 8

9 Lending to customers (Amounts in thousand) % variation Lending to general government 3,839,449 1,211,994 > Lending to other private sectors 113,226,801 97,063, Residents 103,025,775 86,263, Nonresidents 10,201,026 10,799,816 (5.5) Total lending to customers ex-repos 117,066,250 98,275, Other loans 232, ,669 (61.1) Total credit to customers and others 117,298,902 98,872, Valuation adjustments (+/-) (8,489,609) (2,101,669) > Total 108,809,293 96,771, Lending to customers by type (Amounts in thousand) % variation Trade loans and discounts 3,740,553 4,304,512 (13.1) Secured loans 54,023,003 49,076, Mortgage 52,299,261 47,222, Other 1,723,742 1,853,918 (7.0) Repos 6,792,524 6,210, Term loans and other lending 36,301,223 29,464, Leasing 2,732,177 2,749,935 (0.6) Doubtful assets 13,709,422 7,066, Total lending to customers 117,298,902 98,872,

10 Risk Management Performance* Variation (Amounts in thousand) Amount In % Nonperforming loans Balance at 1 January 7,323,272 6,055,019 1,268, Additions 9,436,275 4,278,997 5,157, Recoveries 3,735,750 2,117,129 1,618, Other changes (1) 2,163,204-2,163,204 Net variation 7,863,729 2,161,868 5,701,861 > % increase Writeoffs (1,210,268) (893,615) (316,653) 35.4 Balance at 31 December 13,976,733 7,323,272 6,653, (1) Basically, the contribution from Banco Pastor Variation (Amounts in thousand) Amount In % Credit loss allowances: Balance at 1 January 2,530,076 2,448,164 81, Annual provision: Gross 7,286,282 2,459,381 4,826,901 > Recoveries (2,786,154) (1,402,190) (1,383,964) 98.7 Net 4,500,128 1,057,191 3,442,937 > Other variations (1) 3,324,809 (105,948) 3,430,757 Writeoffs (1,208,969) (869,331) (339,638) 39.1 Balance at 31 December 9,146,044 2,530,076 6,615,968 > Of which sub-standard risk provisions 1,075, , , (1) Basically, the contribution from Banco Pastor (Amounts in thousand) Specific General Country risk Total Balance at 1 January 2,414, ,537 2,079 2,530,076 Net provisions 4,613,556 (113,537) 109 4,500,128 Amount used (1,208,969) - - (1,208,969) Other variations and transfers 3,324, ,324,809 Balance at 31 December 9,143,856-2,188 9,146,044 *Including doubtful off-balance sheet risks and country risk and the related risk allowance 10

11 Risk Management Performance Variation (%) Amount In % Risk quality measures Total Risks ( thousand) 155,582, ,301,714 33,280, Nonperformance (Nonperforming loans/total risks) Credit risk premium Typical spread on lending to customers (Amounts in thousand) Coverage by type of non-performing balance Non-performing balances without mortgage guarantee or pledge guarantee 3,736,261 Non-performing balances with mortgage guarantee or pledge guarantees 10,240,472 Value of guarantees (incuding haircuts) 7,609,518 Total non-performing balances 13,976,733 Loans fully written off 4,355,998 Non-performing balances+loans fully written off 18,332,731 Total value of guarantees (*) 7,609,518 Provisions for insolvency 9,146,044 Provisions for insolvency with written-off balances 13,502,042 % Coverage for non-performing and written-off balances % Coverage for non-performing balances excl written-off balances % Coverage with guarantees (*) Does not include written-off loan guarantees Coverage analysis ( million) 18,333 NPLs 13,977 Coverage: % 21,112 Provisions 13,502 (73.6%) Loans fully written off 4,356 NPLs+Loans fully writen off Effective collaterals incl. BoS haircut 7,610 (41.5%) Effective collateral + B-S provision Variation (Amounts in thousand) Amount In % Asset impairment Financial assets 4,347, ,338 3,395,382 > Credit risk and provisioning 4,248, ,126 3,326,297 > Of which: bad debts recoverd 281, , , Investments 99,297 30,212 69,085 > Non-financial assets and property 1,310, , , Total 5,658,227 1,690,190 3,968,037 > 11

12 Solvency. EBA (Amounts in thousand) Capital 6,355,198 1,955,409 Reserves 3,790,791 6,468,834 Convertibles 1,751,075 - Minority interest 45,380 22,809 Deductions (3,008,511) (1,919,173) Total core capital EBA 8,933,933 6,527,878 Core capital EBA (%) Preffered shares* 165,526 2,315,871 Total Own funds Tier 1 9,099,459 8,843,749 Ratio Tier 1 (%) Own funds BIS computable 9,788,006 8,972,365 Ratio BIS (%) Leverage (1) Total risk weighted assets 88,756,823 88,438,305 from which credit risk 81,118,557 81,973,281 from which operational risk 6,795,054 5,935,699 from which market risk 843, ,325 * Includes MCN (1) Calculated with data as of each period end Equity Capital & Valuation Minority Net asset (Amounts in thousand) reserves adjustments interests value Balance at 31/12/2011 9,124,148 (841,923) 105,999 8,388,224 Capital increase 4,244, ,244,311 Variation in treasury stock 18, ,172 Gain on treasury stock transactions (72,637) - - (72,637) Actuarial differences (885) - - (885) Remuneration of mandatory convertible debentures (31,252) - - (31,252) Consolidation operations and other (net) (23,719) - 3,575 (20,144) Corporate operations (66,905) (66,142) Value adjustments - (44,691) 1,545 (43,146) Net profit at 31 December 2012 (2,461,023) - 80 (2,460,943) Dividends paid/announced in (137) (137) Balance at 31/12/ ,797,878 (886,614) 44,157 9,955,421 Mandatory convertible notes (Amounts in Balance sheet Coupon payment Amount Conversion price Conversion date thousand) consideration accounting method Through Net Floating at market BSOC I/ ,124 Subordinated debt April 2018 Interest Income price. Floor: 0,77 BSOC II/ ,024 Equity Equity Fixed price: 3.57 October ,635 Equity Equity Fixed price: 3.64 November 2015 BSOC III/ ,000 Subordinated debt Through Net Floating. At market 1/3 March 2013, 1/3 September Interest Income price. Floor: 0,5 2013, 1/3 March 2014 BSOC IV/ ,000 Subordinated debt Through Net Floating. At market 1/3 December 2013, 1/3 June Interest Income price. Floor: 0,5 2014, 1/3 December 2014 TOTAL 1,799,783 Net profit should be adjusted by 71m gross annual in a diluted basis to exclude the cost of the coupons of the MCNs. 12

13 Consolidated income and profitability (Amounts in thousand) (Annualized % of ATA) % variation Variation Interest and similar income 5,496,413 4,580, Interest expense and similar charges 2,777,657 2,493, (0.10) =Net interest income 2,718,756 2,086, Return on equity instruments 4,106 8,495 (51.7) (0.01) +Share of results of entities accounted for using the equity method 23,070 46,068 (49.9) (0.02) +Fees and commissions, net 793, , ±Gains or losses on financial assets and liabilities (net) 304,837 81,479 > Exchange differences (net) 55,148 47, ±Other operating results (net) (121,771) 40,404 (0.08) 0.03 (0.11) =Gross operating income 3,777,816 2,996, Administrative expenses: 1,604,723 1,262, Personnel expenses 949, , Other general administrative expenses 654, , Depreciation & amortisation 156, , =Net operating income (Pre-provision profit) 2,016,374 1,627, Financial asset impairment and provisioning 4,347, ,338 > Impairment of other assets 1,310, , ±Gains/(Losses) on assets sales (net) 150, ,853 (70.4) (0.29) =Profit before tax (3,491,719) 444,141 (2.31) 0.35 (2.66) -Income tax (1,030,776) (39,835) > (0.68) (0.03) (0.65) +Gains/losses on discontinued operations (net) =Consolidated profit for the year (2,460,943) 483,976 (1.63) 0.38 (2.01) - Profit attributed to minority interests 80 4,323 (98.1) =Profit attributed to the controlling company (2,461,023) 479,653 (1.63) 0.38 (2.01) Net return on risk-weighted assets (RORWA) (%) (2.60) 0.54 (3.14) Net return on equity (ROE) (%) (23.01) 5.49 (28.50) Operating efficiency ratio (%) In million Average total assets 151, ,339 22,813 Average risk-weighted assets (RWA) 94,745 89,671 5,074 Average equity 10,695 8,739 1,957 13

14 Quarterly Consolidated Income (Amounts in thousand) Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q Interest and similar income 1,073,594 1,130,812 1,180,778 1,195,337 1,342,929 1,440,890 1,375,087 1,337,507 -Interest expense and similar charges 558, , , , , , , ,305 =Net interest income 515, , , , , , , ,202 +Return on equity instruments 1,905 1,930 1,094 3, , Share of results of entities accounted for using the equity method 11,649 10,709 13,835 9,875 12,794 1,053 2,648 6,575 +Fees and commissions, net 171, , , , , , , ,269 ±Gains or losses on financial assets and liabilities (net) 23,589 13,116 24,473 20,301 53, ,323 53,102 62,580 ±Exchange differences (net) 10,958 9,792 14,044 12,951 12,355 15,498 14,794 12,501 ±Other operating results (net) 40,635 1,502 (3,200) 1,467 (23,424) (29,415) (40,281) (28,651) =Gross operating income 775, , , , ,119 1,090, , ,353 -Administrative expenses: 297, , , , , , , ,991 Personnel expenses 189, , , , , , , ,368 Other general administrative expenses 107, , , , , , , ,623 -Depreciation & amortisation 28,068 24,752 26,043 27,328 31,085 35,871 34,503 55,260 =Net operating income (Pre-provision profit) 450, , , , , , , ,102 -Financial asset impairment and provisioning 408, , , , , , ,425 3,356,767 -Impairment of other assets 426,994 94,631 93, ,128 88, ,258 83,988 1,031,727 ±Gains/(Losses) on assets sales (net) 497,698 5,058 1,476 2, (1,753) (1,004) 152,656 =Profit before tax 112, , ,902 75, , , ,372 (3,858,736) -Income tax (76,858) 30,765 7,459 (1,201) 39,395 28,544 48,002 (1,146,717) +Gains/losses on discontinued operations (net) =Consolidated profit for the year 189, , ,443 76, ,586 75,120 75,370 (2,712,019) -Profit attributed to minority interests 3,352 (1,951) 1,821 1, (292) (208) 173 =Profit attributed to the controlling company 185, ,722 98,622 75, ,179 75,412 75,578 (2,712,192) 14

15 Quarterly Profitability (Annualized % of ATA) Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 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 Fees and commissions, net ±Gains/losses on financial assets and liabilities (net) ±Exchange differences (net) ±Other operating results (net) (0.01) 0.01 (0.06) (0.07) (0.11) (0.07) =Gross operating income Administrative expenses: Personnel expenses Other general administrative expenses Depreciation & amortisation =Net operating income (Pre-provision profit) Financial asset impairment and provisioning Impairment of other assets ±Gains/(Losses) on assets sales (net) =Profit before tax (9.90) - Income tax (0.24) (0.01) (2.94) +Gains/losses on discontinued operations (net) =Consolidated profit for the year (6.96) - Profit attributed to minority interests 0.01 (0.01) =Profit attributed to the controlling company (6.96) Net return on risk-weighted assets (RORWA) (%) (11.38) Net return on equity (ROE) (%) (96.89) Operating efficiency ratio (%) In million Average total assets 127, , , , , , , ,875 Average risk-weighted assets (RWA) 92,223 90,615 90,285 89,056 92,639 96,088 96,007 95,296 Average equity 8,793 8,802 8,700 8,685 10,005 10,420 10,685 11,197 15

16 Yields and Costs (Amounts in thousand and rates annualized) Average balance Distribution (%) Income Average Average Distribution or expense rate (%) balance (%) Income or expense Average rate (%) Financial system 4,870, , ,471, , Loans and discounts (a) 107,352, ,820, ,472, ,014, Securities portfolio 20,403, , ,358, , Other assets 18,524, , ,037, , Total earning assets (b) 151,151, ,496, ,338, ,580, Financial system 32,077, , ,214, , Customer funds (c) 81,344, ,738, ,530, ,610, Demand accounts 15,414, , ,702, , Savings and time deposits 57,102, ,419, ,799, ,282, Deposits at central counterparty entities 3,293, , ,540, , Retail commercial paper 5,534, , , , Marketable debt securities & other 21,909, , ,374, , Other interest-bearing liabilities 357, , , , Other funds 4,766, ,237, Equity 10,694, ,738, Total funds (d) 151,151, ,777, ,338, ,493, Customer spread (a-c) Spread (b-d)

17 Quarterly Yields and Costs (Data in % and rates annualized) Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q Distribution Distribution Distribution Distribution Distribution Distribution Distribution Distribution Rate Financial system Loans and discounts (a) Securities portfolio Other assets Total earning assets (b) Financial system Customer funds (c) Demand accounts Savings and time deposits Deposits at central counterparty entities Retail commercial paper Marketable debt securities & other Other interest-bearing liabilities Other funds Equity Total funds (d) Customer spread (a-c) Spread (b-d)

18 Net Fee and Commission Income (Amounts in thousand) Distributions (%) % variation Banking services 747, , Portfolio administration 81,647 73, Securities portfolios 28,214 23, Asset portfolio management 3,015 3,246 (7.1) Mutual funds 40,249 39, Pension plans 10,169 6, Other banking services 563, , Securities and foreign currency purchase and sale 10,393 9, Demand account administration 107,880 98, Provision of collateral and other guarantees 145, , Asset transaction services 44,961 46,240 (2.8) Collection and payment handling 89,241 78, Other 165, , Means of payment 102,380 96, Defaults 46,300 44, Total 793, , (Amounts in thousand) 2012 I II III IV Banking services 173, , , ,772 Portfolio administration 19,658 21,011 16,962 24,016 Securities portfolios 5,689 9,488 5,615 7,422 Asset portfolio management 1, Mutual funds 11,064 8,875 9,616 10,694 Pension plans 1,874 2, ,106 Other banking services 129, , , ,406 Securities and foreign currency purchase and sale 2,578 2,519 2,519 2,777 Demand account administration 24,202 29,057 27,383 27,238 Provision of collateral and other guarantees 34,226 36,627 38,420 36,456 Asset transaction services 11,613 11,654 10,858 10,836 Collection and payment handling 21,903 23,735 21,558 22,045 Other 34,868 58,929 36,288 35,054 Means of payment 24,376 26,858 27,796 23,350 Defaults 12,892 12,817 10,094 10,497 Total 186, , , ,269 18

19 Personnel and general expenses (Amounts in thousand) Distributions (%) % variation Personnel expenses: 949, , Wages and salaries 721, , Social security charges 174, , Other personnel expenses 28,920 23, Pensions 25,562 31,571 (19.0) General expenses: 654, , Rents and common services 154, , Communications 34,605 28, Maintenance of premises and equipment 47,600 32, IT and other technical expenses 145,291 95, Stationery and office supplies 8,780 7, Technical reports and legal expenses 46,097 29, Advertising and publicity 49,155 40, Insurance 10,025 5, Security and fund transport services 23,732 19, Travel 10,621 9, VAT and other 97,167 76, Other general expenses 27,313 27, Total 1,604,723 1,262, (Amounts in thousand) 2012 I II III IV Personnel expenses: 221, , , ,368 Wages and salaries 167, , , ,154 Social security charges 40,617 44,561 44,453 44,375 Other personnel expenses 6,832 8,409 5,557 8,122 Pensions 7,078 4,582 6,185 7,717 General expenses: 143, , , ,623 Rents and common services 36,363 41,754 40,190 36,296 Communications 8,764 10,458 7,621 7,762 Maintenance of premises and equipment 12,122 10,739 10,648 14,091 IT and other technical expenses 27,761 38,155 36,943 42,432 Stationery and office supplies 1,884 2,462 2,062 2,372 Technical reports and legal expenses 10,131 11,070 9,134 15,762 Advertising and publicity 7,647 13,518 10,866 17,124 Insurance 2,519 3,281 2,133 2,092 Security and fund transport services 5,271 6,672 5,802 5,987 Travel 2,383 3,216 2,233 2,789 VAT and other 19,169 21,782 24,007 32,209 Other general expenses 9,744 5,966 5,896 5,707 Total 365, , , ,991 19

20 Market Performance of the Bank s Shares Market information Quarters Share liquidity (Number in thousands) Share market price ( ) Average shares Shares outstanding traded % High Low Closing Dividend paid ( ) Market return* Q 1,375, , % % Q 1,382, , % (1) (5.23%) Q 1,398, , % (2) (9.04%) Q 1,400, , % % Year total 1,389,246 2,304, % (3.13%) Q 1,424, , % (3) (22.44%) Q 1,835, , % (4) (30.74%) Q 2,006, , % (4.60%) Q 3,718,176 3,902, % (65.55%) Year total 2,246,130 5,920, % (79.94%) * Appreciation (depreciation) and dividend as % of initial price in each period. (1) Optional dividend: cash payment of 0.05 (gross) or exchange for new issue shares at the rate of 1 for 85 (reference price 4.222) (2) Optional dividend: cash payment of 0.05 (gross) or exchange for new issue shares at the rate of 1 for 78 (reference price 3.881) (3) Optional dividend: cash payment of 0.04 (gross) or exchange for new issue shares at the rate of 1 for 77 (reference price 3.058) (4) Optional dividend: cash payment of 0.08 (gross) or exchange for shares from treasury stock at rate of 1 for 21 (reference price 1.684) Market ratios Price / Book value Capitalisation / Pre-provision profit Banco Popular share price vs Spanish Banks (euros) (daily closing price, base = 100) January 2010 December 2012 n Banco Popular n Bank 1 n Bank 2 n Bank 3 n Bank 4 n Bank 5 n Bank 6 n Bank 7 Treasury Stock Average Maximum Minimum Closing Total outstanding (a) Total traded (b) Treasury Stock* As % of (a) As % of (b) 2011 First quarter 16,090 31,374 1,427 1,427 1,375, , % 2.08% Second quarter 15,943 28,736 1,427 22,506 1,387, , % 2.87% Third quarter 38,898 47,148 19,192 35,600 1,400, , % 6.35% Fourth quarter 40,422 48,314 30,752 42,715 1,400, , % 11.11% 2012 First quarter 30,848 43,705 7,145 41,378 1,796, , % 5.18% Second quarter 56,423 73,372 1,337 1,337 2,047, , % 6.61% Third quarter 41,348 55,486 2,286 47,725 2,047, , % 7.26% Fourth quarter 88, ,548 48,213 96,594 8,408,550 3,902, % 2.26% * Calculated on average treasury stock held in the quarter 20

21 Basis of presentation and accounting principles and standards Pursuant to Regulation 1606/2002 of the European Parliament and Council, dated July 19, 2002, the obligation for companies whose securities were listed on a regulated market in a Member State of the European Union at the date of their balance sheets to prepare consolidated financial statements in accordance with the International Financial Reporting Standards (IFRS) came into force on January 1, The Bank of Spain, as the accounting regulator of the Spanish banking industry, implemented and adapted the accounting standards for credit institutions in its Circular 4/2004, as published in the Official State Gazette on December 30, That Circular was partly amended by Circular 6/2008 and by Circular 3/2010. Accounting principles and policies and valuation standards The Group s accounting policy is based on the accounting principles set forth in Note 15 to the 2010 consolidated financial statements, which included most notably the following: A) Impairment of the value of assets: The treatment of financial assets differs from that of all other assets, as discussed below. Coverage is envisaged for the losses on financial assets, provided that they are based on objective evidence. Specific and general allowances are booked for customer-attributable credit-loss risk, and specific allowances for country risk. The specific allowance reflects the deterioration of assets individually identified as impaired, and the general allowance reflects the inherent loss incurred based on the nature of each risk and estimated by statistical procedures pending allocation to specific transactions. The Bank of Spain has stipulated models and methodology conforming to IFRS for the calculation of the foregoing allowances. The regulations require strict treatment in the classification of doubtful balances in customer transactions, since default in the payment of one installment triggers the classification as nonperforming of the entire transaction. For all other assets, including goodwill, impairment is deemed to exist if and when the book value of the assets exceeds their recoverable amount. In the case of goodwill, an impairment test must be performed at least once a year, since goodwill is not systematically amortized, and the appropriate writedown is booked if there is evidence of impairment. B) Income: B1) Fees: Under IFRS the treatment of fees collected or paid differs depending on whether they are compensation for a service rendered or a cost incurred, or are remuneration additional to the interest rate on the transaction. The former are recognized as income when the service is rendered or the cost is incurred, and the latter are accrued over the term of the transaction. B2) Interest and dividends: Interest is recognized on an accrual basis by the effective interest rate method, and dividends are recorded when declared. C) Financial instruments are classified for valuation purposes and recorded as follows: - Instruments classified in the trading portfolio, including financial derivatives, are recorded at fair value, with changes taken to the income statement. - Loans and discounts and held-to-maturity investments are recorded at their amortized cost. - Available-for-sale financial assets are valued at fair value, and changes in value are recorded in net worth until realized, at which time they are recognized in the income statement. - Substantially all financial liabilities are valued at amortized cost. D) Non-financial and intangible assets and inventories. These are valued at cost. For the valuation of tangible assets, the Banco Popular Group has not, on a general basis, taken the option provided in IFRS to revalue them, and accordingly they are presented in the balance sheet at cost restated, where appropriate, pursuant to the applicable enabling legislation, net of accumulated depreciation. E) Non-current assets held for sale. Recorded in this caption are the assets bought or foreclosed. 21

22 Disclaimer This financial report has been prepared by Banco Popular solely for purposes of information. It may contain estimates and forecasts with respect to the future development of the business and to the financial results of the Banco Popular Group, which stem from the expectations of the Banco Popular Group and which, by their very nature, are exposed to factors, risks and circumstances that could affect the financial results in such a way that they might not coincide with such estimates and forecasts. These factors include, but are not restricted to, (i) changes in interest rates, exchange rates or any other financial variable, both on the domestic as well as on the international securities markets, (ii) the economic, political, social or regulatory situation, and (iii) competitive pressures. In the event that such factors or other similar factors were to cause the financial results to differ from the estimates and forecasts contained in this report, or were to bring about changes in the strategy of the Banco Popular Group, Banco Popular does not undertake to publicly revise the content of this report. This financial report contains summarised information and in no case shall its content constitute an offer, invitation or recommendation to subscribe or acquire any security whatsoever, nor is it intended to serve as a basis for any contract or commitment whatsoever. The distribution of this document in other jurisdictions may be forbidden, accordingly, holders of this document should be aware of such restrictions and comply with them. 22

23 NOTES BANCO POPULAR ESPAÑOL Registered office: C/ Velázquez 34, Madrid Phone: Fax: banco popular español Banco popular portugal totalbank TargoBank banco popular-e.com popular banca privada Banco Pastor 23

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