Earnings Report. January-June 2018

Transcription

1 Earnings Report January-June July

2 CONTENTS Page Highlights of the quarter 2 1. Relevant data 3 2. Economic and financial environment 4 3. Summary of results 5 4. Balance sheet performance Risk management Funding structure and liquidity Solvency Share performance Rating Significant events Appendix 25 Basis of presentation and comparability of information Given that the merger between Bankia and BMN was effective for accounting purposes from 1 December 2017, the Group s balance sheets as at 30 June 2018 and 31 December 2017 already include all the assets and liabilities of the company resulting from the merger. In the income statement, however, the results of BMN have only been included as from December Therefore, the Group s income statements for the first quarter of 2018 and the first quarter of 2017 are not stated on a constant perimeter basis. To facilitate comparison between the two periods, this report indicates how the main income statement items would have changed on a like-for-like basis, that is, as if BMN s results had already been included in the first quarter of This document was originally prepared in Spanish. The English version published here is for information purposes only. In the event of any discrepancy between the English and the Spanish version, the Spanish version will prevail. 1

3 The Bankia Group posts attributable profit of 515 million euros after capturing the first synergies from the merger with BMN Further progress in the integration of BMN Having completed the IT integration in March, during the second quarter of 2018 the Group has continued to work on reorganising the business, so as to capture the post-merger synergies. At the end of June, 87% of the exits envisaged in the workforce restructuring plan have already taken place. In April all of the Group s real estate activity was brought under the management of Haya Real Estate. In May an agreement was signed with Crédit Agricole Consumer Finance to operate in the consumer finance business in Spain and in July, as part of the reorganisation of the insurance business, the completion of the purchase of 100% of the share capital of Caja Granada Vida and Cajamurcia Vida y Pensiones took place. Business with customers, active cost management and control of the cost of risk continue to be the basis for income generation Fee and commission income is up 1.4% year-on-year on a constant perimeter basis, driven by increased customer activity and loyalty, mainly in mutual funds, debit and credit cards and management of payroll and pension deposits. The focus on efficiency and the first synergies generated from the merger with BMN reduce operating expenses by 1.7% compared with June 2017 on a constant perimeter basis. Provisions and impairments show a positive trend, which in the first half of 2018 decrease by 20.6% year-onyear, despite the integration of BMN s balance sheet. At the end of June 2018, the cost of risk stands at 20 basis points, down 3 basis points vs. the previous quarter and down 5 basis points vs. June Revenue from customers, cost management and control of the cost of risk, lead to an attributable profit for the first half of 515 million euros, compared to 514 million euros in June the previous year. Strong performance in the banking business, new lending and new customers funds At the end of June 2018 digital customers account for 40.9% of the Group s total customers and sales through digital channels make up 16.8% of the Group s total sales. Customers with payroll and pension deposits are up 112,000 vs. June 2017 and debit and credit card revenue grows 12% to reach a market share of 11.8%. New lending grows, with significant increases in the quarter both in lending to businesses (+35.8%) and to individuals, through mortgage loans (+18.1%) and consumer loans (+34.6%). The strategy for attracting savings remains focused on the more liquid resources and on mutual funds. Demand deposits are up 32.3% in the half-year and mutual funds increase 4.1%. Further improvements in risk indicators and strong capital ratios Non-performing loans are down 10.8% since December 2017 and down 7.1% in the quarter. This decline brings the Group s NPL ratio to 8.1% at the end of June, an improvement of 100 basis points compared to December 2017 and 60 basis points in the quarter. The declining trend of the portfolio of foreclosed assets continues. Its net balance decreases 17.9% since December 2017, after the completion of sales totalling 309 million euros in the half-year. As regards solvency, the Group has reached a CET1 Phase-in ratio of 14.01% and a Total Capital ratio of 17.18%, giving a broad margin over and above the regulatory requirements for 2018: +545 basis points over the regulatory CET1 Phase-in ratio (8.56%) and +512 bps over the minimum Total Capital Phase-in ratio (12.06%). At the end of June 2018, the CET1 Fully Loaded ratio stands at 12.70%. 2

4 1. RELEVANT DATA Jun-18 Dec-17 Change Balance sheet ( million) Total assets 208, ,932 (2.7%) Loans and advances to customers (net) (1) 121, ,025 (1.2%) Loans and advances to customers (gross) (1) 127, ,782 (1.3%) On-balance-sheet customer funds 146, ,181 (2.7%) Customer deposits and clearing houses 128, ,396 (1.3%) Borrowings, marketable securities 14,969 17,274 (13.3%) Subordinated liabilities 2,482 2,511 (1.2%) Total customer funds 174, ,467 (1.9%) Equity 12,894 13,222 (2.5%) Common Equity Tier I - BIS III Phase In 11,720 12,173 (3.7%) Solvency (%) Common Equity Tier I - BIS III Phase In 14.01% 14.15% p.p. Total capital ratio - BIS III Phase In 17.18% 16.84% p.p. Ratio CET1 BIS III Fully Loaded 12.70% 12.66% p.p. Risk management ( million and %) Total risk 133, ,353 (1.8%) Non performing loans 10,809 12,117 (10.8%) NPL provisions (2) 5,945 6,151 (3.4%) NPL ratio 8.1% 8.9% -0.8 p.p. NPL coverage ratio (2) 55.0% 50.8% +4.2 p.p. Jun-18 Jun-17 (3) Change Results ( million) Net interest income 1, % Gross income 1,841 1, % Pre-provision profit % Profit/(loss) attributable to the Group % Key ratios (%) Cost to Income ratio (Operating expenses / Gross income) 51.3% 46.4% +4.9 p.p. R.O.A. (Profit after tax / Average total assets) (4) 0.5% 0.6% -0.1 p.p. RORWA (Profit after tax / RWA) (5) 1.2% 1.4% -0.1 p.p. ROE (Profit attributable to the group / Equity) (6) 8.3% 8.6% -0.2 p.p. ROTE ( Profit attributable to the group / Average tangible equity) (7) 8.5% 8.7% -0.2 p.p. Jun-18 Dec-17 Change Bankia share Number of shareholders 189, ,055 (1.12%) Number of shares in issue (million) 3,085 3,085 - Closing price (end of period, ) (8) (19.6%) Market capitalisation ( million) 9,893 12,300 (19.6%) Earnings per share (9) ( ) % Tangible book value per share (10) ( ) (3.3%) PER (Last price (8) / Earnings per share (9) ) (36.7%) PTBV (Last price (8) / Tangible book value per share) (16.8%) Additional information Number of branches 2,284 2,402 (4.9%) Number of employees 16,493 17,757 (7.1%) (1) Includes balances with BFA (in June the balance was 0 and in Dec-17 47mn) (2) In Dec-17, the Group coverage, with the inclusion of additional provisions for impairments resulting from IFRS 9 application, would have been 56,5% (3) The Jun-17 data corresponds to Bankia Group before the merger with BMN given that it took place with accounting effect on 01/12/2017 (4) Annualized profit after tax divided by average total assets (5) Annualized profit after tax divided by risk weighted assets at period end (6) Annualized attributable profit divided by the previous 12 months equity average, excluding the expected dividend payment (7) Annualized Attributable profit divided by the previous 12 months tangible equity average, excluding the expected dividend payment (8) Using the last price as of 29th June 2017 and 29th December 2017 (9) Annualized attributable profit divided by the number of shares in issue excludes the non recurrent integration costs (10) Total Equity less intangible assets divided by the number of shares in issue 3

5 2. ECONOMIC AND FINANCIAL ENVIRONMENT World growth continued at a lively pace in the first six months of 2018 (similar to the rate achieved during 2017, averaging around 3.3%), despite a sequence of negative shocks during the half-year, including: (i) a sharp increase in the oil price; (ii) the protectionist spiral driven by the USA; (iii) the political crisis in Italy; and (iv) turbulence in emerging markets sparked by appreciation of the dollar and the Fed s interest rate hikes. In the euro area, the beginning of the year was somewhat disappointing, as expectations had been raised by the strong performance seen in 2017: growth eased in the first quarter to 1.5%-2.0% and is expected to continue at this pace for the rest of the year. The US economy also slowed in the first quarter of 2018 but picked up sharply in the second quarter, returning to rates above 3.0%. Meanwhile, inflation remains contained, although the scenario is apt to deliver surprises on the upside, given very loose monetary policies (especially in the euro area), sustained growth above potential, a strong labour market, the hike in the oil price and growing trade barriers. The risks are higher in the USA, with core inflation at target and rising, than in the euro area, where core inflation remains stable at around 1.0%. Despite the increased uncertainty, the two large central banks have continued to normalise their monetary policies, albeit at different rates. The Fed carried out two 25bp increases in its benchmark rate, to 1.75%-2.00%, and has continued reducing its balance sheet. The ECB, in contrast, has decided to reduce its asset purchases from 30 billion euros per month to 15 billion from September and to shut the programme down in December. In a sign of caution, however, it has announced that it does not intend to increase its reference rates until at least the summer of This announcement, combined with the lower than expected growth in the euro area, has prompted lively investor interest in German government debt, whose 10-year yield has fallen 13 bp in the half-year. This good performance contrasts with the tensions affecting the Italian bond, which has felt the effect of the political profile of the new government and its willingness to increase government spending. The positive news has been that Spanish debt has suffered scarcely any contagion. Economic activity in Spain in the first half of 2018 continued to expand, with GDP growing 0.7% in the second quarter, a pace it has maintained for one year now, supported by strong domestic demand, in a context of favourable lending conditions and employment growth. Thus, the number in employment has risen by almost 574,000 people in the last year, bringing the total to more than 19 million, its highest level in the last decade. In contrast to the rally in investment, consumption has weakened somewhat in recent months, affected by the loss of purchasing power due to the rise in inflation. Growth of the economy continues to be compatible with a high external financing capacity, which remains at 2% of GDP. The most notable development as regards the Spanish banking industry has been the year-on-year trend in the stock of loans to households, which has stopped falling for the first time in seven years, driven by the upswing in consumer lending and loans for other purposes. The expansion of new lending in the consumer segment has been decisive in the change of trend and can also be observed in the other segments, though without, as yet, the same positive impact on the outstanding balance. As regards credit quality, the pace of reduction of the volume of non-performing assets has been stepped up this year through sales of large portfolios by some institutions, a trend that is expected to continue in the coming months. On the funding side, the balances of deposits continue to increase slowly, while the assets of mutual funds have grown at a brisker pace. Once again, profitability looms as the great challenge for the industry. With regard to the Banking Union, during the Euro Summit at the end of June a commitment was reached to start work on a road map for negotiations on the European Deposit Insurance Scheme and an agreement to strengthen the European Stability Mechanism, providing a common backstop to the Single Resolution Fund. 4

6 3. SUMMARY OF RESULTS In June 2018, the Bankia Group posts attributable profit of 515 million euros, equalling the figure reported in the first half of 2017 Note on the comparative information on results: Given that the merger between Bankia and BMN was effective for accounting purposes on 1 December 2017, the Group balance sheets at 30 June 2018 and 31 December 2017 already include all the assets and liabilities of the company resulting from the merger. In the income statement, however, the results of BMN have only been included as from December Therefore, the Group s income statements for the first quarter of 2018 and 2017 are not stated on a constant perimeter basis. To facilitate comparison between the two periods, this report indicates how the main income statement items would have changed on a like-for-like basis, that is, as if BMN s results had already been included at 30 June The increase in business with customers has driven growth in fee and commission income, which, combined with the continuing focus on efficiency and control of the cost of risk, has allowed the Group to match the attributable profit obtained in the first half of 2017 and offset the impact on net interest income of sales and rotation of the fixed income portfolio, the maturity and repricing of the mortgage portfolio and the non-recurring profit from the sale of Globalvia recognised in the first half of As regards the business with customers, new lending in target segments and the number of loyal and digital customers have continued to grow in the second quarter. This positive trend has been coupled with a steady improvement in risk management metrics, which in the second quarter once again reflect a decline in nonperforming loans and the NPL ratio. INCOME STATEMENT ( million) 1H H 2017 (1) Amount % Net interest income 1, % Dividends % Share of profit/(loss) of companies accounted for using the equity method % Total net fees and commissions % Gains/(losses) on financial assets and liabilities % Exchange differences % Other operating income/(expense) (74) (65) (9) 14.0% Gross income 1,841 1, % Administrative expenses (856) (681) (176) 25.8% Staff costs (596) (461) (135) 29.3% General expenses (260) (220) (40) 18.3% Depreciation and amortisation (88) (83) (5) 5.7% Pre-provision profit % Provisions (171) (171) 0 (0.1%) Provisions (net) Impairment losses on financial assets (net) (208) (174) (33) 19.2% Operating profit/(loss) % Impairment losses on non-financial assets 32 (9) 41 - Other gains and other losses (76) (10) (67) - Profit/(loss) before tax (12) (1.7%) Corporate income tax (166) (179) 12 (6.9%) Profit/(loss) after tax % Profit/(Loss) attributable to minority interests (0) (66.2%) Profit/(loss) attributable to the Group % Cost to Income ratio (2) 51.3% 46.4% +4.9 p.p. 10.6% Recurring Cost to Income ratio (3) 61.1% 55.3% +5.8 p.p. 10.5% (1) 1H 2017 data corresponds to Bankia Group before the merger with BMN given that it took place with accounting effect on 01/12/2017 (2) Operating expenses / Gross income (3) Operating expenses / Gross income (excluding gains/losses on financial assets and liabilities and exchange differences) Change 5

7 QUARTERLY RESULTS ( million) 2Q Q Q 2017 (1) 3Q 2017 (1) 2Q 2017 (1) 1Q 2017 (1) Net interest income Dividends Share of profit/(loss) of companies accounted for using the equity method Total net fees and commissions Gains/(losses) on financial assets and liabilities Exchange differences Other operating income/(expense) (70) (3) (132) 2 (61) (3) Gross income Administrative expenses (419) (437) (383) (344) (336) (345) Staff costs (291) (305) (255) (229) (226) (235) General expenses (128) (132) (128) (114) (110) (110) Depreciation and amortisation (40) (48) (47) (44) (42) (41) Pre-provision profit Provisions (68) (103) (50) (73) (72) (99) Provisions (net) (6) (5) 8 Impairment losses on financial assets (net) (91) (116) (88) (66) (67) (107) Operating profit/(loss) Impairment losses on non-financial assets 36 (4) (2) (2) (1) (9) Other gains and other losses (28) (49) (67) (29) (22) 12 Profit/(loss) before tax Corporate income tax (99) (67) (51) (34) (78) (100) Profit/(loss) after tax Profit/(Loss) attributable to minority interests (0.1) 0.3 (12) Profit/(loss) attributable to the Group Net integration costs (2) - - (312) Profit/(loss) attributable to the Group as reported (235) Cost to Income ratio (3) 50.8% 51.7% 64.6% 51.6% 49.6% 43.6% Recurring Cost to Income ratio (4) 61.6% 60.7% 70.6% 55.6% 57.4% 53.4% (1) 1Q 2017, 2Q 2017 ad 3Q 2017 data correspond to Bankia Group before the merger with BMN. 4Q 2017 data includes one month of BMN P&L given that the merger took place with accounting effect on 01/12/2017 (2) Non recurrent integration costs due to the merger between Bankia and BMN, net of taxes (3) Operating expenses / Gross income. Group data at 4Q 2017 excludes non recurrent integration costs in the calculation (4) Operating expenses / Gross income (excluding gains/losses on financial assets and liabilities and exchange differences). Group data at 4Q 2017 excludes non recurrent integration costs in the calculation ( million) 2Q Q Q 2017 Bankia + BMN (1) 3Q 2017 Bankia + BMN (1) 2Q 2017 Bankia + BMN (1) 1Q 2017 Bankia + BMN (1) Net interest income Dividends Share of profit/(loss) of companies accounted for using the equity method Total net fees and commissions Gains/(losses) on financial assets and liabilities Exchange differences Other operating income/(expense) (70) (3) (157) (0) (50) 1 Gross income ,048 Administrative expenses (419) (437) (455) (429) (425) (430) Staff costs (2) (291) (305) (295) (291) (285) (297) General expenses (128) (132) (160) (138) (140) (133) Depreciation and amortisation (40) (48) (55) (55) (54) (52) Pre-provision profit (1) 1Q 2017, 2Q 2017, 3Q 2017 and 4Q 2017 include BMN to facilitate the quaterly comparison on a like-for-like basis (2) Recurrent staff cost not including the extraordinary integration costs due to the merger between Bankia and BMN ( 312mn net of taxes) 6

8 Net interest income for the first half of 2018 totalled 1,047 million euros, 5.3% more than in the same period of 2017, due to the inclusion of BMN. If BMN s results had been included in the first half of 2017, the Group s net interest income on a constant perimeter basis would have been down 9.8% year-on-year, affected by lower returns from fixed-income securities after the portfolio sales and rotation that took place in 2017 and 2018, as well as the maturities and repricings of the mortgage portfolio associated with the Euribor negative performance. On a quarterly basis, second quarter net interest income is 521 million euros, down 1% (-5 million euros) compared to the previous quarter. This decline is a result of scheduled maturities in the stock of loans and the strategy of selling fixed income portfolios. New loans (excluding single name transactions) were granted at an average rate of 2.6%, in line with the rate recorded during The cost of deposits remains at historically low levels, with the rate on new term deposits reaching 3 basis points in the second quarter of 2018, 1 basis point below the rate recorded the previous quarter and 17 basis points below the cost of the back book at the close of the second quarter of This trend in the prices of retail funding has brought the customer margin to 1.56% at the close of the second quarter of the year, on a par with the previous quarter (1.57%) and with the level recorded in the second quarter of 2017 (1.57% on a like-for-like basis (Bankia + BMN). However, active management of the pricing of loans and deposits continued in the second quarter of REVENUES AND EXPENSES 2Q Q Q 2017 (Bankia + BMN) (1) 3Q 2017 (Bankia + BMN) (1) Average Revenues Average Revenues Average Revenues Average Revenues Yield Yield Yield ( million & %) Amount /Expense Amount /Expense Amount /Expense Amount /Expense Yield Loans and advances to credit institutions (2) 7, % 6, % 6, % 7, % Net Loans and advances to customers (a) 120, % 121, % 124, % 123, % Debt securities 53, % 53, % 56, % 58, % Other interest earning assets (3) % % % % Other non-interest earning assets 26, , , , Total Assets (b) 207, % 209, % 216, % 217, % Deposits from central banks and credit (2) institutions 37, % 37, % 38, % 39, % Customer deposits (c) 126, % 126, % 130, % 131, % Strict Customer Deposits 118, % 118, % 120, % 120, % Repos % 1, % 2, % 2, % Single-certificate covered bonds 7, % 7, % 7, % 8, % Marketable securities 16, % 17, % 17, % 17, % Subordinated liabilities 2, % 2, % 2, % 2, % Other interest earning liabilities (3) 1, % 1, % 1, % 1, % Other liabilities with no cost 10, , , , Equity 13, , , , Total equity and liabilities (d) 207, % 209, % 216, % 217, % Customer margin (a-c) 1.56% 1.57% 1.53% 1.52% Net interest margin (b-d) % % % % (1) Data including BMN to facilitate the comparison on a like-for-like basis for the period (2) Loans and advances to credit institutions include revenues arising from the negative interest rates applicable on "Deposits from central banks and credit institutions" (mainly TLTRO II and repo transactions) following accounting standards. On the liabilities side, the contrary occurs with regards to "Deposits from central banks and credit institutions" (3) Includes insurance contracts related to pensions, liabilities under insurance contracts and other financial liabilities 7

9 REVENUES AND EXPENSES 2Q Q Q 2017 (1) 3Q 2017 (1) Average Revenues Average Revenues Average Revenues Average Revenues Yield Yield Yield ( million & %) Amount /Expense Amount /Expense Amount /Expense Amount /Expense Yield Loans and advances to credit institutions (2) 7, % 6, % 6, % 6, % Net Loans and advances to customers (a) 120, % 121, % 106, % 102, % Debt securities 53, % 53, % 48, % 47, % Other interest earning assets (3) % % % % Other non-interest earning assets 26, , , , Total Assets (b) 207, % 209, % 185, % 179, % Deposits from central banks and credit (2) institutions 37, % 37, % 35, % 34, % Customer deposits (c) 126, % 126, % 106, % 102, % Strict Customer Deposits 118, % 118, % 100, % 97, % Repos % 1, % % % Single-certificate covered bonds 7, % 7, % 5, % 4, % Marketable securities 16, % 17, % 16, % 17, % Subordinated liabilities 2, % 2, % 2, % 2, % Other interest earning liabilities (3) 1, % 1, % 1, % % Other liabilities with no cost 10, , , , Equity 13, , , , Total equity and liabilities (d) 207, % 209, % 185, % 179, % Customer margin (a-c) 1.56% 1.57% 1.59% 1.53% Net interest margin (b-d) % % % % (1) BMN was integrated with accounting effect on 1 st December, hence, the revenues/expenses and the average amounts include the financial revenues, financial expenses, interest earning assets and interest earning liabilities of BMN corresponding to December. 3Q 2017 data corresponds to Bankia group before the merger with BMN. (2) Loans and advances to credit institution includes revenues arising from the negative interest rates applicable on "Deposits from central banks and credit institutions" (mainly TLTRO II and repo transactions) following accounting standards. On the liabilities side, the contrary occurs with regards to "Deposits from central banks and credit institutions" (3) Includes insurance contracts related to pensions, liabilities under insurance contracts and other financial liabilities 8

10 Net fee and commission income reached 534 million euros in the first half of the year, representing yearon-year growth of 25.6%, as a result of the increased activity and loyalty of our customers and the integration of BMN, which contributes 24.2% of the growth. Fees and commissions performed well across all businesses, most notably collection and payment services, demand account management and asset management (mainly, the marketing of mutual funds and insurance). If BMN s results had been included in the first half of 2017, the year-on-year growth would have been 1.4%. The second quarter of 2018 confirms this growth trend, with net fee and commission income up 2.5% compared to the previous quarter, reaching a total of 270 million euros. Most notable is the growth in fee and commission income from debit and credit cards (+7.5%), closely linked to the higher transactionality levels reached with customers; the securities brokerage service (+6.8%), contingent risks and commitments (+10.7%), and foreign exchange (+12.6%). NET FEE AND COMMISSION INCOME ( million) 6M M 2017 (1) Change 6M 2018 /6M 2017 Assets under management % Securities brokerage service (1) (2.1%) Mutual funds, Pension funds and insurances % Payments services % Bills of exchange 9 10 (1) (11.7%) Debit and credit cards % Means of payment % Origination % Contingent risks and commitments % Forex % Structuring and design of transactions (2) (5.8%) Management of NPLs, write offs and others % Management of NPLs and write offs 4 5 (1) (20.3%) Claims on Past due % Accounts manteinance % Fees and commissions received % Fees and commissions paid % TOTAL NET FEE AND COMMISSION INCOME (1) % Bankia + BMN % (1) 6M 2017 data corresponds to Bankia Group before the merger with BMN given that the merger took place with accounting effect on 01/12/2017. Bankia + BMN data provides a proforma of how the performance of fees and commissions would have been if BMN had been integrated from 1Q 2017 Change on ( million) 2Q 18 1Q 18 4Q 17 (1) 3Q 17 (1) 2Q 17 (1) 1Q 17 (1) 1Q 18 2Q 17 Assets under management (2.2%) 13.7% Securities brokerage service % 0.5% Mutual funds, Pension funds and insurances (3.7%) 16.5% Payments services % 26.0% Bills of exchange (4.5%) (5.9%) Debit and credit cards % 30.2% Means of payment (3.4%) 23.0% Origination % 4.6% Contingent risks and commitments % 21.2% Forex % 10.7% Structuring and design of transactions (11.6%) (17.1%) Management of NPLs, write offs and others % 27.5% Management of NPLs and write offs % (43.9%) Claims on Past due % 37.9% Accounts manteinance (17.1%) 131.9% Fees and commissions received % 22.6% Fees and commissions paid % 6.9% TOTAL NET FEE AND COMMISSION INCOME (1) % 24.0% Bankia + BMN % 0.5% (1) 1Q 17, 2Q 17 ad 3Q 17 data correspond to Bankia Group before the merger with BMN. 4Q 17 data includes one month of BMN P&L given that the merger took place with accounting effect on 01/12/2017. Bankia + BMN data provides a proforma of how the performance of fees and commissions would have been if BMN had been integrated from 1Q

11 Net trading income (NTI) contributed 291 million euros to the half-yearly income statement, 29 million less than in the first half of It includes mainly the realisation of unrealised gains on sales of fixed-income securities carried out by the Group in the first half of 2018 and 2017 in anticipation of the foreseeable trend in market interest rates. If BMN s results had been included in the first half of 2017, NTI would have been down 6.4% year-on-year. Other operating income and expenses show a net expense of 9 million euros in the first half of 2018, 14% more than in June 2017, due to the increased contribution to the Single Resolution Fund (SRF) and the increase in tax on deposits after including BMN. The bulk of this net expense was generated in the second quarter of the year as a result of the contribution to the SRF in the amount of 72 million euros, of which 61 million euros were recorded under this item of the income statement. Other operating revenues (dividends, share of results of equity-accounted companies and exchange differences) does not include significant amounts, totalling in aggregate 43 million euros at the end of the first half of 2018, 13 million euros more than in the same period of 2017, as a result of the larger contribution from equity-accounted companies (Bankia Mapfre Vida and Caser). The performance of the above items brings the Group s gross income for the half-year to 1,841 million euros, representing year-on-year growth of 11.8%. If BMN s results had been included in the first half of 2017, gross income would have been down 7.5% on a constant perimeter basis. Looking at the quarterly trend, second quarter gross income is down 3.8% due to the seasonal effect of the contribution to the SRF, although revenue from the core business (net interest income and net fee and commission income) has stabilised, reaching a combined total of 791 million euros (vs. 790 million euros the previous quarter). Operating expenses (administrative expenses and depreciation and amortisation expense) totalled 944 million euros, a year-on-year increase of 23.6%, which reflects the integration of BMN s results in the first half of On a like-for-like basis (i.e., including BMN s expenses in the first half of 2017), operating expenses would have been down 1.7% compared to June 2017, after the first synergies from the workforce adjustments which begun in April have materialised, with 87.3% of the exits envisaged in the workforce adjustment plan agreed after the merger with BMN already complete as of the end of June This workforce reduction has reduced second quarter operating expenses by 5.4% compared to the previous quarter. The trend in expenses brings the efficiency ratio at the end of the half year to 51.3%, while the ratio of annualised operating expenses to RWAs as of the end of June 2018 is 2.28%. ADMINISTRATIVE EXPENSES ( million) 6M M 2017 (1) Change 6M 2018 /6M 2017 Staff cost % Wages and salaries % Social security costs % Pension plans (13) (55.9%) Others % General expenses % From property, fixtures and supplies % IT and communications % Advertising and publicity % Technical reports % Surveillance and security courier services % Levies and taxes % Insurance and self-insurance premiums 2 3 (1) (30.1%) Other expenses % TOTAL ADMINISTRATIVE EXPENSES (1) % Bankia + BMN % (1) 6M 2017 data corresponds to Bankia Group before the merger with BMN given that the merger took place with accounting effect on 01/12/2017. Bankia + BMN data provides a proforma of how the performance of fees and commissions would have been if BMN had been integrated from 1Q

12 Change on ( million) 2Q 18 1Q 18 4Q 17 (1) 3Q 17 (1) 2Q 17 (1) 1Q 17 (1) 1Q 18 2Q 17 Staff cost (4.5%) 28.8% Wages and salaries (6.7%) 34.1% Social security costs (4.2%) 25.7% Pension plans % (40.3%) Others % 32.7% General expenses (3.2%) 16.6% From property, fixtures and supplies (10.4%) 18.9% IT and communications (1.4%) 17.9% Advertising and publicity % (5.0%) Technical reports (3.1%) 6.0% Surveillance and security courier services % 37.7% Levies and taxes % 31.7% Insurance and self-insurance premiums % (24.9%) Other expenses (7.5%) 26.0% ADMINISTRATIVE EXPENSES (4.1%) 24.8% INTEGRATION COSTS TOTAL ADMINISTRATIVE EXPENSES (1) (4.1%) 24.8% Bankia + BMN (4.1%) (1.3%) Bankia + BMN (without integration costs) (4.1%) (1.3%) (1) 1Q 17, 2Q 17 ad 3Q 17 data correspond to Bankia Group before the merger with BMN. 4Q 17 data includes one month of BMN P&L given that the merger took place with accounting effect on 01/12/2017. Bankia + BMN data provides a proforma of how the performance of fees and commissions would have been if BMN had been integrated from 1Q 2017 In the first half of 2018 the Bankia Group recorded provisions and impairment losses totalling 189 million euros, 20.6% less than in June This amount includes releases of net provisions for contingent liabilities in the amount of 36 million euros and, amongst others, 180 million euros for insolvency provisions and 50 million euros for impairment losses on foreclosed assests. As a result of the lower volume of provisions, the Group s cost of risk remains very low, reaching 0.20% at the end of June 2018, a fall of 3 basis points quarter-on-quarter and 5 basis points year-on-year, despite the inclusion in the balance sheet of more than 20 billion euros of loans and advances to customers from BMN. Other gains and losses show a net loss of 76 million euros, which include impairments and gains or losses from sales of foreclosed assets and equity investments, as well as the selling and maintenance costs of foreclosed properties for the half-year. In June 2017 this item showed a loss of 10 million euros, as it included the proceeds (47 million euros) of the deferred payment for the sale of Globalvia. The Bankia Group s attributable profit at the end of June 2018 amounts to 515 million euros, exceeding the profit for the first half of For yet another quarter, the growth of the business with customers, active cost management and control of the cost of risk were the basis for generating results, allowing the Group to offset the impact on net interest income of the natural amortization in the mortgage back book and the strategy for managing the fixed-income portfolio. PROVISIONING Change on ( million) 2Q 18 1Q 18 4Q 17 (1) 3Q 17 (1) 2Q 17 (1) 1Q 17 (1) 1Q 18 2Q 17 Impairment losses on financial assets (91) (116) (88) (66) (67) (107) (21.6%) 36.2% Impairment losses on non-financial assets 36 (4) (2) (2) (1) (9) - - Foreclosed assets (23) (27) (65) (21) (18) (39) (15.6%) 25.2% Provisions (net) (6) (5) % - TOTAL PROVISIONS (1) (55) (134) (117) (96) (91) (147) (59.3%) (40.0%) (1) 1Q 17, 2Q 17 ad 3Q 17 data correspond to Bankia Group before the merger with BMN. 4Q 17 data includes one month of BMN P&L given that the merger took place with accounting effect on 01/12/

13 4. BALANCE SHEET PERFORMANCE Change ( million) Jun-18 Dec-17 (1) Amount % Cash and balances at central banks 2,518 4,504 (1,986) (44.1%) Financial assets held for trading 6,271 6,773 (502) (7.4%) Trading derivatives 6,151 6,698 (546) (8.2%) Debt securities % Equity instruments 4 74 (70) (94.4%) Financial assets designated at fair value through profit or loss Debt securities Loans and advances Financial assets designated at fair value through equity 17,873 22,745 (4,872) (21.4%) Debt securities 17,799 22,674 (4,874) (21.5%) Equity instruments % Financial assets at amortised cost 161, ,711 2, % Debt securities 34,803 32,658 2, % Loans and advances to credit institutions 4,776 3,028 1, % Loans and advances to customers 121, ,025 (1,499) (1.2%) Hedging derivatives 2,558 3,067 (509) (16.6%) Investments in subsidaries, joint ventures and associates % Tangible and intangible assets 2,626 2,661 (35) (1.3%) Non-current assets held for sale 2,867 3,271 (404) (12.4%) Other assets 12,038 11, % TOTAL ASSETS 208, ,932 (5,724) (2.7%) Financial liabilities held for trading 6,669 7,421 (752) (10.1%) Trading derivatives 6,446 7,078 (631) (8.9%) Short positions (121) (35.3%) Financial liabilities at amortised cost 184, ,898 (4,067) (2.2%) Deposits from central banks 13,856 15,356 (1,500) (9.8%) Deposits from credit institutions 23,867 22,294 1, % Customer deposits and funding via clearing houses 128, ,396 (1,700) (1.3%) Debt securities in issue 17,451 19,785 (2,334) (11.8%) Other financial liabilities 960 1,067 (107) (10.0%) Hedging derivatives (126) (33.4%) Provisions 1,756 2,035 (278) (13.7%) Other liabilitiess 1,493 1,587 (95) (6.0%) TOTAL LIABILITIES 195, ,319 (5,319) (2.7%) Minority interests (10) (38.7%) Other accumulated results (67) (18.3%) Equity 12,894 13,222 (328) (2.5%) TOTAL EQUITY 13,209 13,613 (405) (3.0%) TOTAL EQUITY AND LIABILITIES 208, ,932 (5,724) (2.7%) (1)The consolidated financial statements of the Bankia Group are reported considering the adjustment of the content of the public financial information to the the so-called NIIF 9 criteria, which came into force on 1st January The changes of this adaptation are detailed in note of the financial statements as of June The most relevant changes are the reclassification of the fixed income portfolio and change in their nomenclature, given that Bankia decided not to restate the comparable financial statements as of December 2017, as allowed by the rule. 12

14 New lending increases, driven by the growth trend in SMEs, consumer finance, mortgages and private banking After the merger with BMN in the first half of the year, commercial activity has continued at a brisk pace, with significant growth both in new lending and in customer funds. Additionally, the Group has posted strong growth in the debit and credit cards market (+12% year-on-year in turnover) and digital sales, which at the end of June 2018 have reached 16.8% of Group sales. On the asset side, new lending maintained the good performance shown the previous quarter, with significant growth in the second quarter, both in lending to businesses (+35.8%) and in lending to individuals, through mortgage loans (+18.1%) and consumer loans (+34.6%). The stock of gross loans is up 9.9% year-on-year in consumer finance and up 1.9% in loans to bussineses. In accounting terms, these types of loans are classified as Other term loans and Loans to non-residents, which have grown 2.7% and 13.6% since December In the mortgage segment, the significant increase in new lending still does not offset natural amortizations. As a result, the Group s stock of secured loans declined by 2.6% in the half-year. On the other hand, receivables on demand are up 918 million euros (+35.7%), driven by the seasonal effect associated with advances to pensioners in June (extraordinary pension payment). The growth in new lending has been achieved while maintaining high asset quality. Thus, non-performing loans have continued to decline, falling 10.9% compared to December At the end of the first half of 2018, non-performing loans account for 7.9% of the Group s gross loan book, compared to 8.8% in December Excluding non-performing loans and reverse repurchase agreements, in June 2018 the performing gross loans portfolio totalled 116,967 million euros, similar to the level recorded in December the previous year (-0.2%), thanks to the favourable commercial trends, which help offset the deleveraging that is still in progress in the mortgage segment. LOANS AND ADVANCES TO CUSTOMERS Change ( million) Jun-18 Dec-17 Amount % Spanish public sector 5,218 5,295 (77) (1.5%) Other resident sectors 106, ,970 (457) (0.4%) Secured loans 74,899 76,874 (1,975) (2.6%) Other term loans 23,566 22, % Commercial credit 4,559 4,570 (12) (0.3%) Receivable on demand and other 3,489 2, % Non-residents 4,073 3, % Repo transactions (264) (87.1%) Of which: reverse repurchase agreements with BFA 0 47 (47) (100.0%) Other financial assets 985 1,142 (157) (13.7%) Other valuation adjustments (6) (3.1%) Non-performing loans 10,076 11,304 (1,228) (10.9%) Gross loans and advances to customers 127, ,782 (1,700) (1.3%) Loan loss reserve (5,548) (5,757) 209 (3.6%) NET LOANS AND ADVANCES TO CUSTOMERS 121, ,025 (1,490) (1.2%) GROSS LOANS AND ADVANCES TO CUSTOMERS EX NPLs & REPOs 116, ,175 (208) (0.2%) 13

15 Retail customer funds (excluding repo transactions and single-certificate covered bonds) have grown 1.1% in the half-year (+1.9% quarter-on-quarter), reaching a total of 149,535 million euros at the end of June Broken down by product, term deposits and savings accounts have continued to decrease in relation to demand deposits, which have grown 32.3% since December, due to the transfer out of term savings and the effect of supplementary salary payments in June. Public sector deposits are up 22.8% and off-balancesheet customer funds show the same good performance as in previous quarters, with cumulative growth of 2.4% in the half-year, driven by strong performance in new customer funds and an increase in portfolios managed and marketed. Most notable is the growth of mutual funds, a product in which the Bankia Group s market share has reached 6.4% at the end of May 2018, having grown 2 basis points since December As regards the rest of the Group s funding, reverse repurchase agreements dropped 2,234 million euros (- 83.9%) in the half-year, while wholesale funding is down 2,304 million euros (-13.3%), due to maturities in the second quarter. CUSTOMER FUNDS Change ( million) Jun-18 Dec-17 Amount % Spanish public sector 6,970 5,678 1, % Other resident sectors 119, ,501 (2,856) (2.3%) Current accounts 38,377 29,016 9, % Savings accounts 36,127 41,140 (5,014) (12.2%) Term deposits 38,036 42,183 (4,147) (9.8%) Repo transactions 428 2,663 (2,234) (83.9%) Single-certificate covered bonds 6,676 7,499 (823) (11.0%) Non-residents 2,080 2,217 (137) (6.2%) Funding via clearing houses and customer deposits 128, ,396 (1,700) (1.3%) Debentures and other marketable securities 14,969 17,274 (2,304) (13.3%) Subordinated loans 2,482 2,511 (29) (1.2%) TOTAL ON-BALANCE-SHEET CUSTOMER FUNDS 146, ,181 (4,034) (2.7%) Mutual funds 19,993 19, % Pension funds 7,951 8,082 (131) (1.6%) Off-balance-sheet customer funds (1) 27,944 27, % TOTAL CUSTOMER FUNDS 174, ,467 (3,376) (1.9%) (1) Off-balance sheet products managed and marketed without SICAVS Change on ( million) Jun-18 (1) Mar-18 (1) Dec-17 (1) Sep-17 Jun-17 Mar-18 Dec-17 Spanish public sector 6,970 5,393 5,678 3,989 4, % 22.8% Other resident sectors 112, , ,339 89,575 91, % 0.2% Current accounts 38,377 37,115 29,016 22,618 22, % 32.3% Savings accounts 36,127 34,453 41,140 32,120 32, % (12.2%) Term deposits 38,036 40,177 42,183 34,837 36,336 (5.3%) (9.8%) Non-residents 2,080 2,162 2,217 2,067 2,055 (3.8%) (6.2%) Strict Customer Deposits 121, , ,234 95,631 98, % 1.1% Mutual funds 19,993 19,635 19,205 16,272 15, % 4.1% Pension funds 7,951 8,025 8,082 6,642 6,588 (0.9%) (1.6%) Total customer off-balance funds (2) 27,944 27,660 27,287 22,915 22, % 2.4% TOTAL 149, , , , , % 1.4% TOTAL Bankia + BMN (1) 149, , , , , % 1.4% (1) Since Dec-17, the data corresponds to the merger of Bankia and BMN. Bankia + BMN data provides a proforma of how the develop would have been if BMN had been integrated from 1Q 2017 (2) Off-balance sheet products managed and marketed without SICAVS 14

16 5. RISK MANAGEMENT Good performance in non-performing assets and further reductions in NPLs and foreclosed assets In the first half of 2018, the Bankia Group maintained the positive trend in the main risk management indicators. The Group s NPL ratio stands at 8.1%, reflecting a further improvement of 60 basis points in the quarter and 80 basis points since December (On a constant perimeter basis, i.e. Bankia + BMN, the improvement since June 2017 is 110 basis points.) NPL coverage, meanwhile, reached 55% at the end of the first half, up 4.2 percentage points compared to December This improvement has been assisted by the favourable trend in non-performing loans, which have fallen 822 million euros in the quarter and 1,309 million euros since the previous year-end, reaching a total of 10,809 million euros at the end of June The decline has been achieved both organically (through lower inflow of new NPLs and effective recovery management) and through the sales of loan portfolios carried out during the half-year. Foreclosed assets have also followed the positive trend seen in previous quarters, falling 17.9% since the end of 2017 to a net total of 2,693 million euros at the end of June In the first half of 2018, the Group continued with its strategy of reducing real estate exposure and completed sales of foreclosed assets for a total of 309 million euros, 1.4% more than in the same period of As regards provision coverage, at the end of June 2018 the Group s portfolio of foreclosed assets had coverage of 39% from the time of foreclosure. Reducing the volume of non-performing assets is one of the main pillars of the Group s Strategic Plan. Accordingly, Bankia has set itself the target of reducing the volume of non-performing assets by 2,900 million euros per year. As of the end of the first half of 2018, the Group has already reduced 1,700 million euros of non-performing assets, which represents 58% of the target for the year. This reduction is being achieved while maintaining the coverage ratio, and selling foreclosed assets of all kinds without impairing the quality profile of the real estate assets retained on the balance sheet. NPL RATIO AND COVERAGE RATIO Jun-18 / Dec-17 ( million and %) Jun-18 (1) Mar-18 (1) Dec-17 (1) Sep-17 Jun-17 Amount % Non-performing loans 10,809 11,631 12,117 10,194 10,554 (1,309) (10.8%) Total risk-bearing assets 133, , , , ,188 (2,391) (1.8%) Total NPL ratio (2) 8.1% 8.7% 8.9% 8.8% 9.1% -0.8 p.p. Total provisions (3) 5,945 6,412 6,151 5,480 5,683 (207) (3.4%) NPL coverage ratio (3) 55.0% 55.1% 50.8% 53.8% 53.9% +4.2 p.p. (1) Since Dec-17, the data corresponds to the merger of Bankia and BMN. (2) NPL ratio: (Doubtfull risks of loans and advances to customers and contingent risks) / (Total risks of loans and advances to customers and contigent risks) (3) Group coverage at Dec-17 including additional provisions due to the IFRS 9 application would have been 56.5% NPL PERFORMANCE ( million and %) 2Q Q Q Q Q Q 2017 Non-performing loans at the begining of the period 11,631 12,117 10,194 10,554 10,984 11,476 Net outflows (754) (297) (336) (258) (338) (461) Write offs (68) (190) (118) (102) (92) (31) BMN NPLs contribution - - 2, Non-performing loans at the end of the period 10,809 11,631 12,117 10,194 10,554 10,984 15

17 BREAKDOWN OF FORECLOSED ASSETS Gross value (1) ( million) Jun-18 (2) Mar-18 (2) Dec-17 (2) Sep-17 Jun-17 Property assets from construction and property development Of which: finished buildings Of which: buildings under construction Of which: Land Property acquired related to mortgage loans to homebuyers 2,902 3,032 3,188 2,194 2,294 Other foreclosed assets 1,087 1,104 1, Total 4,761 4,938 5,115 3,149 3,259 (-) Assets assigned to the Social Housing Fund (3) (218) (228) (-) Rented assets yielding >3% of their net value (3) (142) (148) Total gross foreclosed assets 4,401 4,562 5,115 3,149 3,259 (1) Includes all assets acquired by the Group in payment of debt, regardless if they are clasified as non-current assets held for sale, investment properties and inventories (2) Since Dec-17, the data corresponds to the merger of Bankia and BMN. (3) Excluded from "Total gross foreclosed assets" as from Mar-18. Impairments (1) ( million) Jun-18 (2) Mar-18 (2) Dec-17 (2) Sep-17 Jun-17 Property assets from construction and property development Of which: finished buildings Of which: buildings under construction Of which: Land Property acquired related to mortgage loans to homebuyers 1,237 1,192 1, Other foreclosed assets Total 1,788 1,749 1,836 1,068 1,113 (-) Impairments of assets assigned to the Social Housing Fund (3) (50) (52) (-) Impairments of rented assets yielding >3% of their net value (3) (42) (44) Total impairments on foreclosed assets 1,696 1,653 1,836 1,068 1,113 (1) Includes all assets acquired by the Group in payment of debt, regardless if they are clasified as non-current assets held for sale, investment properties and inventories (2) Since Dec-17, the data corresponds to the merger of Bankia and BMN. (3) Excluded from "Total impairments on foreclosed assets" as from Mar-18. Net value (1) ( million) Jun-18 (2) Mar-18 (2) Dec-17 (2) Sep-17 Jun-17 Property assets from construction and property development Of which: finished buildings Of which: buildings under construction Of which: Land Property acquired related to mortgage loans to homebuyers 1,666 1,840 1,958 1,374 1,435 Other foreclosed assets Total 2,973 3,189 3,280 2,082 2,146 (-) Assets assigned to the Social Housing Fund (3) (168) (176) (-) Rented assets yielding >3% of their net value (3) (99) (104) Total net foreclosed assets 2,705 2,909 3,280 2,082 2,146 (1) Includes all assets acquired by the Group in payment of debt, regardless if they are clasified as non-current assets held for sale, investment properties and inventories (2) Since Dec-17, the data corresponds to the merger of Bankia and BMN. (3) Excluded from "Total net foreclosed assets" as from Mar

18 RESTRUCTURED LOANS ( million and %) Jun-18 (1) Mar-18 (1) Dec-17 (1) Sep-17 Jun-17 Amount % Gross exposure Non-performing loans 6,369 7,095 7,399 6,357 6,661 (1,029) (13.9%) Performing loans 4,635 4,874 5,180 3,941 4,105 (545) (10.5%) Total refinanced 11,005 11,969 12,579 10,298 10,766 (1,574) (12.5%) Impairments Non-performing loans 2,792 3,006 3,210 2,984 3,094 (418) (13.0%) Performing loans % Total Impairments 3,032 3,271 3,338 3,086 3,214 (306) (9.2%) Coverage (%) Non-performing loans 43.8% 42.4% 43.4% 46.9% 46.5% +0.4 p.p. Performing loans 5.2% 5.4% 2.5% 2.6% 2.9% +2.7 p.p. Total coverage 27.5% 27.3% 26.5% 30.0% 29.9% +1.0 p.p. (1) Since Dec-17, the data corresponds to the merger of Bankia and BMN. Jun-18 / Dec-17 17

19 6. FUNDING STRUCTURE AND LIQUIDITY At the end of June 2018, the Bankia Group has a strong liquidity position, based on the funding of its lending activity through customer funds, which at the end of the half-year account for 66% of the Group s financial resources (64% in December 2017). With this retail funding structure, the Group s LTD (loan-todeposit) ratio at the end of the first half of 2018 stood at 92.2%. At that same date, Bankia s liquidity coverage ratio (155.3%) was well above the regulatory requirement for 2018 (100%). As regards institutional funding, as of 30 June 2018 issued wholesale debt totals 17,451 million euros and is made up of various different debt instruments, including senior secured and unsecured debt (mainly residential mortgage covered bonds) and subordinated debt. Funding from the ECB has been reduced by 1,500 million euros compared to December 2017, since Bankia prepaid the TLTRO I funding in the second quarter. At the end of June 2018, ECB funding totals 13,856 million euros, all of it under the TLTRO II programme, representing 7% of the Group s total funding. The Group s total liquid assets at the end of the first half of 2018 amount to 30,089 million euros. This amount covers the Group s wholesale debt maturities 1.3 times. LTD RATIO AND COMMERCIAL GAP ( million) Jun-18 Dec-17 Amount % Net Loans and advances to customers 121, ,025 (1,490) (1.2%) o/w Repo transactions RPS (1) (217) (84.7%) a. Strict Net Loans and advances to customers 121, ,769 (1,274) (1.0%) Strict customer deposits and retail commercial paper 121, ,234 1, % Single-certificate covered bonds 6,676 7,499 (823) (11.0%) ICO/EIB deposits 3,527 3, % b. Total Deposits 131, ,740 1, % LTD ratio (a/b) 92.2% 93.9% -1.7 p.p. (1) Reverse repurchase agreements Change ( million) Jun-18 Dec-17 Amount % Net Loans and advances to customers 121, ,025 (1,490) (1.2%) o/w Repo transactions RPS (1) (217) (84.7%) Strict Net Loans and advances to customers 121, ,769 (1,274) (1.0%) (-) Strict customer deposits and retail commercial paper 121, ,234 1, % (-) ICO/EIB deposits 3,527 3, % Strict Comercial GAP (3,623) (472) (3,151) 667.4% (1) Reverse repurchase agreements Change 18

20 DEBT MATURITIES ( million) (1) Covered bonds 271 2, ,506 Senior debt 9 1, Subordinated debt - 1,000-1,425 Securitisation ,715 Total issuance maturities 280 4, ,781 (1) Maturities of Bankia group in nominal values net of treasury shares and retained issuance LIQUID ASSETS Change ( million) Jun-18 Dec-17 Amount % Treasury account and deposit facility (1) 414 2,206 (1,792) (81.2%) Undrawn amount on the facility 14,460 10,918 3, % Available high liquidity assets (2) 15,215 19,703 (4,488) (22.8%) Total 30,089 32,827 (2,738) (8.3%) (1) Cash and Central Banks accounts reduced by minimal reserves (2) Market value considering ECB haircut FUNDING STRUCTURE 19

21 7. SOLVENCY As of 30 June 2018 the Bankia Group has a CET1 Phase-in ratio of 14.01% and a Total Capital Phase-in ratio of 17.18%. During the first half of 2018, the CET1 Phase-in ratio fell 14 basis points as a result of the impact of the change in the applicable calendar and the effect of full implementation of IFRS 9 (the Bankia Group has not elected to apply the transitional provisions), which was partly absorbed by organic capital generation. The Total Capital Phase-in ratio was 17.18%, up 34 basis points compared to December 2017, given that the decline in CET1 was offset by the positive effect of the increase in eligible Tier 2 provisions after IFRS 9. Compared with the SREP minimum capital requirements for 2018 notified by the supervisor (CET % and Total Capital %), these figures indicate a CET1 surplus of 545 basis points and a Total Capital surplus of 512 basis points. If the unrealised sovereign gains in the fair value portfolio are excluded, the CET1 Phase-in ratio is 13.72% and the Total Capital ratio, 16.89%. On a Fully Loaded basis, the CET1 ratio stands at 12.70% and the Total Capital ratio stands at 15.87%. During the first half of 2018, the CET1 Fully Loaded ratio has risen 4 basis points, given that the effect of full implementation of IFRS 9 on 1 January 2018 has been absorbed by organic generation of fully loaded capital. The Total Capital Fully Loaded ratio is 15.87%, up 43 basis points compared to December 2017, due to the increase in CET1 and the positive effect of the increase in eligible Tier 2 provisions under IFRS 9. If the unrealised sovereign gains in the fair value portfolio are excluded (management ratios), the CET1 Fully Loaded ratio stands at 12.41% (+8 basis points in the half-year) and the Total Capital ratio stands at 15.58% (+47 basis points vs. December 2017). The Bankia Group s Fully Loaded leverage ratio at 30 June 2018 is 5.43% (5.32% if the unrealised sovereign gains are not included), amply exceeding the regulatory capital requirements and after absorbing the effect the application of IFRS 9 has had on the leverage ratio. SOLVENCY RATIOS AND LEVERAGE (1) (2) Jun-18 ( million and %) Phase In Fully Loaded Common equity Tier I - CET1 (%) 13.72% 12.41% Total solvency ratio (%) 16.89% 15.58% CET SREP requirement (incl. additional buffers) 8.56% 9.25% Total solvency 2018 SREP requirement (incl. additional buffers) 12.06% 12.75% Surplus over CET SREP requirement 5.16% 3.16% Surplus over Total solvency 2018 SREP requirement 4.83% 2.83% (1) Solvency ratios include the result that is expected to be allocated to reserves (2) Does not include unrealised gains on the fair value sovereign portfolio. 20

22 SOLVENCY RATIOS AND LEVERAGE RATIOS PHASE IN ( million and %) Jun -18 (1) (2) (1) (2) (3) Dec -17 Eligible capital 14,372 14,488 Common equity Tier I (CET 1) 11,720 12,173 Capital 3,704 3,704 Reserves (as per reserve perimeter) 8,750 9,094 Result attributable net of dividend acrual Deductions (1,201) (963) Others (treasury stocks, Non-controlling interests and unrealise Tier I Capital 12,470 12,856 Instruments Others (68) Tier II Capital 1,902 1,632 Instruments 1,672 1,672 Others 230 (40) Risk-weighted assets 83,634 86,042 Common equity Tier I (CET 1) (%) 14.01% 14.15% Tier I Capital 14.91% 14.94% Tier II Capital 2.27% 1.90% Solvency ratio - Total capital ratio (%) 17.18% 16.84% Leverage ratio 5.93% 6.02% Total exposition leverage ratio 210, ,505 (1) Includes unrealised gains in the fair value (FV) sovereign debt portfolio which since October 2016 are included in regulatory capital due to Reglamento (UE) 2016/445 BCE. Without including unrealised gains in the FV sovereign debt portfolio (regulatory capital), as of 30 June 2018, the CET-1 Phase-in ratio stands at 13.72% and the Total Capital Phase-in ratio at 16.89%. And as of 31 December 2017 the CET 1 ratio would have been %, and Total Capital ratio 16.57%. (2) Solvency ratios include the result that is expected to be allocated to reserves (3) Data includes the effects of the merger with BMN (capital increase, BMN integration, costs) RATIOS FULLY LOADED ( million and %) Jun -18 (1) (2) (1) (2) Dec -17 Eligible capital 13,271 13,289 Common equity Tier I (CET 1) 10,618 10,896 Capital 3,704 3,704 Reserves (as per reserve perimeter) 8,750 9,094 Result attributable net of dividend acrual Deductions (2,302) (2,301) Others (treasury stocks, Non-controlling interests and unrealise Tier I Capital 11,368 11,646 Instruments Others 1,902 1,642 Tier II Capital 1,672 1,672 Instruments 230 (30) Risk-weighted assets 83,634 86,042 Common equity Tier I (CET 1) (%) 12.70% 12.66% Tier I Capital 13.60% 13.54% Tier II Capital 2.27% 1.91% Solvency ratio - Total capital ratio (%) 15.87% 15.44% Leverage ratio 5.43% 5.49% Total exposition leverage ratio 209, ,236 (1) Includes unrealised gains in the fair value (FV) sovereign debt portfolio which since October 2016 are included in regulatory capital due to Reglamento (UE) 2016/445 BCE. Without including unrealised gains in the FV sovereign debt portfolio (regulatory capital), as of 30 June 2018, the CET-1 Fully Loaded ratio stands at 12.41% and the Total Capital Fully Loaded ratio at 15.58%. And as of 31 December 2017 the CET 1 ratio would have been 12.33%, and Total Capital ratio 15.11%. (2) Solvency ratios include the result that is expected to be allocated to reserves (3) Data includes the effects of the merger with BMN (capital increase, BMN integration, costs) 21

23 8. SHARE PERFORMANCE SHARE PRICE MAJOR SHAREHOLDERS AND STOCK MARKET DATA BANKIA (stock data) Jun-2018 Number of shareholders 189,897 Daily average volume (num. shares) 9,204,718 Daily average turnover (euros) 34,579,525 Maximum closing price ( /share) 4,389 (26-Jan) Minimum closing price ( /share) 3,207 (29-Jun) Closing price ( /share) 3,207 (29-Jun) 22