Bankia Results Presentation 2012 February 2013 1 of 41 / February 2013
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Contents 1. 2012 highlights 2. 2012 results 3. Asset quality and risk management 4. Liquidity and solvency 5. Bankia outlook 2013 3 of 41 / February 2013
2012 highlights Main recent events 1 16 May Appointment of Management Committee 2 25 May Restructuring Plan and appointment of new Board of Directors 3 20 July Signing of MoU 4 5 6 7 12 September Capital injection of 4,500 million 28 November Approval of BFA Group Recapitalization Plan and presentation of 2012-2015 Strategic Plan 27/31 December Capital injection of 13,459 million in BFA and transfer of Group s assets to SAREB 8 February 2013 Signing of Workforce Agreement (ERE) 8 18 March 2013 Completion of IT integration 4 of 41 / February 2013
2012 highlights P&L Bankia / BFA Summary ( bn) Pre-Provision Profit Provisions and write-downs Loss after tax Hybrid instruments exchange (1) Loss after tax post - exchange (1) +1,7-23,9-19,2 +1,8-26,8-21,2 +1,8-19,4 (1) Pro forma data. Pending of execution 5 of 41 / February 2013
2012 highlights BFA capital needs ( bn) Capital needs post SAREB effect 24.5 ALREADY EXECUTED Capital increase in ESM bonds 18.0 PENDING Exchange of hybrid instruments for Bankia ordinary shares 6.5 6 of 41 / February 2013
2012 highlights Bankia capital needs ( bn) Capital needs post SAREB effect 15.5 ALREADY EXECUTED Subordinated loan (September 2012) Issue of contingent convertible bonds (December 2012) 4.5 10.7 PENDING Exchange of convertible bonds for Bankia ordinary shares Exchange of hybrid instruments for Bankia ordinary shares Cancellation of subordinated loan 10.7 4.8 4.5 7 of 41 / February 2013
2012 highlights FUNDAMENTALS BFA Group CLEAN BALANCE SHEET Developer risk reduced (3.6% of portfolio) High coverage of total credit portfolios - 8% Investees marked to market SOLVENCY EBA core tier 1 ratio 9.5% (post capital increase) Self-sustainable model of capital generation LIQUIDITY Liquid assets 31Dec12: 40.3bn 90% of total Group maturities covered Loan to deposit ratio: 121.1% 8 of 41 / February 2013
Contents 1. 2012 highlights 2. 2012 results 3. Asset quality and risk management 4. Liquidity and solvency 5. Bankia outlook 2013 9 of 41 / February 2013
2012 results BFA Group Income Statement - Summary Dec 2011 Dec 2012 % chg. Net interest margin 2,421 3,153 30.2% Gross margin 4,406 4,131-6.2% Operating expenses 2,638 2,324-11.9% Pre-Provision Profit 1,768 1,807 2.2% Provisions and other expenses 6,690 26,845 Loss before tax (4,922) (25,038) Loss after tax (4,954) (21,238) Exchange of hybrids (1) 1,800 (1) Pro forma data. Pending of execution BFA Group data. mn Loss after tax (4,954) (19,438) (1) 10 of 41 / February 2013
2012 results Individual BFA structure after exchange of hybrids CLEAN BALANCE SHEET Investees marked to market Credit risk barely significant: Net carrying amount of developer loans: 71mn Coverage ratio: 79% PROFITABLE Revenues from fixed income portfolios and dividends from investees currently cover funding costs LIQUID SOLVENT 13.2bn (1) in liquid assets Total maturities: 8.9bn Compliance with capital requirements (1) : Core Tier I c. 15% BIS II solvency c. 14% EBA Core Tier I c. 15% (1) Pro forma December 2012 after exchange of hybrid instruments and cancellation of subordinated loan with Bankia 11 of 41 / February 2013
2012 results Bankia Income Statement - Summary Dec 2011 Dec 2012 Dec 2012 (1) %chg 2011-2012 (1) A Net interest margin 2,742 3,089 3,198 16.6% B Gross margin 4,121 4,010 4,119-0.05% C Operating expenses (2) 2,592 2,293 2,293-11,5% D Pre-Provision Profit 1,529 1,717 1,826 19,4% E Provisions and other expenses (2) 5,843 23,907 Loss before tax (4,314) (22,189) Loss after tax (3,010) (19,193) (1) Actual figures adjusted by +109 million of funding cost associated with the subordinated loan from BFA to Bankia, which will be cancelled with Bankia s capital increase (2) Provision release in 2011 for payment of variable pay and IPO expenses and costs related to the integration reclassified from operating costs to provisions with no effect on the net loss Bankia Group data. mn 12 of 41 / February 2013
2012 results A Net interest income Bankia Net interest income quarterly and cumulative growth 635 634 2,742 712 761 844 861 3,198 (1) 762 18 (1) 731 91 (1) Although net interest income grew 16.6% on a yearly basis, the quarterly series shows a fall in net interest income during 2H, due to: Macro impact: fall in interest rates Lower volume of credit 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 (1) Excluding the temporary cost of the subordinated loan from BFA to Bankia, which will be cancelled in 1Q 2013. Bankia Group data. mn 13 of 41 / February 2013
2012 results A Net interest margin Bankia Customer margin Quarterly series (%) 3,50% 3,00% 2,99% 3,03% 3,26% 3,44% 3,49% 3,41% 3,13% 2,99% 2,50% 2,00% 1,50% 1,00% 1,70% 1,29% 2,06% 0,97% 1,96% 1,97% 1,30% 1,47% 1,90% 1,59% 1,69% 1,72% 1,95% 1,95% 1,18% 1,04% 0,50% 1Q 2011 pro forma 2Q 2011 pro forma 3Q 2011 4Q 2011 1Q 2012 2Q 2012 3Q 2012 4Q 2012 Loan yield Cost of deposits Gross interest margin Downward trend in gross interest margin due to drop in interest rates while the cost of deposits remained stable in 2H 2012 14 of 41 / February 2013
2012 results A Net interest margin Bankia Yield on loans vs Euribor12M 4,00% 3,50% 3,00% 2,99% 3,03% 3,26% 3,44% 3,49% 3,41% 3,13% 2,99% -42bps 2,50% 2,00% 1,50% 1,00% 0,50% 1,74% 2,13% 2,11% 2,05% 1,67% 1,28% 0,90% 0,60% -77bps Fall in yields is lower than fall in Euribor rates 0,00% 1Q 2011 pro forma 2Q 2011 pro forma 3Q 2011 4Q 2011 1Q 2012 2Q 2012 3Q 2012 4Q 2012 Loan yield EURIBOR 12M Interest margin declined, mainly due to the lag in repricing of the mortgage portfolio 15 of 41 / February 2013
2012 results A Net interest margin Bankia Increase in spreads on new transactions Annual cumulative Quarterly Non-developer SMEs and corporates Consumer 2012 2011 2012 2011 2.87 3.68 8.53 6.94 +81bps +159bps 2,77 2,67 3,01 3,10 3,50 3,62 3,73 4,01 Mortgages to third parties 2012 2011 (1) Calculated using data for 2H 2011 2.15 1.67 (1) +48bps 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 Average spreads Low interest rate environment partly offset by: Repricing of the portfolio Business mix: >80% of new lending in 2012 granted to businesses and SMEs 16 of 41 / February 2013
2012 results Annual fees and commission income Bankia Breakdown of fee and commission income Fee income as % business volume mn 2011 2012 %Chg Basic banking activity 644 625-2.9% Marketing of products 192 184-4.5% Total recurring fees 836 809-3.3% Other fees 397 346-12.6% Total fees received 1,233 1,155-6.3% Total fees paid 172 163-4.9% Net fees 1,061 992-6.5% 0.26% 0.32% 2011 2012 Net fees as a percentage of business volume has increased a 23.9% Bankia Group data. mn 17 of 41 / February 2013
2012 results Contribution to the Deposit Guarantee Fund Bankia 426.2 219.9 Non-recurring 219.9m were charged in 2012, due to extra deposit rates 125.7 Extra rates 23.9 101.8 Recurring 206.3 % contribution to DGF has doubled, from 0.1% to 0.2% 2011 (1) 2012 (1) Pro Forma Bankia Group data. mn Increased contribution to DGF, mainly due to impact of extra deposit rates, which will not apply in 2013 18 of 41 / February 2013
2012 results B Gross margin Bankia Composition of gross margin 992 387 6 464 109 3,198 Contribution to DGF: 426.2m 4,119-0.05% 4,121 Net interest margin Net fees Trading income and exch. gains Dividends and Eq. method Other (DGF) GROSS MARGIN 2012 GROSS MARGIN 2011 Bankia Group data. mn Gross income stable, despite difficult macroeconomic environment 19 of 41 / February 2013
2012 results C Operating expenses Bankia Comparison of annual operating expenses 2,455 2,592 (11.5)% 2,293 299 733 1,423 (16) 153 299 717 1,576 Depreciation and amortization General expenses Staff costs (7.7%) (7.4%) (14.1)% 276 664 1,353 2011 (1) (1) Pro Forma Non-recurring adjustment* 2011 recurring 2012 * Release of provision for payment of variable pay and IPO expenses and costs related to the integration Bankia Group data. mn Operating expenses are down 11.5% compared to 2011 on a recurring basis 20 of 41 / February 2013
2012 results D Pre-Provision Profit Bankia 2011 2012 Change Gross margin 4,121 4,119 (2) -0.05% Operating expenses (1) (2,592) (2,293) (11.53%) Recurring net profit 1,529 1,826 19.42% (1) Amounts on a recurring basis (2) Includes 109m of net interest income due to the impact of the subordinated loan Growth in net profit, supported by strict cost containment and stability in the gross margin Bankia Group data. mn 21 of 41 / February 2013
2012 results E 2012 provisions Bankia Total 2012 Main extraordinary provisions and write-downs Q4 2012 Real estate exposure 10.3 Corporates 6.7 Impact of transfer price to SAREB 3.1 Retail 2.9 Investees 2.4 Marking to market of investees 2.4 Other 1.6 Total provisions and write-downs 23.9 Bankia Group data. bn 22 of 41 / February 2013
2012 results Main conclusions Gross income remains stable in a complex macro environment Operating expenses continue to fall Provisions and write-downs recorded during the year Costs of the restructuring plan already provisioned in 2012 23 of 41 / February 2013
Contents 1. 2012 highlights 2. 2012 results 3. Asset quality and risk management 4. Liquidity and solvency 5. Bankia outlook 2013 24 of 41 / February 2013
Asset quality and risk management Main points Transfer of assets to SAREB already completed, totalling a net amount of 22.3bn in BFA, of which 19.5bn are attributable to Bankia Significant improvement in credit portfolio composition, with reduced exposure to the developer sector (3.3% of total portfolio) High coverage ratios in business and retail portfolios 25 of 41 / February 2013
Asset quality and risk management Breakdown of credit portfolio Credit portfolio Dec 2012 Public Sector and Other 7% Developers 3% Retail 60% Corporates 30% Developers down from 17.2% in 2011 to 3.3% in 2012 of the credit portfolio Gross customer loans 145.8bn Bankia Group data. bn 26 of 41 / February 2013
Asset quality and risk management Real estate exposure Breakdown of real estate exposure * 1 2 NET developer loans NET real estate assets Net amount Dec 2012 ( bn) 2.6 2.9 Coverage ratio 44.8% 32.1% 1 2 Coverage of developer exposure in accordance with Royal Decrees More than 70% of real estate assets on the balance sheet consist of finished houses Total net exposure 5.5 * Business in Spain Developers represent only 3.3% of total loan portfolio, compared to an average of 11.1% among Spanish comparable peers (1) (1) SAN business in Spain, BBVA business in Spain, CAIXABANK, POPULAR and BANKINTER Bankia Group data. bn 27 of 41 / February 2013
Asset quality and risk management Credit quality Loans, provisions on the balance sheet and portfolio coverage ratios Main portfolios Gross amount Dec 2012 Stock of provisions Dec 2012 Coverage ratio (%) Developers 4.8 Corporates 43.0 2.2 6.4 44.8% 14.8% High coverage ratios Retail 87.6 2.9 3.3% NPLs and coverage NPLs 19.8 Total gross risks 152.5 NPL ratio (%) 13.0% NPL coverage ratio (%) 61.8% Bankia Group data. bn 28 of 41 / February 2013
Contents 1. 2012 highlights 2. 2012 results 3. Asset quality and risk management 4. Liquidity and solvency 5. Bankia outlook 2013 29 of 41 / February 2013
Liquidity and solvency Liquidity and solvency Strong increase in Liquid assets which, at year-end cover wholesale funding maturities until 2018 Commercial gap reduced by 47.5% and improvement in LTD ratio by 15.9 pps Stability in strict customer deposits during 4Q12 Solvency levels strengthened after capital injection 30 of 41 / February 2013
Liquidity and solvency Liquid assets BFA Group liquidity situation ( bn) Wholesale maturities Liquid assets (31.12.2012) 13.6 Covered bonds (revolving) 30.3 SAREB bonds 22.0 Rest of maturities 14.7 Covered bonds amortization due to transferred to SAREB (8.4) Total BFA Group maturities 45.0 BFA capital injection (net) (1) 13.1 Of which, maturing up to 2018 (incl.) 34.9 Total liquid assets 31.12.2012 40.3 (1) Net of the 4.5bn already injected in September Liquid assets cover 90% of the Group s total wholesale maturities and 1.2x the wholesale maturities outstanding until 2018, inclusive. BFA Group data. bn 31 of 41 / February 2013
Liquidity and solvency Liquid assets Bankia liquidity position ( bn) Wholesale maturities Liquid assets (31.12.2012) 5.6 Covered bonds (revolving) 30.3 Sareb bonds 19.2 Rest of maturities 6.4 Covered bonds amortization due to transferred to SAREB (8.4) Total Bankia Group maturities 36.7 Bankia capital injection 10.5 Of which, maturing up to 2018 (incl.) 26.5 Total liquid assets 31.12.2012 26.9 Organic liquidity generation 2013-2015 12.8 Liquid assets as of Dec 2012 cover 73% of the Group s total wholesale maturities and all the wholesale maturities outstanding until 2018, inclusive. Bankia Group data. bn TOTAL 39.7 If organic liquidity generation forecasted for 2015 is considered, all maturities for the Group would be widely covered. 32 of 41 / February 2013
Liquidity and solvency Main liquidity indicators - Bankia Yearly evolution Commercial GAP ( bn) Loan to Deposits (%) 63.5-30.2bn 136,3% -15.9pps 33.3 120,4% Dec 11 Dec 12 Dec 11 Commercial gap: Net credit ICO / BEI / other credits retail commercial paper strict customer deposits Dec 12 LTD ratio: (Net credit / (retail commercial paper + strict customer deposits + ICO/BEI deposits + singular covered bonds) 47.5% reduction in commercial gap due to balance sheet management and SAREB effect Improvement of 15.9 pps in LTD ratio Bankia Group data. bn 33 of 41 / February 2013
Liquidity and solvency Growth in strict customer deposits - Bankia bn 98.6 2.9 (1) - 0.1% 98.5 3.2 (1) 95.7 95.3 Sep 12 (1) deposits attributable to CNB and Bancofar, reclassified for accounting purposes Dec 12 The volume of strict customer deposits stabilized in the last quarter of the year Bankia Group data. bn 34 of 41 / February 2013
Liquidity and solvency Ratios Solvency ratios - Bankia Group Bankia Group year-end 2012 ACTUAL bn % Bankia Group 2012 PRO FORMA after exchange of hybrids bn % CORE TIER I 5.4 5.2% 10.2 9.8% TOTAL BIS II SOLVENCY 10.2 9.8% 10.3 9.8% RWAs ( bn) 104 104 EBA core tier 1 5.2 5.0% 10.0 9.6% Bankia Group data. bn 35 of 41 / February 2013
Liquidity and solvency Ratios Solvency ratios - BFA Group BFA Group year-end 2012 ACTUAL bn % BFA Group 2012 PRO FORMA after exchange of hybrids bn % CORE TIER I 4.4 3.9% 11.0 9.9% TOTAL BIS II SOLVENCY 10.1 9.0% 10.1 9.4% RWAs ( bn) 112 112 Core Tier I EBA 3.9 3.5% 10.6 9.5% BFA Group data. bn 36 of 41 / February 2013
Contents 1. 2012 highlights 2. 2012 results 3. Asset quality and risk management 4. Liquidity and solvency 5. Bankia outlook 2013 37 of 41 / February 2013
Outlook for 2013 Challenges ECONOMIC OUTLOOK EVOLUTION OF ACTIVITY INTEREST RATE SCENARIO PLAN IMPLEMENTATION 2013 is the year of restructuring 38 of 41 / February 2013
Outlook for 2013 1 WORKFORCE AGREEMENT (ERE) Agreement reached between working representatives and Bankia 8th Feb Shared effort 2 NETWORK REORGANIZATION PLAN Keep the status of a national player Defined branch closure plan Faster implementation First stage under way: Madrid and Valencian Community Experience in implementing and managing closures Closures Bankia network after reorganisation Branch network 1,138 1,888 Contribution to PPP (*) 9% 91% (*) Pre-provision profit 39 of 41 / February 2013
Outlook for 2013 Start in 2013 1 SOUND FINANCIAL POSITION Solvency Liquidity Provisions 2 STABILIZED BUSINESS 3 P&L DYNAMICS Pressure in net interest margin Cost reduction Limited provisioning needs 4 STRATEGIC PLAN DEFINED AND IN EXECUTION Goal 2015: ROE >10% 40 of 41 / February 2013
41 of 41 / February 2013 Thank you for your attention