Release Date: October 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Unicaja Banco SA (XMAD:UNI, Financial) reported a 58% increase in net income compared to 2023, indicating strong profitability growth.
- The bank's asset quality trends remain positive, with NPL balances falling 22% year-on-year and foreclosed assets decreasing by 36%.
- Customer funds grew by 4.3% year-on-year, with off-balance sheet funds increasing by almost 7%, supported by a 6.3% quarterly increase in mutual funds.
- The bank's CET1 ratio reached 15.4% in the third quarter, reflecting a strong capital position.
- Unicaja Banco SA (XMAD:UNI) has a robust liquidity position, with an LCR ratio above 300% and a loan-to-deposit ratio of 70%.
Negative Points
- Performing loans fell by 2.3% in the quarter, indicating challenges in loan growth.
- Net interest income was flat in the quarter, with a 19% growth over the first nine months, but future NII may be impacted by declining interest rates.
- Total costs increased by 5.4% in the first nine months of the year, driven by higher personnel expenses.
- The bank faced a EUR10 million adjustment related to the Spanish banking levy, impacting other revenues and expenses.
- Fees fell by 5% in the first nine months of the year, attributed to commercial campaigns and a focus on more loyal customers.
Q & A Highlights
Q: Your corporate loan book has picked up quarter-on-quarter. Are you doing anything differently to improve your market share? And what was the reason for a decline in new mortgage production?
A: We have established a strategy to enhance our capabilities and relationships with corporates and SMEs, which is starting to show positive developments. Regarding ICO loans, we have around EUR1 billion remaining, and we are comfortable with our provisions and classifications. The decline in new mortgage production is due to market conditions and competition.
Q: How should we think about the growth in public sector deposits given your strong liquidity position?
A: We have seen significant growth in public sector deposits, which is part of our strategy to improve our deposit base. The average cost of deposits remained stable, and the increase in public sector deposits has been net positive for our NII, improving our relationship with customers and enhancing our product offerings.
Q: Can you explain the reasons behind the RWA evolution despite a falling loan book?
A: The increase in RWAs is due to a mix shift towards corporate loans, which have a higher risk weight than mortgages, and investments in our fixed income portfolio. Additionally, there has been an increase in the valuation of our equity portfolio, contributing to the RWA growth.
Q: What is the NII sensitivity to interest rate changes, and what are your assumptions for average rates in 2025 and 2026?
A: A 100 basis point parallel downshift in rates would have a mid-single-digit negative impact on NII in the second year. Our base case assumes rates around 2% for next year, but we run multiple scenarios to hedge against rate volatility.
Q: With excess capital above your target, why not utilize it to gain market share in loans?
A: We focus on shareholder value, which includes volume, pricing, and risk. We aim to grow where we see positive returns, not just for volume's sake. We are improving our product offerings and have changed the trend in lending, particularly in corporate loans.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
