Unicaja finally manages to overcome the payment of 64 million of the temporary tax. The bank earned 285.4 million between January and September, 4.9% more than in the same period last year, as reported this Monday to the National Securities Market Commission (CNMV). In the first semester, the bank still achieved a result that was 13% lower than last year, being the only entity that was in this situation.
This step forward occurs in a key quarter: at the end of July it put an end to its governance crisis with the appointment of Isidro Rubiales as CEO to try to end the internal battle for power between the Malaga and Asturian sides of Liberbank. Of course, the group has a pending task: to improve profitability, which stood at 5.7% of its tangible capital, the lowest by far among listed Spanish banks. With these figures, investors have reacted with a drop in the stock market session of 3.28%.
The growth of Unicaja’s figures is supported by the boost in margins derived from the interest rate increases of the European Central Bank (ECB), as is the case with its peers. The shift in monetary policy since July 2022 has meant the return of a part of the recurring banking business that had vanished during the era of zero or negative rates. Specifically, the interest margin of the Malaga entity has shot up by 25.4%, to 973 million. The other part of banking income, net commissions, are not growing as intensely. Between January and September, Unicaja earned 401 million, almost 1.8% more. “These results are accompanied by an improvement in balance sheet quality and the maintenance of a solid solvency and liquidity position,” the bank added in a statement.
The increase in the interest margin is due to the update of loan installments, especially variable rate mortgages, which are usually referenced to the Euribor and are usually reviewed once a year. Therefore, there is a part of the portfolio that has already been revised to the new price of money, although there is another that still has to grow, as explained in the note that the current level of the Euribor has not yet been transferred to the entire portfolio. . In fact, the sector still expects some quarters of growth, although with less intensity.
This expected rebound in margins was the justification given by the Government for approving an extraordinary tax on banks: the so-called benefits fallen from the sky due to such a sharp rise in interest rates. The rate, initially temporary although PSOE and Sumar have agreed to maintain it beyond 2024, taxes precisely the two figures already mentioned, the interest margin and net commissions.
Cost reduction
Regarding operating costs, Unicaja has managed to reduce them by 2.2%, to 573 million euros, due to the adjustments made after the merger with Liberbank that have offset inflationary pressures. Specifically, if we look only at personnel expenses, the decrease is even greater, 4.9%. According to the entity, this setback occurs when “the synergies derived from 100% of the planned center closures and 94.8% of employee departures contemplated in the ERE materialize.”
In this way, the Malaga group has managed to improve its efficiency ratio to 45.9% (the lower, the better). Experts consider that a bank begins to be efficient when this indicator is below 50%. Of course, both in this calculation and in the profitability calculation, the bank only provides the data excluding the impact of the extraordinary tax.
In terms of solvency, the CET1 capital ratio fully loaded, the highest quality, rose to 14.2%. Thus, the entity has an excess of capital of around 680 million euros over 12%, and just over 500 million over its target set at 12.5%. Regarding profitability, one of Unicaja’s pending tasks, the return on tangible capital (ROTE) stood at 5.7%, the lowest by far among listed banks and that does not include the payment of the temporary rate. “We have a clear mandate to improve our profitability. Not to be a larger bank, but to be a more profitable bank,” said Pablo González, financial director of Unicaja, in the presentation of the results with the analysts.
Regarding late payment, one of the most reliable thermometers of when problems arise in the economy, it remains under control: Unicaja closed September with a rate of 3.39% and a coverage rate of 65.8%. According to the latest figures from the Bank of Spain, the sector has a default rate of 3.56% at the end of August, far from the 13.62% recorded during the Great Recession, in December 2013.
The insolvencies of companies and, above all, of families have worried both the banks and the Government since the beginning of the interest rate increases in the Old Continent. Hence, they agreed to expand the Code of Good Practices to help indebted families in trouble.
Fewer customer resources and less credit
On the balance sheet, the customer resources managed by Unicaja were reduced at the end of September 2023 compared to the same month last year. Specifically, Unicaja has 87,536 million of its retail customers, 2.5% less than in September 2022. “The customer deposit base, very granular and stable, presents a high percentage of individuals, 75% of the total”, highlights the entity.
Where it does show an increase is in off-balance sheet resources and insurance, which rose 3.2% to 20,759 million, “with growth of 9.7% in savings insurance, 0.2% in investment funds and of 0.7% in pension funds.” This is due to clients’ search for greater profitability on their savings in the face of low remuneration on retail deposits (0.47% in Unicaja, the lowest among the six listed Spanish banks).
On the credit side, the Malaga group is no stranger to the downward trend of the sector and the volume of credit granted to public administrations (-17%), to companies (-14.8%) and to individuals (-2, 5%). The total figure stood at 49,533 million euros, 7.1% below that harvested in September 2022, “in a context of contraction in the demand for financing, increase in early repayments of loans at variable rates and the concentration of loan maturities guaranteed by the ICO,” the bank argued in its statement.
If we look at the behavior of family financing, we see that home purchases are reduced by 3%, while consumer financing grows by 2.1%. That is to say, there is a decline in long-term financing, but short-term financing is increased to be able to face the general increase in recurring costs.
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