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Consistent with the “la Caixa” Group’s strategy for extreme prudence, total allowance coverage of 1,543 million has been set aside, mostly against loan insolvencies, to further reinforce the strength of the balance sheet. Allowance coverage continued to improve, rising to 66% (132% if mortgage guarantees are taken into account), while the non-performing loan ratio stands at 3.53%.
No use was made during the first nine months of the year of the general allowance fund, which has remained at 1,835 million euros since the close of the 2009 financial year, thanks to the capacity to generate income, which offers great financial robustness against future unfavourable environments. Extraordinary net capital gains of 233 million have been allocated in their entirety to allowance coverage.
Operating costs have fallen to 4%. This has combined with the Group’s strong commercial capacity to give a net operating income figure of 2,724 million euros, with an efficiency ratio of 43%.
The intense activities of the branch network in a difficult climate helped business volumes rise to 421,338 million (+1.3%), driven by the customer loan portfolio, which increased by 2.2%, and total customer funds, which rose by 0.6%. The Group continues to strengthen its position as a leading institution in the Spanish banking sector, increasing its market share in key areas.
In an environment experiencing strong pressure on pricing, the “la Caixa” Group obtained attributed net income of 1,228 million euros during the first nine months of 2010 (-12.9%). The Group further consolidated its robust financial strength, increasing its liquidity, maintaining a contained non-performing loans ratio and increasing allowance coverage, without making use of the general allowance fund.
Net interest income stands at 2,451 million, down 18.4%, following careful management of business volumes, operational margins and the interest rate curve. This figure to a great extent reflects the effects of the fall in rates applied by the Group to customer mortgage repayments.
Net fees increased by 7.6% to 1,054 million, due to the increase in banking business, particularly in the business banking and investment banking segments, as well as in investment funds and insurance business, with appropriate management of the services offered to customers. Charges for the maintenance and administration of instant access accounts remain among the lowest in the marketplace, particularly with regard to savings accounts.
Total income (gross margin) stands at 5,293 million, down by 4.2%. The strict management of cost-containment and rationalisation procedures has led to a fall in operating costs of 4%. This has combined with the strong commercial capacity of the branch network to give an efficiency ratio of 43%, bringing net operating income to 2,724 million, down by 4.3%.
The “la Caixa” Group’s non-performing loans ratio stands at 3.52%, only 0.11 percentage points higher than in December 2009, thanks to the high quality of its loans portfolio, strict risk management and robust recovery procedures, meaning that this figure remained below the 5.62% average for the financial sector in August. The allowance coverage ratio rose to 66% (132% if mortgage guarantees are taken into account).
The general allowance fund for insolvencies was not used during the first nine months of the year, despite the absorption of the impact of 75 million euros from the latest Bank of Spain Circular 3/2010 on allowance coverage for credits and buildings. The general allowance fund for insolvencies remains the same as at the end of 2009, 1,835 million euros, and at approximately 100% of the α factor, affording “la Caixa” great financial strength to deal with adverse future circumstances.
Extraordinary capital gains resulting from active management of the investment portfolio amounted to an attributed net total of 233 million, all of which has been allocated to allowance coverage to further increase the strength of the balance sheet.
The significant income generated by the Group’s recurring activities, 2,724 million, has allowed for a higher level of total allowance coverage at 1,543 million. Net attributed income was 1,228 million, with a high level of profitability (ROE of 9.6%).
Consolidation of financial strength
The “la Caixa” Group maintains its leading position in the sector, with a Core Capital figure (high-quality shareholder equity) of 8.7%, providing continuing evidence of the Group’s excellent levels of solvency. Tier 1 stands at 9.9% while the Group has a BIS II Capital Ratio of 11.7%.
The shareholder equity that can be attributed to the Group amounts to a total of 19,013 million, with a surplus over the minimum regulatory requirement of 5,995 million, up by 1,328 million since the end of the last financial year.
Group liquidity has risen by 894 million since December, reaching a total of 22,102 million, 8% of total assets, practically all of it immediately accessible. Dependence on the wholesale markets is also extremely low, providing high levels of stability and underlining the Group’s forward-looking approach: borrowings to the value of 2,610 million matured during the first nine months of the year, with just 200 million still to mature over the rest of the year.
“la Caixa” has made various issues on the institutional markets: a mortgage bond issue for 2,967 million, of which 525 million was issued in October, and a public covered bonds issue in April for a further 1,000 million.
Increase in banking business
Under the chairmanship of Isidro Fainé and the management of Juan María Nin, “la Caixa” continues to pursue its mission to lead the Spanish banking sector through the use of a specialist management model to attend to its 10.5 million customers.
The “la Caixa” Group has strengthened its leading position in the Spanish banking sector, increasing its market share in key areas such as salaries and pensions paid directly into “la Caixa” accounts (15.3% and 13.1% respectively), pension plans (16.1%), investment funds (10.7%), instant access deposits (11.5%), mortgages (10.5%) and savings plans (14.4%), among others.
The Group’s great commercial strength, with 28,014 employees, 5,229 branches (the largest network in the Spanish financial system), 7,902 ATMs and a leading position in on-line banking through Línea Abierta (more than 6.36 million customers), mobile phone banking (more than 1.8 million customers) and electronic banking (10.2 million cards in circulation), means that the Group is showing balanced and high quality growth in its banking and commercial business.
“la Caixa” is the number one financial institution in mobile phone banking, as 49% of clients who operate with their financial institution via the mobile network in Spain do so with “la Caixa”, according to data from Nielsen Netratings for the first quarter of 2010. “la Caixa” has its own mobile “store”, offering more than 25 different applications which are regularly updated.
Total banking business amounted to 421,338 million, thanks to sustained growth in both loans and deposits. The customer loan portfolio increased in value by 3,969 million over the last nine months (+2.2%), reaching a total of 181,995 million, with 974,664 operations over the last 12 months and 99,214 million in risk granted. At the present time, more than 388,800 businesses are clients of “la Caixa”. Customer funds totalled 239,343 million, with a careful price management, in addition to the strong increase in pension plans, insurance and investment funds.
InverCaixa, the “la Caixa” investment fund manager, has also continued to perform well, attaining a market share of 10.7%, with managed investment assets of 15,613 million. Invercaixa, which is one of the largest investment fund managers, has also seen one of the highest levels of growth during the first nine months of the year, showing an increase of 13.10% thanks to strong inflows of funds, at a time when the market has contracted by 10.63%.
The 2007-2010 Strategic Plan consolidates the specialised business model
“la Caixa”, whose core business is personal banking, has continued its successful implementation of a specialised model for personal customers, private banking, SME business banking and corporate banking, with more than 2,466 specialist managers.
“la Caixa” has further strengthened its leading position in Individual Banking. According to the results of an FRS study on individual financial behaviour in Spain, “la Caixa” has reaffirmed its leading position in this sector, with a customer penetration share of 20.6%. It has also made advances in quality of service, obtaining a score of 7.73, the highest among comparable institutions.
The volume of funds and securities managed by Personal Banking had risen to more than 56,000 million euros by the end of September. For its part, the “la Caixa” Private Banking division now has 34,500 customers and manages funds and securities worth more than 35,300 million.
Commercial activity in the individual, personal and private banking segments during the third quarter of the year was concentrated, in the main, on two campaigns: investment funds and insurance, with highly successful results in both areas.
The investment fund campaign, which began in mid-June and ran to around the end of August, resulted in a total of 2,902 million subscribed funds, of which 64% was accounted for by new investment fund customers. This resulted in an increase in market share of 185 base points.
The insurance campaign, which began at the end of August and will run until the end of October, has already resulted in 75,306 policies being taken out, an increase of 29% over last year’s campaign. In addition, the MultiEstrella programme has meant a further 515,291 salaries and 125,617 pensions have been managed from “la Caixa” accounts during the last year.
The SME Banking Service provides assistance to SMEs through 837 specialist managers spread among the Group’s network of 5,216 branches. By the end of September, this service was managing around 9,914 million in customer funds and 27,250 million in loan investments. In terms of commercial business, particular efforts were devoted to the placement of ICO loans, which allowed “la Caixa” to almost double its share from the previous year, bringing it to 11.9%.
Two new Business Banking centres were opened during this last quarter, one in Jaén and the other in Gijón, bringing the number of specialist business banking centres to 82, with a workforce of 851 people specially trained to attend to the requirements of this sector. This has led loan investment to increase by 12% to 16,726 million, with customer funds rising 19% to 8,685 million. As far as products and services are concerned, there has been strong growth in operational transactions: market shares in factoring and confirming operations have reached 10.4% and 14.4% respectively, having grown by 31% and 21% over the last twelve months.
The Corporate Banking division attends to 4,000 businesses from 570 corporate groups, with a turnover of more than 200 million euros, through the “la Caixa” offices in Madrid and Barcelona and a highly specialised team of 140 people. Business volumes, including guarantee bonds, have risen by 1,637 million since September 2009, an increase of 4%, and now total 43,000 million, with a notable increase of 51% in international guarantee bonds and credit cards, and a rise of 7% in investment.
MicroBank, the social banking institution created by “la Caixa”, continued to grow and consolidate its banking model in Spain. Created in 2007, it has already financed more than 83,456 projects to a value of 524 million euros, making it the financial institution that devotes the greatest resources to the promotion of projects and self-employment through the use of micro-credits. During the first nine months of the year, MicroBank increased its investments by 12% as compared with the same period in 2009.
Internationalisation and the investment portfolio
As part of its international expansion plan, "la Caixa" has agency offices in London (United Kingdom), Paris (France), Milan (Italy), Stuttgart and Frankfurt (Germany), Istanbul (Turkey), Beijing and Shanghai (China), Delhi (India) and Dubai (UAE). It also has branches in Warsaw (Poland), Bucharest (Romania) and Casablanca (Morocco), where it was the first Spanish banking institution to open a branch.
As regards investment in financial institutions, Criteria CaixaCorp, a subsidiary of “la Caixa” has a 20% holding in GFInbursa, 30.1% in BPI Bank, 15% in The Bank of East Asia, 10.1% in ErsteBank and 20.8% in Boursorama.
The market value of the “la Caixa” Group’s portfolio of listed investments, held through Criteria, totals 17,818 million euros with unrealised capital gains of 2,084 million.
The “la Caixa” Social Projects show the Group’s continuing commitment to people
Creating jobs among the most disadvantaged groups, overcoming child poverty in Spain and caring for people who are terminally ill have remained among the main priorities of the “la Caixa” Social Projects programme during the third quarter of 2010.
In this connection, 7,600 people have found jobs through the Incorpora Programme so far this year, bringing the total to 34,305 jobs with more than 12,600 companies since the programme was started up. The scope of this project was further widened during July, with the signing of an agreement between “la Caixa” and the Confederación Española de Hoteles y Alojamientos Turísticos (Spanish Confederation of Hotels and Tourist Accommodation), which will promote the employment of people with difficulties at the Association’s 14,000 member establishments.
For its part, the combating child poverty programme has helped 52,500 children during 2010, with combined investments by the “la Caixa” Group totalling 31 million euros since the beginning of the year. The programme to provide care for the terminally ill and their families has offered assistance to 6,100 patients and 10,520 of their relatives so far this year.
In addition to consolidating projects already under way, the “la Caixa” Social Projects programme further strengthened its commitment to society during the third quarter of 2010 with the announcement of new initiatives.
Notable among these is the pioneering Programme for Multicultural Community Intervention, aimed at encouraging urban harmony and social cohesion in 17 parts of Spain that are particularly notable for their high levels of demographic and cultural diversity.
Another great event, this time in the cultural arena, was the signing in July of an agreement between the “la Caixa” Foundation and the MACBA Foundation, to combine and jointly manage the Contemporary Art Collections belonging to both institutions. The new collection, which includes some 2,400 works, has an estimated market value of 160 million euros.
Also in the cultural arena, on 21 September “la Caixa” and “la Caixa” Foundation Chairman Isidro Fainé attended the ceremony for the laying of the foundation stone for the institution’s future social and cultural centre in Zaragoza, a new CaixaForum, which will be ready for inauguration in around 30 months. In addition, “la Caixa” CEO Juan María Nin opened the “Lorca, Dalí and the Residencia de Estudiantes” exhibition at CaixaForum Madrid, an event that commemorates the centenary of this prestigious cultural institution and forms one of the main exhibitions in the centre’s programme for the new season.
Along with these other projects, the la Caixa” Social Projects initiative has continued its work on the prevention of dependence and active and healthy ageing for the elderly, an awareness campaign against drug use (as part of a programme that was awarded the Queen Sofia Award for Combating Drugs), child vaccination in developing countries and conservation of the environment.
In short, “la Caixa” has further strengthened its commitment to individual welfare and to providing for the most important social needs. “la Caixa” has this year allocated 500 million euros to the promotion of social, educational, cultural and environmental programmes. Of this 500 million figure, 356 million is earmarked for social programmes, 27 million will go to educational and training programmes, 62 million will be devoted to research, science and the environment, while 55 million will be spent on cultural programmes.
NOTE.- In so far as it relates to income from investments, this financial information from the “la Caixa” Group for the first nine months of 2010 has been prepared mainly on the basis of estimates, and cannot under any circumstances be used to make forecasts regarding the income of Criteria CaixaCorp, a subsidiary of the “la Caixa” Group