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Consistent with the “la Caixa” Group’s strategy of extreme prudence, total allowance coverage of 2,651 million has been set aside, mostly against loan insolvencies, to further reinforce the balance sheet. Allowance coverage improved once again, to 70% (140% including mortgage guarantees), with an NPL ratio of 3.71%.
No use was made in 2010 of the general allowance fund, which has held at 1,835 million euros since the close of the 2009 financial year thanks to the Group’s ability to generate income, offering real financial robustness against future adverse circumstances. Extraordinary net capital gains of 634 million euros have been fully allocated to provisions, with an additional allocation of 200 million euros net of taxes to allow for future business management.
Operating costs were down 4%, which combined with the Group’s powerful commercial capacity to generate a net operating income figure of 3,323 million euros, with a cost-to-income ratio of 43.6%.
A strong performance from the branch network amid a difficult climate helped business volumes rise to 437,443 million (+5.2%), driven by the customer loan portfolio, which grew by 6.5%, and total customer funds, which were up by 4.2%. The Group continues to reinforce its leading position in the Spanish banking sector, increasing its market shares in key areas.
Amid a climate of harsh price adjustments, the "la Caixa" Group recorded net recurring profit of 1,507 million euros in 2010 (-11.9%). The Group further consolidated its robust financial position, increasing liquidity, maintaining a contained non-performing loans ratio and increasing allowance coverage, without making use of its general insolvency fund, which held at the €1,835 million figure reported at the close of 2009, thanks to its strong income generation capacity.
Net interest income stood at 3,152 million euros, down 19.8%, following careful management of business volumes, operating margins and the interest rate curve. This figure is largely a reflection of the group's ability to transfer falling interest rates onto customer mortgage payments.
Net fees grew by 8% to €1,407 million due to growth in the banking business, particularly in business banking and investment banking, as well as investment funds and insurance, with solid management of services provided to customers. Maintenance charges and demand deposit account fees remain the lowest in the market, particularly in savings accounts.
Total income (gross margin) stands at 6,745 million, down by 6.1%. Strict cost-containment and cost rationalisation has led to a 4% drop in operating costs, which combined with the branch network's strong commercial performance to result in a cost-to-income ratio of 43.6% and net operating income of 3,323 million euros, down 8.3%.
The “la Caixa” Group’s non-performing loans ratio stood at 3.71%, just 0.29 percentage points higher than in December 2009, thanks to the excellent quality of its loan book, strict risk management and very robust recovery procedures, keeping the figure below the 5.68% average for the financial sector in November. The coverage ratio held at 70% (140% including collateral backed mortgages).
The general insolvency fund stood at 1,835 million euros, the same figure as at the close of 2009 and approximately 100% of the α factor, which lends the Group a truly solid financial position from which to face any future adverse circumstances.
As per 31 December 2010, the "la Caixa" Group's real estate portfolio, linked to loan book management, stood at a net figure of 3,652 million euros, with coverage of 25%.
Extraordinary capital gains resulting from active management of the investment portfolio and a deal with Global Payments to extend merchant services, led to an attributed net total of 634 million euros, all of which has been allocated to provisions in order to further strengthen the balance sheet. Furthermore, as a pre-emptive measure an additional 200 million euros has been allocated towards future business management.
The significant income generated by the Group’s recurring activities, at 3,323 million euros, has allowed “la Caixa” Group to increase overall provision allocations, at 2,651 million. Net attributed income was 1,307 million euros, with a high level of profitability (ROE of 9.3%).
Consolidation of financial strength
“la Caixa” Group retains its market leading position, with a Core Capital ratio (high-quality shareholder equity) of 8.6%, providing further evidence of the Group’s excellent solvency levels. The Tier 1 capital ratio stood at 9.9% with a BIS II Capital Ratio of 11.8%.
Shareholders' equity attributable to the Group amounted to 19,198 million euros, with a surplus over the minimum regulatory requirement of 6,130 million, up by 1,463 million from the end of the previous financial year.
Group liquidity was 19,638 million euros, representing 6.9% of total assets, practically all of which is immediately accessible. In addition, the Group's reliance on wholesale markets is very low, providing real stability and demonstrating the Group's ability to pre-empt difficulties. In 2010 "la Caixa" issued 5,652 million euros on institutional markets, compared with maturing borrowings worth 2,810 million. The Group thereby generated funds to cover maturities due in 2011, totalling 7,288 million euros.
The Group has made various issues on the institutional markets: a mortgage bond issue of 3,267 million euros, 1,000 million in public sector covered bonds and 1,385 million in bonds.
Growth in banking business
Under the chairmanship of Isidro Fainé and the management of Juan María Nin, “la Caixa” continues to pursue its mission of leading the Spanish banking sector, based on a specialist management model to serve its 10.5 million customers.
In 2010 the Group launched four chief campaigns: mortgages, mutual funds, insurance and pensions. 2010 also saw the consolidation of the multiEstrella programme, with the introduction of new benefits and incorporation of the health care community.
The Group's true commercial strength, with 28.651 employees, the largest network in the Spanish financial system, 5,409 branches and 8,181 ATMs, and a leading position in online banking through Línea Abierta (with more than 6.62 million customers), mobile phone banking (more than 1.8 million customers) and electronic banking (10.34 million cards), saw the Group register high-quality and balanced growth in its commercial and banking business.
“la Caixa” is the number one financial institution in mobile phone banking, with more mobile phone banking service users than any other. “la Caixa” also has its own free mobile “store” service, offering more than 36 different applications that are regularly updated with new functions.
Total banking business stood at 437,443 million euros, thanks to sustained growth in both loans and deposits. The customer loan book increased in value by 11,520 million euros (+6.5%) to 189,546 million euros, with 939,463 transactions over the last 12 months and 99,491 million euros in loans extended.
More than 379,600 companies are currently "la Caixa" customers. Customer funds totalled 247,897 million euros (+4.2%), with careful price management in addition to strong growth in pension plans, insurance and investment funds.
InverCaixa, the “la Caixa” investment fund manager, also continued to perform well, recording a market share of 10.6% and managing a total of 14,634 million euros in investment assets. Invercaixa was the fastest growing of the major investment fund managers in 2010, with growth in assets of 5.18%, thanks to a strong inflow of funds at a time when the market had contracted 15.41%. In June Invercaixa launched FonCaixa Bienvenida, a fund that was very well received and managed to attract more than 1,600 million euros during its marketing period from 14 June to 16 August.
Consolidation of the specialised business model
One of "la Caixa"’s strategic goals is to consolidate its leading position in Individual Banking. According to a study by FRS on the financial behaviour of Spanish individuals, "la Caixa" has a 21% market share in retail clients, representing growth of 30 basis points, seeing "la Caixa" confirm its position as market leader and again demonstrate its ability to secure customer loyalty and form bonds of trust with its clients.
The Personal Banking division managed more than 56,100 million euros in funds and securities, thanks to “la Caixa”’s value based approach, founded on customisation to client needs, a hands on approach and made to measure products and services, with 1,015 specialised agents at our customers’ disposal.
The consolidation of "la Caixa" Private Banking, a division that serves customers with more than 500,000 euros in assets under management, helped lift the sum of funds and shares managed to 35,000 million. Among the numerous advances made in 2010, highlights include an agreement signed in April with the Fashion Designers Association of Spain (ACME), which covers exclusive events for customers, a loyalty card and CSR programmes to promote labour integration for groups at risk of social exclusion.
The SME Banking division provides services to SMEs via the network of "la Caixa” branches, with 820 specialised managers on hand. As per the close of the year the division managed 36,500 million in funds, with a 40% market share in the small business sector. In terms of commercial activity, an exceptional 40,000 ICO credit facilities were granted to SMEs, companies and freelancers, worth a total of €1,579 million.
In 2010 three new Business Banking branches were opened, bringing the total network up to 83 specialist branches providing services to this group. This helped lending to grow 12% to €17,233 million, while funds managed grew 14.5% to €9,007 million.
As far as products and services are concerned, there was strong growth in operational transactions: market shares in factoring and confirming reached 10.4% and 14.4% respectively, following growth of 30% and 49% respectively over the last twelve months. There have also been substantial efforts to complete the comprehensive range of products and services provided to meet international business needs, all of which have been well received by customers, as indicated by an increase in documentary credits and foreign trade financing.
Corporate Banking, with a team of 125 highly specialised staff based at "la Caixa"'s offices in Madrid and Barcelona, provides services to nearly 4,000 companies from 570 corporations, recording annual turnover in excess of 200 million euros. The volume of assets and bonds managed stood at close to 29,000 million, growing 12%.
MicroBank, the community development bank set up by "la Caixa", confirmed its position in 2010 as the leading operator in funding entrepreneurial and family projects through microcredit. Over last year MicroBank made 36,800 transactions worth 212 million euros, 20% more than the previous year, ending 2010 with investment portfolio growth of 37%. Since its foundation in 2007 MicroBank has funded 93,879 projects with a total of €588.7 million and has established itself as a benchmark European operator in microfinance.
International growth: Cairo and Singapore
As part of its international programme, "la Caixa" has offices in London (United Kingdom), Paris (France), Milan (Italy), Stuttgart and Frankfurt (Germany), Istanbul (Turkey), Beijing and Shanghai (China), Delhi (India) and Dubai (UAE). The company also has its own branches in Warsaw (Poland), Bucharest (Romania) and Casablanca (Morocco), where it was the first Spanish banking institution to open a branch.
Furthermore, “la Caixa" plans to open new offices in 2011 in Cairo (Egypt) and Singapore (Singapore).
As for investments in financial institutions, Criteria CaixaCorp, a subsidiary of “la Caixa”, has a 20% holding in GFInbursa, 30.1% in Banco BPI, 15% in The Bank of East Asia, 10.1% in Erste Bank and 20.8% in Boursorama.
The market value of the “la Caixa” Group’s listed investments, held via Criteria, is a total of 17,818 million euros, with unrealised capital gains of 2,084 million euros.
New 2011-2014 strategic plan
"La Caixa" Group's 2007-2010 strategic plan was successfully implemented. The result was to strengthen the institution's traditional leadership in retail banking, establishing a model based on specialisation in personal banking, private banking, SME banking, business banking and corporate banking, all of which has seen "la Caixa" gain market share and optimise its positions in these market segments.
Thus, "la Caixa" Group has seen its key market share figures grow: direct deposits of payrolls (15.4%) and pensions (13.1%), pension plans (16.2%), mutual funds (10.6%), demand deposits (11.4%), mortgages (10.6%) and savings insurance (14.4%), among others.
"la Caixa" Group's new 2011-2014 strategic plan, with its slogan "make the difference", again emphasises the institution's commitment to growth, leadership and social responsibility. The strategic targets are to strengthen "la Caixa"'s leadership in Spanish retail banking, diversify its businesses, propel further international growth, sustain its commitment to the business sector (with a distinguishing investment portfolio) and to further substantiate its social commitment. Furthermore, "la Caixa" will continue to actively and pre-emptively manage capital and liquidity levels to optimise its financial strength.
"la Caixa"'s community work budget for 2011 unchanged
Just as in 2010, "la Caixa" will, at its General Assembly, propose a 2011 budget for its Community Projects foundation of 500 million euros, matching that of last year and thereby sustaining its commitment to the community, despite the difficult economic climate.
Social projects in 2010 were mostly targeted at the issues of greatest concern to the community: the struggle against social exclusion, a particular focus on child poverty and job creation for disadvantaged groups.
Including last year, the organization has put €100 million towards breaking the vicious cycle of inherited poverty through the CaixaProinfancia programme, which has provided support to more than 165,000 children since its foundation. In 2010 the Incorpora programme provided job opportunities to 11,553 people at 4,174 companies.
Other priorities for the foundation included comprehensive care for people with advanced disease (8,398 patients assisted last year) and the social integration and inclusion of the elderly, including dependency prevention. As part of this work, more than 700,000 seniors took part in activities organised by the community work foundation across Spain, aimed at promoting active ageing.
A further area in which the foundation has worked is developing affordable rental housing for families, young people and the elderly, towards which the foundation has put €190 million since the programme began in 2005.
Various graduate scholarships programs have given students the opportunity to benefit from university training at leading academic institutions both in Spain and abroad, as well as supporting advances in biomedical research. This funding (272 grants awarded in 2010) came on top of professional training aimed at prison inmates, to aid their social and professional reintegration.
In the important area of intercultural cohesion, in 2010 the foundation established a new Multicultural Community Intervention Programme, aimed at promoting social cohesion in 17 Spanish regions with high levels of cultural diversity.
Its environmental programmes, including Conservation of natural spaces and social reintegration, which prioritises the hiring of people at risk of social exclusion for work on environmental development, and "La Caixa" working for the sea, aimed at conserving coastal ecosystems, are proof of how social work can be used to benefit biodiversity.
Furthermore, the foundation boosted its support for scientific research via its RecerCaixa programme, jointly run with the Catalan Public Universities Association, and also launched a project with the Catalan Climate Sciences Institute Foundation (IC3) aimed at observing and researching the effects of climate change. Both join the ongoing work at centres such as irsiCaixa, where research is carried out into retroviral AIDS treatments; the "la Caixa" Molecular Cancer Therapy Unit, at the Oncology Research Institute of Hospital Vall d'Hebron (VHIO); the Wider centre in Barcelona and the National Cardiovascular Research Centre in Madrid (CNIC), among others.
The institution’s commitment to developing countries led to the launch of the Global Health Institute in Barcelona, ISGlobal, and millions of children being vaccinated thanks to the Business Alliance for Child Vaccination, driven by "la Caixa"'s International Cooperation program and the GAVI Alliance, as well as 49 other ongoing projects in 23 countries to promote socio-economic development. Haiti has become the main recipient of the foundation's aid, to alleviate the suffering caused by the earthquake a year ago and provide continual aid for reconstruction efforts.
The CosmoCaixa Museums of Science in Barcelona and Madrid, which received more than one million visitors in 2010, continued their hard work to promote popular science through permanent exhibitions, temporary displays, conferences and workshops for schoolchildren and families.
In the cultural arena, activities run by CaixaForum centres (Barcelona, Madrid, Palma de Mallorca, Tarragona and Lleida), as well as mobile exhibitions travelling throughout Spain, helped promote education as a means of social development and improving the community’s quality of life. Further progress was made in this direction thanks to partnerships aimed at restoring cultural heritage (Roman art), the educational programme "The art of education" run alongside the Prado Museum, and concerts organised by the foundation in which the public can take part.
Other cultural highlights included the opening of the first exhibition to result from a partnership with the Louvre Museum (Routes of Arabia, at CaixaForum Barcelona), a retrospective exhibition on the work of Miquel Barceló in Madrid and Barcelona, and an agreement to coordinate management of the "la Caixa" Foundation's contemporary art collection and that of the Barcelona Contemporary Art Museum (MACBA), in a fund worth an estimated 160 million euros.
In 2011, the foundation plans to distribute its 500 million euro budget as follows: 67% to social programmes, 14% to environmental and scientific programmes, 13% to cultural programmes and 6% to educational programmes and research.
NOTE.- In so far as it relates to income from investments, this financial information from the “la Caixa” Group for 2010 has been prepared mainly on the basis of estimates, and cannot under any circumstances be used to make forecasts regarding the 2010 results of Criteria CaixaCorp, a subsidiary of the “la Caixa” Group.