Bankia S A : Earnings report about the fourth quarter of 2020.

Annual Earnings Report 2020

28 January 2021

DECEMBER 2020 EARNINGS REPORT

CONTENTS

		Page
Highlights of the year	1
1.	Relevant data	3
2.	Economic and financial environment	4
3.	Summary of results	6
4.	Balance sheet performance	12
5.	Risk management	15
6.	Funding structure and liquidity	17
7.	Equity	19
8.	Solvency	19
9.	Share performance	21
10. Rating	22
11. Management of the impact of the COVID-19 crisis	23
12. Significant events during 2020	25
13. Appendix	27

DECEMBER 2020 EARNINGS REPORT

Group ends 2020 having met the strategic targets for capital generation

and asset quality.

In December, extraordinary general meetings of Bankia and CaixaBank

approve common draft terms for merger between the two entities.

Common draft terms of merger between CaixaBank and Bankia

• On 17 September 2020, the Boards of Directors of Bankia and CaixaBank signed the common draft terms for the merger by absorption of Bankia, S.A. into CaixaBank, S.A.
• The merger was approved by the extraordinary general meetings of shareholders of Bankia, S.A. and CaixaBank, S.A. held in December 2020.
• Closing under the merger plan will be conditional on obtaining the requisite regulatory approvals, with execution of the merger agreement projected for the first quarter of 2021 and the technological integration to be completed in the last quarter of that year.

Core earnings up 3.8% in 2020. Bank allocates 505 million euros to extraordinary COVID-19 provisions

• Strong fee and commission income (+12.2%) and reduced operating expenses (−2%) bring core earnings for full-year 2020 to 1,336 million euros (+3.8%). Quarter-on-quarter, the trend is equally positive, with core earnings up 10.4% compared to the third quarter and 10.8% compared to the fourth quarter of 2019.
• During the year, the Group set aside extraordinary provisions of 505 million euros in anticipation of future impacts resulting from the deteriorating macroeconomic conditions caused by COVID-19. Of this total, 40 million euros were recognised in the fourth quarter of the year.
• Excluding extraordinary COVID-19 provisions, profit before tax for 2020 comes to 816 million euros, up 8% compared to 2019. After COVID-19 provisions, profit before tax is 311 million euros and attributable profit, 230 million euros.
• The Group's fourth-quarter profit before tax is 94 million euros and attributable profit, 50 million euros.

Strong growth in lending to companies, while retail business picks up

• In the businesses segment, the lending stock is up 17% year-on-year, driven by new ICO-backed loans, which totalled 10,941 million euros (26.1% of total loans to businesses at the end of December), lifting the bank's market share of business loans to 8.11% as of November 2020 (+37 basis points year-on-year).
• Mortgage lending saw another record increase, with growth of 35.6% compared to the previous quarter and 28.1% compared to the fourth quarter of 2019, boosting new mortgage production by 14.3% over the year as a whole.
• In consumer finance, new loans continue their gradual recovery, after the initial impact of COVID-19, rising 43.5% in the quarter.
• Net flows into mutual funds continue the upward trend seen in the previous two quarters, with the volume of funds managed and sold up 7.3% in the year, bringing the market share to 7.51% (+46 basis points in the year). In pension plans, the full-year growth is 1.7% and the monthly average figures for new insurance production confirm the upward trend, with growth of 83.8% in the quarter.
• The digital preference of the bank's customers continues to grow. As of year-end 2020, digital sales accounted for 46.9% of the Group's total sales (+10.9 percentage points in the year), with 60.5% of customers transacting through digital channels (+7.2 percentage points in the year).

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DECEMBER 2020 EARNINGS REPORT

Group meets targets for NPAs and capital generation set in Strategic Plan

• The non-performing loans ratio is down 0.3 percentage points in the year at 4.7%. Extraordinary COVID-19 provisioning has boosted coverage to 58.2%, an increase of 4.2 percentage points compared to December 2019.
• Gross non-performing assets (non-performing loans plus foreclosed assets) stand at 8,293 million euros (−0.7% compared to December of the previous year), while coverage has climbed to 51.7% (+3 percentage points in the year), bringing the net NPA ratio (2.98%) to the target level set for December 2020 in the Strategic Plan (NPA ratio below 3%).
• As of year-end, the Group's liquid assets cover debt maturities 1.6 times and the bank has drawn 22,919 million euros under the ECB's TLTRO III facility.
• Turning to capital ratios, Bankia has a CET1 ratio, before applying any flexibility measures, of 16.66% on a phase-in basis and 15.48% on a fully loaded basis. These levels provide a CET1 buffer, above the regulatory minimum for 2020, equal to +828 basis points on a phase-in basis and +710 basis points on a fully loaded basis. After applying the flexibility measures announced by the supervisory bodies in response to the COVID-
  19 crisis (IFRS 9 "Quick Fix" measures), the fully loaded CET1 ratio rises to 16.17%.

Completion of 2018-2020 Strategic Plan

• Despite having to implement its Strategic Plan in a more adverse than expected macroeconomic environment, the Group has met or exceeded many of the targets it set itself.
• The synergies from the BMN merger have been harvested faster than expected.
• Sales targets, in terms of business lending, mutual funds and cards, have been exceeded.
• The growth targets for net fee and commission income and cost reduction have been met.
• In asset quality, the Group has met the main targets set in the Plan as regards reducing non-performing assets and improving provision coverage.
• On the capital front, at year-end 2020 the Group has a buffer of 2,228 million euros over and above the required 12% CET1 ratio on a fully loaded basis (excluding gains on sovereign holdings), which combined with dividend distributions (706 million euros), allows the Group to exceed the target of 2.5 billion euros set in the Strategic Plan.

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