Bankia : The Company reports press release about the results of the second quarter of 2016.

The results for the quarter beat the market consensus

• Further improvement in solvency, bringing the CET1 fully loaded ratio to 12.89%, up from 12.26% in December

• Non-performing loans are down 1,244 million in the half-year, pushing the NPL ratio below 10% for the first time in four years

• The no fees strategy attracts 113,151 salary and pension accounts and leads to 348,924 new cards in the year to date

• The upward trend in business lending and consumer finance continues, with a 2.5% increase

• Managed customer funds are up 1,945 million in the year to June, with growth in deposits and funds managed off-balance-sheet

• Half-yearly earnings reflect the impact of the sale of CNB in 2015, the depreciation of the Sareb bonds and the drop in the Euribor, but profit is up 3.5% in the second quarter compared to the first

• Strict control of operating costs, which are down 2.3% on a constant perimeter basis, kept the efficiency ratio ex NTI steady at 50.7%

• Return on equity stands at 8.2% in a negative interest rate environment

On a quarterly basis, the profit for the second quarter of 2016 was 245 million euros, up 3.5% on the first quarter, beating the market consensus.

Bankia's CEO, José Sevilla, emphasised that, during this first half, "Bankia has proven its capacity to face a negative interest rate environment. By containing costs and reducing the level of provisioning for NPLs, we have been able to maintain high levels of profitability."

Sevilla went on to say that, "Bankia has shown an extraordinary ability to improve its capital ratios quarter after quarter, making us the most solvent of the large Spanish banks, while the significant decrease in non-performing loans has brought our NPL ratio down below the average for Spanish banks, for the first time in our history."

On the commercial front, "the new positioning the Bank has adopted is proving a success. In just six months we have increased the number of customers who have their salary or pension paid directly into their account by more than 113,000 and we have issued almost 350,000 new cards."

"What's more," Sevilla went on, "we are gaining market share in key segments, such as consumer finance, businesses and mutual funds, and are making strides in the digital transformation of the Bank to keep pace with our customers' needs."

Net interest income is down 19.1% at 1,124 million euros. Among the factors contributing to this decrease are the sale of CNB (-72 million), the SAREB bonds (-78 million), the fall in the Euribor to negative levels, which affects the return on mortgages (-85 million), and the decision taken one year ago to withdraw the "floor clauses" (-21 million).

Fee and commission income is affected by the Bank's new positioning, launched in January for individual customers and in May for the self-employed, aimed at removing fees and commissions for customers who have their salary or pension paid directly into their account. As a result, fee and commission income for the first half is down 15.5% compared to the first half of the previous year, at 406 million euros.

Nevertheless, this new policy, aimed at building loyalty among existing customers and attracting new customers, is already producing results. Thanks the growth in customer numbers and increased cross-selling, especially in

lending, fee and commission income in the second quarter of the year is up 3.4% compared to the first quarter.

Net trading income (NTI) and exchange differences are down 17.2%, at 134 million euros, while in other operating income and expenses the proceeds from the sale of the stake in Visa Europe almost entirely offset the contribution to the Single Resolution Fund.

All in all, gross income for the half year to June came to 1,686 million euros, 16.9% less than in the same period of 2015.

Throughout the year, Bankia has continued to make determined efforts to contain operating expenses, which fell 6.7% over the half-year to 787 million euros. Not counting CNB, the decline in expenses is 2.3%. The efficiency ratio ex NTI was 50.7%, more than 10 points above the average of the Bank's competitors.

Net operating income before provisions was 900 million euros, 24.2% less than in 2015.

Another noteworthy achievement in the half-year is the sharp reduction of non- earning assets, with decreases in both non-performing loans and the volume of foreclosed assets.

As a result, the Bank had to record fewer provisions. Specifically, the provisions recorded in the first half of 2016 were 235 million euros (45.5%) less than those recorded in the same period of 2015.

Profit before tax for the year to date came to 639 million euros, while net attributable profit was 481 million euros, a decrease of 13.4% compared to the same period of the previous year. On a constant perimeter basis, i.e., excluding the contribution of CNB in 2015, the decrease would have been 8.7%.

The attributable profit for the second quarter of the year was 245 million euros, which represents an increase of 3.5% compared to the first three months of the year.

The new positioning in relation to customers, which Bankia put into effect last January, is being implemented with notable success.

In the first six months of the year, Bankia registered 113,151 new customers who have their income paid directly into their account. Over the same period, the number of active cards increased by 348,924, of which 203,799 are credit cards. The market share of mutual funds grew from 5.44% to 5.70%.

All this translates into a steady increase in customer satisfaction. In the mystery shopper survey, Bankia scores 7.58 out of 10, almost half a point above the industry average. The Bank's score in the customer satisfaction index has risen four points in six months, an increase similar to that recorded between 2013 and 2015, and already stands at 86.5%.

In lending, the focus remains on consumer finance and loans to the self- employed and SMEs, although new home loans are also starting to increase.

A total of 702 million euros of consumer finance was granted in the first six months of the year, an increase of 29.6% compared to the same period of 2015. New home loans are up 21.5% at 390 million euros.

Loans granted during the first six months of the year to finance the activity of the self-employed and SMEs totalled 1,651 million euros, 7.2% more than in the same period of 2015.

The growth of new lending has resulted in a 2.5% increase in the stock of loans in the consumer finance and business segments, improving the Bank's market share in both segments.

Customer funds show an increase during the half-year, both in deposits and in off-balance-sheet customer funds. Deposits are up 1,680 million euros in the year to date, at 98,670 million euros. Customer funds held in mutual funds and pension plans increased by 265 million to 23,038 million euros, despite the difficult market environment.