Earnings Report January-June 2017 26 July 2017 CONTENTS

Page

Introduction

3

1. Relevant data

4

2. Economic and financial environment

5

3. Summary of results

6

4. Balance sheet performance

13

5. Risk management

16

6. Funding structure and liquidity

19

7. Solvency

21

8. Share performance

23

9. Rating

24

10. Significant events during the quarter

25

11. Appendix

26

Basis of presentation and comparability of information

The audit reports included in the consolidated financial statements for the year ended 31 December 2016 include the following Emphasis of Matter paragraph in relation to the legal proceedings associated with the Bankia IPO in July 2011:

"We draw attention to the information provided in Notes 2.18.1 and 20 to the accompanying consolidated financial statements, which describe the uncertainty regarding the final outcome of litigation in relation to the Initial Public Offering of shares carried out in 2011 for the stock market listing of Bankia, S.A. This matter does not modify our opinion."

At 30 June 2017 the abovementioned uncertainty remains, so the financial data contained in this document must be interpreted in the context just mentioned and together with the information contained in the abovementioned notes to the consolidated financial statements for the year ended 31 December 2016.

The Bankia Group's attributable profit is 514 million euros, an increase of 6.7% compared to the first half of 2016 In line with the targeted objectives, customer's related business performance, cost efficiency and cost of risk control have been key factors in achieving this result

  • Net interest income continues with its stabilising trend (-2.6% in the quarter), reflecting the diminishing impact of the interest rates curve on the repricing of the mortgage portfolio, the positive contribution of new lending, and positive management of the cost of retail funding

  • Fee and commission income is performing well, growing 4.7% year-on-year and 5.1% quarter-on-quarter,

    thanks to an increased customer's activity and customer's loyalty

  • As a result, the Group's income from the core banking business (net interest income plus fee and commission income) is increasingly stable and recurring (-0.3% quarter-on-quarter)

  • Continued cost management brings the efficiency ratio to 46.4% at the end of June 2017

  • The Group's cost of risk shows further improvement, ending June 2017 at 25 basis points, three basis points less than in the first half of 2016.

  • The stabilisation of income from the banking business, the focus on efficiency, and control of the cost of risk drive attributable profit growth for the first half by 6.7% to 514 million euros.

  • The Bankia Group closes the first half of 2017 with an ROE of 8.6%.

    Growth in customers and loyalty increases investment and new deposits

  • Great dynamism in the multichannel offering. The Connect with your Expert customers are up 57.7% in the half-year. At the end of June 2017, multichannel customers already represent 39.3% of the Group's total customers, compared to 37.6% in December 2016.

  • New mortgage loans are up 129% year-on-year and 54.9% in the quarter.

  • Consumer and businesses lending maintain a steady rate of growth. Since June 2016 the stock of consumer loans is up 18.1% and the stock of performing loans to businesses grows by 450 million euros.

  • Customer funds managed by the Group have grown 1.1% since June 2016, driven by demand deposits (+29.7%), savings accounts (+12.2%) and mutual funds (+11.6%).

    Further improvements in risk management

  • Non-performing loans reach 10,554 million euros at the end of June 2017, marking a decrease of 8% in the half-year and 10.2% year-on-year. This figure puts the Group's NPL ratio at 9.1%, an improvement of 70 basis points compared to December 2016.

  • The decrease in the portfolio of foreclosed assets continues. The net balance is down 17.7% compared to June 2016, with sales totalling 234 million euros in the first half of the year.

    Capital strength and value generation for shareholders

  • The Bankia Group continues to improve its capital ratios, thanks to its organic capital generation capacity. At the end of the first half of 2017, the Bankia Group's CET1 Phase-in ratio is 15.36% (+66 bps vs. December 2016) and the CET1 Fully loaded ratio (not including unrealised gains on sovereign holdings in the AFS portfolio) is 13.82% (+80 bps in the half-year).

  • The Group's capital ratios show an ample surplus above the minimum prudential requirements imposed by the ECB for 2017: +748 bps above the regulatory CET1 Phase-in ratio (7.875%) and +601 bps above the minimum Total Capital ratio (11.375%).

  • This comfortable solvency position will allow Bankia to undertake the merger with Banco Mare Nostrum (BMN) without having to resort to the wholesale markets to finance the transaction, while earning a return on the capital generated organically in recent years.

  • Bankia carries out its first AT1 bond issue in the amount of 750 million euros. The issue was completed on 6 July, with a coupon of 6.00%, and was 3.3 times oversubscribed.

1. RELEVANT DATA

Jun-17

Dec-16

Change

Balance sheet (€ million)

Total assets

180,884

190,167

(4.9%)

Loans and advances to customers (net)(1)

104,144

104,677

(0.5%)

Loans and advances to customers (gross)(1)

109,437

110,595

(1.0%)

On-balance-sheet customer funds

121,700

125,001

(2.6%)

Customer deposits and clearing houses

103,038

105,155

(2.0%)

Borrowings, marketable securities

17,144

18,801

(8.8%)

Subordinated liabilities

1,518

1,045

45.2%

Total managed customer funds

142,830

145,097

(1.56%)

Equity

12,481

12,303

1.4%

Common Equity Tier I - BIS III Phase In

11,463

11,329

1.2%

Capital adequacy (%)

Common Equity Tier I - BIS III Phase In(2)

15.36%

14.70%

+0.66 p.p.

Total capital ratio - BIS III Phase In(2)

17.39%

16.03%

+1.36 p.p.

Ratio CET1 BIS III Fully Loaded(2)

13.82%

13.02%

+0.80 p.p.

Risk management (€ million and %)

Total risk

116,188

117,205

(0.9%)

Non performing loans

10,554

11,476

(8.0%)

NPL provisions

5,683

6,323

(10.1%)

NPL ratio

9.1%

9.8%

-0.7 p.p.

NPL coverage ratio

53.9%

55.1%

-1.2 p.p.

Results (€ million)

Jun-17 Jun-16 Change

Net interest income 995 1,124 (11.4%)

Gross income 1,648 1,686 (2.3%)

Operating income before provisions 884 900 (1.8%)

Profit/(loss) attributable to the Group 514 481 6.7%

Key ratios (%)

Cost to Income ratio (Operating expenses / Gross income) 46.4% 46.6% -0.2 p.p.

R.O.A. (Profit after tax / Average total assets) (3) 0.6% 0.5% +0.1 p.p.

RORWA (Profit attributable to the group / RWA) (4) 1.4% 1.2% +0.2 p.p.

ROE (Profit attributable to the group / Equity) (5) 8.6% 8.2% +0.4 p.p.

ROTE ( Profit attributable to the group / Average tangible equity) (6) 8.7% 8.4% +0.3 p.p.

Bankia share

30-Jun-2017 31-Dec-2016 Change

Number of shareholders 204,778 241,879 (15.3%)

Number of shares in issue (million)(7) 2,879 11,517 -

Closing price (end of period, €)(7)(8) 4.23 0.97 -

Market capitalisation (€ million) 12,185 11,183 9.0%

Earnings per share (7)(9) 0.36 0.07 -

Tangible book value per share (€) (7)(10) 4.40 1.10 -

PER (Last price (8) / Earnings per share) 11.76 13.91 (15.4%)

PTBV (Last price (8) / Tangible book value per share) 0.96 0.89 8.5%

Additional information

Number of branches 1,766 1,855 (4.8%)

Number of employees 13,477 13,505 (0.2%)

  1. Includes transactions with BFA (Jun-17 €384mn; Dec-16 €125mn)

  2. Capital ratios do not include the €750mn Contingent convertible bond issuance

  1. Annualized profit after tax divided by the average total assets

  2. Annualized attributable profit divided by the risk weighted assets

  3. Annualized attributable profit divided by the previous 12 months equity average

  4. Annualized attributable profit divided by the previous 12 months tangible equity average

  5. Number of shares after the reverse split executed on June 2017

  6. Us ing the las t price on 30th June and 31th December

  7. Annualized attributable profit divided by the number of shares in issue

  8. Total Equity les s intangible assets divided by the number of shares in issue

Bankia SA published this content on 26 July 2017 and is solely responsible for the information contained herein.
Distributed by Public, unedited and unaltered, on 26 July 2017 06:50:03 UTC.

Original documenthttp://www.bankia.com/recursos/doc/corporativo/20170123/ingles/02-02-2q17-earnings-report-vf.pdf

Public permalinkhttp://www.publicnow.com/view/013086EFF5BC2EDDE10F215DFEBF7D0DEB6F3FD9