THE INCOME STATEMENT IS CHARACTERIZED BY STRONG REVENUES, COST CONTAINMENT, AND EFFORTS IN PROVISIONS AND WRITE-DOWNS
MAIN BUSINESS FIGURES GROW: CUSTOMER LENDING INCREASES BY 4% AND DEPOSITS RISE BY 6%
OPERATING INCOME GROWS BY 20.2%, THANKS TO A 7% INCREASE IN NET INTEREST INCOME AND COST CONTAINMENT
17,412 MILLION ALLOCATED TO WRITE-DOWNS AND PROVISIONS, A SIMILAR AMOUNT TO 2013, REPRESENTING 1.01% OF ATA
THE STRENGTHENING OF NET WORTH IS REFLECTED IN AN IMPROVEMENT IN CAPITAL RATIOS, WHICH ARE NOW MUCH MORE DEMANDING. CET1 INCREASES FROM 11.43% TO 11.54%
Spanish banking groups present at September 2014 an income statement characterized by the strength of their most recurring revenues, the containment of operating expenses, and the maintenance of their significant efforts in provisions. All of this results in an attributable profit, at constant perimeter, reaching 7,449 million euros, representing an 11.1% increase over that obtained at September 2013. If we take into account the effect of the perimeter increase due to the recent incorporation of a new group into the consolidated accounts, the attributable profit rises to 9,723 million.
The aggregate balance sheet of Spanish banking groups increases by 120,488 million euros to reach 2,417,419 million, 5.2% higher than one year earlier, an increase partly due to the aforementioned perimeter effect.
On the asset side, balance sheet growth is concentrated in customer lending, which increases by 53,560 million euros (+4.0%), and in fixed-income investments, which increase by 69,323 million (+20.7%). This increase in assets has been financed primarily by significant growth in customer deposits of 72,700 million euros (+6.1%); by greater recourse to funding from other credit institutions, amounting to 22,642 million; and by the strengthening of equity by 15,452 million (+9.4%). The deposits-to-loans coverage ratio rises to 91%, from 89% one year earlier.
The strengthening of accounting equity is reflected in capital ratios which, under the more demanding regulatory framework established in CRD IV, means moving from a Common Equity Tier 1 (CET1) of 11.43%, estimated at September 2013, to a ratio of 11.54% currently.
Regarding the income statement, the increase in operating income of 20.2% to reach 11,652 million is noteworthy, which in terms of return on Average Total Assets (ATA) implies an increase from 0.54% to 0.68% at the close of the third quarter of this year.
This stability and strength of the most recurring part of the income statement is based, firstly, on the significant growth recorded by net interest income of 7% annually, which originates from the positive evolution of costs and has allowed the return on ATA to increase by 23 basis points. This improvement has been transferred to gross margin (+28 basis points), which in turn reflects better results from financial operations and lower foreign exchange differences.
Furthermore, both the containment of operating expenses (-0.9%) and the effort in provisions and allowances, similar to that made in the previous year (-3.1% in amount and one basis point more on ATA), are maintained. Thus, the efficiency ratio improves by 1.4 percentage points to stand at 48.8%.
Overall, provisions and allowances in the first nine months of the year have amounted to 17,412 million euros, representing 1.01% in terms of ATA. The non-performing loan ratio of Spanish banking groups decreased at September 2014 by six basis points to stand at 8.07%.
Below operating income, the income statement is affected by the aforementioned perimeter effect and by the lower presence of extraordinary results, so that consolidated profit, at constant perimeter, is 7.6% higher than one year ago. Profitability in terms of ATA stands at 0.52%, six basis points above that obtained in September 2013.
Individual statements
In contrast to the increase in the consolidated balance sheet, the individual balance sheet, which is not affected by the perimeter effect, decreases by an amount of 52,497 million euros, 3.56% less. The evolution of its elements and balances is also somewhat different.
In assets, customer lending decreases by 26,372 million euros, 3.4% lower than the balance existing one year earlier. In liabilities, the balance of securities issued decreases by 27,013 million (-16.2%), and customer deposits also decrease by an amount of 10,969 million euros (-1.5%).
The trend is, however, similar to that of the consolidated balance sheet regarding the positive evolution of equity, which grows by 7,348 million, 5.9% higher than that existing in the previous year.
In the individual income statement of Spanish banks, the decrease in net interest income of 5.8% is offset by the good performance of results from financial operations (+23.5%) and by the containment of operating expenses, which decrease by 1.7%. All of this places the operating margin before provisions at 12,178 million, similar to that recorded one year earlier.
The effort in provisions and allowances reaches 7,284 million, 20.2% less than that made in the same period of 2013, although it still represents 60% of the operating margin. The non-performing loan ratio of Spanish banks is 13.59%, after experiencing a slight increase (38 basis points) compared to that of September of the previous year.
After recording non-recurring results and corporate income tax expense, the profit for the year stands at 4,069 million euros, 31.2% higher than that obtained one year earlier, and represents a return of 0.39% on average total assets for the period, 12 basis points more than in September 2013.
