PROVISIONS GROW BY 20% TO REACH 27,533 MILLION AND ALONE ACCOUNT FOR THREE-QUARTERS OF THE DECLINE IN CONSOLIDATED EARNINGS
NET INTEREST INCOME SHOWS GROWTH OF NEARLY 2% THANKS TO RECURRING RETURNS FROM TYPICAL BANKING ACTIVITY
CORE CAPITAL STANDS AT 10.04%, FOUR PERCENTAGE POINTS HIGHER THAN SPANISH BANKS HAD AT THE START OF THE CRISIS
Spanish banking groups achieved an attributable profit of 8,295 million euros in 2011, 41% lower than the previous year. These results occurred in a context characterized by general economic stagnation, significant pressure on financial costs, and the substantial provisioning effort that, once again, was necessary.
In this unfavorable environment, the profits obtained in 2011 are explained, despite their decline, by the capacity of Spanish banks to generate recurring income from retail commercial banking activity. This is reflected in the stability of the items preceding the gross margin: interest, dividends, and commissions.
During 2011, Spanish banking groups significantly improved their solvency. Core capital, which includes the highest quality equity components, increased by 104 basis points to 10.04%, a ratio that is now four percentage points higher than our banks had at the beginning of the crisis.
Total assets stand at 2.328 trillion, with a 3.8% increase (85,870 million), one of the lowest annual growth rates in recent years. This limited growth is reflected in very moderate changes in deposits and loans, which represent typical banking activity. Deposits barely increased by 1.2% annually (13,072 million), while loans grew by 2.2%.
The consolidated non-performing loan (NPL) ratio rose to 4.69%, 32 basis points higher than a year earlier, with a coverage ratio of 57%, compared to 65% in December 2010.
As previously mentioned regarding solvency, accounting equity increased by almost 10,000 million in the last twelve months, thanks to a prudent policy of profit capitalization and recourse to capital markets. The balance thus increased by 7% annually, a percentage almost double that of the balance sheet.
Regarding the consolidated income statement, Spanish banking groups achieved net interest income of 50,725 million euros, representing an increase of almost 2% over the amount achieved in 2010 and maintaining return on average total assets (ROATA) at 2.23%, only one basis point lower. All of this occurred with average total assets (ATA) 2.7% higher than those managed during 2010.
Higher net income from commissions and financial transaction results from the trading portfolio failed to offset lower income from exchange rate differences and sales of financial instruments from other portfolios. The gross margin was 0.4% lower in amount and 10 basis points lower in ROATA (3.32%).
Operating expenses increased by 8.6%, partly explained by the incorporation of some foreign subsidiaries into the consolidation scope and by adjustments in consolidated groups. Consequently, the efficiency ratio stood at 47.6% as of December 2011.
Provisions (27,533 million) increased by 20% compared to the significant effort made in 2010 and deducted 18 basis points from ROATA. They alone account for two-thirds of the decline in profitability in the final result for the year.
After considering corporate income tax and lower extraordinary results, the consolidated profit totaled 8,295 million, 41% lower than that obtained in 2010. ROATA decreased by 27 basis points, and attributable ROE stood at 5.6%.
Regarding individual balance sheets, their aggregated sum amounted to 1,528,428 million as of December 31, 2011, a 3.3% increase from a year earlier. On the liabilities side, a 5.4% decrease in customer deposits (39,036 million less) and an 8% reduction in issued securities are noteworthy. Both declines are offset by the borrowing position from central banks and credit institutions, which increased by 60,434 million.
On the asset side, customer loans, in individual balance sheets, decreased by 20,944 million, 2.4% lower than the balance existing in December 2010. The non-performing loan ratio stood at 6.68% as of December 2011, with a coverage ratio of 52%.
In the individual account, the rise in financial costs coincided with a poorer performance of commissions and results from financial operations and exchange rate differences. All of this translated into a 9.8% drop in net interest income and a 9.1% drop in gross margin. Operating expenses remained contained, with a 2% increase, and provisions rose by 7%. The profit of Spanish banks amounted to 4,378 million, 48% lower than that achieved in 2010.
