8

Segment information

The objective of business segment reporting is to allow internal supervision and management of the Group’s activity and profits. The information is broken down into several lines of business according to the Group’s organisation and structure. The segments are defined and segregated taking into account the inherent risks and management characteristics of each one, based on the basic business units which have accounting and management figures.

The following is applied to create them: i) the same presentation principles are applied as those used in Group management information, and ii) the same accounting principles and policies as those used to prepare the financial statements.

After the sale of 80% of the real estate business in December 2018, starting from 2019 the non-core real estate business will no longer be reported separately, integrating the remaining assets in the Banking and Insurance business, with the exception of the stake in Coral Homes, SLU (Coral Homes), which is assigned to the Equity Investment business. For comparative purposes, the 2018 and 2017 information is presented aggregating both segments.

As a result, the Group is made up of the following business segments:

1. Banking and insurance

Includes the results of the banking business (retail, corporate and institutional banking, cash management and markets), together with the insurance business and asset management, primarily carried out in Spain through the branch network and the other complementary channels. It covers the activity and results generated by the Group's customers, as well as management of liquidity and the Assets and Liabilities Committee, income from financing the other businesses and the corporate centre. In addition, it includes the businesses acquired by CaixaBank from BPI during 2018 (i.e. insurance, asset management, and cards).

The insurance and banking business is presented in a unified way consistent with the joint business and risk management, since it is a comprehensive business model within a regulatory framework that shares similar monitoring and accounting objectives. The Group markets insurance products, in addition to the other financial products, through its business network with the same client base, because the majority of the insurance products offer savings alternatives (life-savings and pensions) to the banking products (savings and investment funds).

2. Equity investments

Includes income from dividends and/or profit from banks accounted for using the equity method, net of financing costs, from the interests and gains/(losses) on financial assets and liabilities held in Erste Group Bank, Repsol SA (Repsol), Telefónica SA (Telefónica), Banco Fomento de Angola, SA (BFA) and Banco Comercial e de Investimentos, SA (BCI). From 1 January 2019 the 20% stake in Coral Homes is added to this segment, after the sale of the real estate business at the end of December 2018. Similarly, it includes the significant impacts on income of other relevant stakes acquired in various sectors.

It includes the stakes in BFA, which after reassessing the significant influence at year-end 2018 is classified as Financial assets at fair value with changes in other comprehensive income, and in Repsol, until completing its sale in the second quarter of 2019.

3. BPI

Covers the income from the BPI's domestic banking business, essentially in Portugal. The income statement includes the reversion of the adjustments resulting from the application of fair value to the assets and liabilities in the business combination. Furthermore, it excludes the financial statement and equity capital associated with BPI’s assets assigned to the aforementioned equity business (essentially BFA and BCI).

The operating expenses of these business segments include both direct and indirect costs, which are assigned according to internal distribution methods.

In 2019, the allocation of capital to the equity investment business has been adapted to the Group's capital corporate objective of maintaining a fully-loaded Common Equity Tier 1 (CET1) ratio of 12%, taking into account both the 12% consumption of capital for risk-weighted assets (11% in 2018) and any applicable deductions.

The allocation of capital to BPI is at sub-consolidated level, i.e. taking into account the subsidiary's own funds. The capital consumed in BPI by the investees allocated to the investment business is allocated consistently to this business.

The difference between the Group’s total shareholders' equity and the capital assigned to the other businesses is attributed to the banking and insurance business, which includes the Group’s corporate centre.

The performance of the Group by business segment is shown below:

Consolidated statement of profit or loss of the caixabank group - by business segment (Millions of euros)

Banking and insurance business *

Investments

BPI

2019

2018

2017

Of which insurance

Of which insurance

Of which insurance

2019

2018

2017

2019

2018

2017

Net interest icome

4,659

316

4,659

305

4,532

306

(124)

(149)

(168)

416

397

382

Dividend income and share of profit/(loss) of entities accounted for using the equity method **

232

192

220

171

223

156

335

746

416

21

6

14

Net fee and commission income

2,340

(68)

2,303

(124)

2,223

(103)

258

280

276

Gains/(losses) on financial assets and liabilities and others

239

57

219

1

304

64

35

11

(44)

24

48

23

Income and expenses under insurance and reinsurance contracts

556

556

551

551

471

472

Other operating income and expense

(369)

79

(498)

51

(412)

31

(17)

(26)

(18)

Gross income

7,657

1,132

7,454

955

7,341

926

246

608

204

702

705

677

Administrative expenses

(4,803)

(99)

(3.813)

(87)

(3,644)

(73)

(4)

(4)

(4)

(397)

(436)

(502)

Depreciation and amortisation

(479)

(22)

(368)

(21)

(391)

(41)

(67)

(37)

(36)

Pre-impairment income

2,375

1,011

3,273

847

3,306

812

242

604

200

238

232

139

Impairment losses on financial assets and other provisions

(811)

(673)

1

(1,744)

4

200

106

29

Net operating income/(loss)

1,564

1,011

2,600

848

1,562

812

242

604

204

438

338

168

Gains/(losses) on disposal of assets and others

(169)

(179)

1

160

(607)

5

2

51

(1)

Profit/(loss) before tax from continuing operations

1,395

1,011

2,421

849

1,722

812

242

(3)

209

440

389

167

Income tax

(332)

(216)

(695)

(186)

(381)

(178)

71

90

49

(108)

(107)

(46)

Profit/loss) after tax from continuing operations

1,063

795

1,726

663

1,341

634

313

87

258

332

282

121

Profit/(loss) attributable to minority interests

3

57

6

33

13

20

17

Profit/(loss) attributable to the group

1,060

795

1,669

663

1,335

634

313

54

245

332

262

104

Total assets

355,416

76,116

350,783

66,244

347,425

64,016

4,554

4,685

6,894

31,444

31,078

28,817

Of which: positions in sovereign debt

91,549

56,702

87,786

49,247

81,254

47,068

4,637

3,307

3,727

(*) In 2017 this segment includes the impact of the business combination resulting from the acquisition of Banco BPI, as it derived from a corporate operation.

(**) Insurance business includes the contribution of the stake in SegurCaixa Adeslas.

The banking and insurance businesses have an integrated Banking-Insurance management model. Under a regulatory framework with similar accounting and supervision objectives, sales and risks are managed jointly, as the model is integrated. The results of the Banking-Insurance business are presented as a single business segment in the segment reporting because of this integrated Banking-Insurance management model.

The income of the Group by segment, geographical area and distribution of ordinary income is as follows:

Distribution of interest and similar income by geographical area (Millions of euros)

CaixaBank

CaixaBank Group

2019

2018

2017

2019

2018

2017

Domestic market

4,104

4,266

4,277

6,540

6,458

6,551

International market

48

23

20

515

488

420

European Union

43

19

16

510

484

403

Eurozone

9

0

0

476

465

387

Non-eurozone

34

19

16

34

19

16

Other countries

5

4

4

5

4

17

Total

4,152

4,289

4,297

7,055

6,946

6,971

Distribution of ordinary income * (Millions of euros)

Ordinary income from customers

Ordinary income between segments

Total ordinary income

2019

2018

2017

2019

2018

2017

2019

2018

2017

Banking and insurance

11,345

11,071

10,964

138

160

176

11,483

11,231

11,140

Spain

11,170

10,981

10,941

138

160

176

11,308

11,141

11,117

Other countries

175

90

23

175

90

23

Equity Investments

370

758

372

370

758

372

Spain

106

347

239

106

347

239

Other countries

264

411

133

264

411

133

BPI

757

820

776

64

60

5

821

880

781

Portugal/Spain

749

812

734

64

60

5

813

872

739

Other countries

8

8

42

8

8

42

Ordinary adjustments and eliminations between segments

(202)

(220)

(181)

(202)

(220)

(181)

Total

12,472

12,649

12,112

0

0

0

12,472

12,649

12,112

(*) Corresponding to the following items in the Group's public statement of profit or loss.

1. Interest income.

2. Dividend income.

3. Share of profit/(loss) of entities accounted for using the equity method.

4. Fee and commission income.

5. Gains/(losses) on derecognition of financial assets and liabilities not measured at fair value through profit or loss, net.

6. Gains/(losses) on financial assets and liabilities held for trading, net.

7. Gains/(losses) on assets not designated for trading compulsorily measured at fair value through profit or loss, net.

8. Gains/(losses) on financial assets and liabilities designated at fair value through profit or loss, net.

9. Gains/(losses) from hedge accounting, net.

10. Other operating income.

11. Income from assets under insurance and reinsurance contracts.