Integrated Corporate Report 2017
STRATEGIC LINE 3
To manage capital actively, anticipating new regulatory requirements.
To maintain a policy of high and stable dividends (minimum cash pay-out of around 50% of profits).
To reduce unproductive assets (non-performing loans and foreclosed assets).
CaixaBank continued to anticipate and adapt to the capital requirements set down by regulatory bodies. In 2017, the bank completed various issuances of subordinated instruments, including its first placements of contingent convertibles and non-preferred senior debt, all of which enabled it to strengthen its capital ratios. The Common Equity Tier 1 (CET1) and total capital ratios, both fully-loaded, came in at 11.7% and 15.7%, respectively, in December 2017, comfortably higher than the minimum prudential requirements.
In the second half of the year, the European Central Bank, as the bank’s supervisory authority, approved the prudential deconsolidation of CaixaBank and CriteriaCaixa, and began to apply its capital adequacy and liquidity requirements to CaixaBank alone.
The bank has continued to pursue its strategic objective of reducing the volume of non-performing assets. Excluding BPI, the balance of non-performing loans has fallen by more than €1,600 million in the year, to €13,086 million, due, above all, to the fall in new defaults and sales of real estate portfolios. Further, intensive commercial efforts (sales and rentals of real estate assets) enabled the Bank to continue reducing its available-for-sale foreclosed assets. Proceeds on sales of these assets have improved in response to higher levels of coverage and the gradual recovery of the real estate sector.
Reducing these assets as quickly as possible is a key strategic priority. As a result various significant actions were taken in 2017, including enhancing the management of non-performing loans by the network and sales of foreclosed real estate assets.
Reducing instances of default and the volume of foreclosed real estate assets.
Anticipating new regulatory requirements relating to solvency.
To foster the highest quality in regulatory, risk and management information.
At 31 December 2017, CaixaBank’s fully loaded CET1 ratio stood at 11.7%; its Tier 1 ratio at 12.3%; its total capital ratio at 15.7%; and its leverage ratio at 5.3%. According to the criteria in force in 2017 for the phased-in implementation, regulatory capital and leverage were: CET1 of 12.7%, Tier 1 of 12.8%, total capital of 16.1%, and leverage ratio of 5.6%.
Fully loaded risk weighted assets totalled €148,695 million.
The European Central Bank (ECB) and the national supervisor require the CaixaBank Group to maintain regulatory CET1, Tier 1 and total capital ratios of 7.375%, 8.875% and 10.875%, respectively, at 31 December 2017 (including the phased-in implementation of the capital conservation and systemic risk buffers), which climb to 8.75%, 10.25% and 12.25% in a fully-loaded approach. Due to the transitional application of buffers, the regulatory requirements for 2018 are 8.063% for CET1, 9.563% for Tier 1 and 11.563% for Total Capital. These requirements remain unchanged in 2018 on a fully loaded basis. The CaixaBank Group’s current ratios show that the requirements imposed on the Group will not trigger any of the automatic restrictions envisaged in applicable capital adequacy regulations relating to payouts of dividends, variable remuneration and interest to holders of additional Tier 1 capital instruments.
This brought the NPL ratio at 31 December 2017 to 6.0% (-0.9 percentage points vs. 2016).
CaixaBank’s non-performing loans (NPL) fell by €1,668 million in the year.
The main risk segment - lending to individuals for house purchases - features a very diversified portfolio, with good collateral and a low NPL ratio (4.2%).
2017 saw a continuation of the downwards trend in exposure to the real estate development sector, which fell by 11.5%.
Finished homes account for 63.5% of the portfolio.
Coverage for non-performing assets in this segment stands at 44%.
The underlying principle guiding CaixaBank’s management of non-performing assets is to help borrowers meet their obligations. When the borrower no longer appears to be reasonably able to fulfil these obligations, foreclosure proceedings are initiated.
Decrease in the carrying amount of available-for-sale foreclosed assets to €5,878 million (-€378 million vs. 2016). The coverage ratio remains unchanged at 58%.
In addition, real estate assets held for lease amounted to €3,030 million, net of provisions. The occupation rate for this portfolio is 88%.
Total properties rented or sold amounted to €1,694 million in 2017, with positive returns from sales in the year (20% of net carrying amount). The composition of the portfolio of available-for-sale foreclosed real estate assets, 57% of which is finished buildings, is a unique factor aiding in the sale of these properties on the market.
