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Report BFA - Bankia 2014 / Accomplishing our plansStrategic Plan

  • Capital raised
    €4.48 Bn
  • Liquidity generated
    €36.37 Bn
  • Sales
  • Income from sales
    €5.50 Bn
  • Divestments
    €58.91 Bn
  • Assets
    €242.47 Bn

During 2014, the BFA-Bankia Group fulfilled the vast majority of the objectives in the Strategic Plan for the end of 2015. Goals such as streamlining the institution, generating liquidity, making efficiency gains and divesting non-core assets were hit more than a year ahead of the planned dates agreed with the authorities.

The bank’s performance also prompted the process of privatising Bankia and repaying the aid received from the State. Although the recapitalisation process finished in May 2013 with Bankia receiving a capital injection of 10.62 billion euros, just nine months later in February 2014, BFA sold 7.5% of the institution for 1.30 billion euros, generating a net gain of 301 million euros.

This show of confidence by the markets was accompanied by a senior debt issue in January 2014 of 1 billion euros, and another of subordinated debt for the same amount in May last year.

The year drew to a close with the publication of the results of the stress tests conducted by the European Central Bank (ECB) and the European Banking Authority (EBA). These stress tests demonstrated the BFA-Bankia Group’s capacity to maintain high levels of solvency even in considerably adverse economic scenarios.

Corporate governance and principles

Another of Bankia’s constant goals is to enhance its corporate governance. As part of this process, José Sevilla (who had previously been an executive director and Bankia’s General Manager of the Chairman’s Office) was appointed Chief Executive Officer in June 2014.

Antonio Ortega, the bank’s General Director of People, Resources and Technology, was appointed executive director, while Fernando Sobrini, Deputy General Director of Retail Banking, and Gonzalo Alcubilla, Deputy General Director of Business Banking, joined the Management Committee.

It was also decided in October 2014 to split the Appointments and Remuneration Committee in two. The Risk Advisory Committee was also established. The three committees are solely comprised of independent directors.

Moreover, among measures to enhance corporate governance, in March, Bankia’s General Meeting of Shareholders resolved to boost the rights of minority shareholders by reducing the minimum percentage ownership interest required to receive a supplement for attending the General Meeting and the right to information.

The General Meeting was also conferred a number of powers that cannot be delegated. With regard to the Board of Directors and directors, shareholders defined at the aforesaid General Meeting the Board’s powers that cannot be delegated, reduced board member’s terms of office from six to four years, and established that any board members serving for more than 12 years would step down as independent directors.

These changes represent another step in bolstering the group’s corporate governance, paving the way to achieve the objectives for transforming Bankia and further engaging the bank’s business units in the decision-making process.

Faultless ethical and professional conduct is crucial to excellent corporate governance. Bankia’s Management Committee and Board of Directors have therefore notified the judicial and regulatory authorities of any transactions breaching banking orthodoxy detected by the institution’s staff. Over 30 transactions at Bankia relating to former executives of the savings banks that were merged to create Bankia have been reported to the various authorities.

Targets hit

Restructuring plan earmarked for completion at year-end 2015 has been fulfilled over 12 months ahead of schedule.

The BFA-Bankia Group had agreed with the European and Spanish authorities a demanding Restructuring Plan to be completed by the end of 2015. Nonetheless, the main adjustment goals have been reached more than 12 months earlier.

The aim of cutting the number of branches to around 2,000 had already been met in 2013, while the workforce was resized in 2014 to below 14,500 people. This measure was designed to preserve as many jobs as possible by selling off affiliates or outsourcing in order to retain posts.

Efficiency ratio 4Q 2014The BFA-Bankia Group had set itself the challenge of reducing total assets to below 252.2 billion euros by the end of 2015. Twelve months early, this goal was reached at 31 December 2014 after assets were decreased to 242.47 billion euros.

Access to the markets, the improved economic climate in Spain, and investor appetite to acquire assets in our country have led to the bank carrying out more divestments of non-core assets than initially planned. Starting with an asset divestment target of 50 billion euros, divestments of 58.91 billion euros had already been made by year-end 2014.

Throughout 2014, for example, the BFA-Bankia Group: sold its stake in Iberdrola, generating income of over 1.5 billion euros; completed the sale of its Mapfre shares, bringing in over 1.2 billion euros; and divested stakes in NH Hoteles, Metrovacesa and Deoleo, generating additional liquidity of 360 million euros.

Over the two years of executing the Strategic Plan, the Group has divested stakes in over 330 companies, around 200 of which were financial or industrial and a further 130, real-estate businesses. Accumulated income from these sales exceeded 5.5 billion euros.

Bankia has also been successful in selling off loan books, most of which non-performing. By year-end 2014, it had sold off loan books valued at close to 10 billion euros.

The non-core asset divestments and gains there from have helped bolster the bank’s liquidity and solvency.

In terms of liquidity, customer confidence in Bankia has led to an increase in deposits at the institution which, along with the balance sheet deleveraging, has generated liquidity of over 36 billion euros in 2013 and 2014. In other words, the target of generating 28.8 billion of liquidity between 2013 and 2015 has been smashed in just two years.

Turning to capital, the results obtained and reduction in risk assets have seen the BFA-Bankia group generate a total of 4.48 billion euros. 84% of the target for the three years has therefore been hit in just 24 months. Moreover, stripping out the extraordinary provision to cover any potential contingencies from the civil cases related with the 2011 IPO, the goal to generate 5.4 billion euros of capital for the 2013-2015 period would already have been reached in 2014.

Balance sheet






Progress in driving up profitability has been significant. After cleaning up the balance sheet in 2012, the bank obtained a return on equity (ROE) of 5.6% in 2013. 2014 earnings totalled 747 million euros, raising profitability to 6.6% (8.6%, stripping out the effect of extraordinary provisions). Bankia is therefore on track to achieve a 10% ROE in 2015 and therefore meet the target the bank had committed to.

Profitability is key to generating value; increasing Bankia’s share price and therefore, enabling taxpayers to recover the public aid granted to the institution.

The improved efficiency ratio is one factor contributing to the uptick in the bank’s profitability. Bankia had to spend more than 63 euros to generate 100 euros in revenue in 2012. The bank then set about reducing this expense to below 45 euros by the end of 2015. At year-end 2014, however, this goal had already been reached and the efficiency ratio stood at 43.7%. Nevertheless, the aim is to continue to bring this down further.

The enhanced quality of the balance sheet has also enabled us to reduce provisions and hit the 2015 targets early. Despite the high levels of loans in default from the past, Bankia committed to bringing its risk premium (volume of provisions over loans) down to 0.5% by the end of 2015. Once again, this objective was achieved a year early, with the risk premium standing at 0.5% by the fourth quarter of 2014.

Looking at new finance, Bankia awarded loans and advances to customers of close to 30 billion euros in the first two years of its Strategic Plan, over three-quarters of which were to the self-employed, SMEs and corporations. In short, the BFA-Bankia Group’s staff have worked responsibly over the last two years to hit ahead of schedule all the targets for year-end 2015 agreed with the European and Spanish authorities.

That said, the institution is aware that there is still a way to go and more work to be done in 2015.