Growth in the banking business, driven by higher recurring revenues, combined with the decline in non-performing assets, contributed to improving the Grupo Cooperativo Cajamar balance sheet in the third quarter of the year. The statement of profit and loss likewise shows how the Group has continued placing priority on improving the quality of its balance sheet, allocating part of the income obtained to impairment losses on financial and non-financial assets, specifically €261 million, bringing consolidated net profit to €78.9 million, 26.5% higher in year-on-year terms, in line with the Group's projections.
Further improvement was achieved in asset quality with a decrease in non-performing assets, which recorded a €310 million decline in non-performing loans, now 22% below the level recorded in the same period of the previous year. A key transaction in this respect was the September sale of the Ostende portfolio of assets written off, with a gross book value of €703 million. All of this combined to bring the NPL ratio down one percentage point to 2.9%, below the sector average. Net foreclosed assets in turn were down by €353 million and are now 35.2% below the level recorded in the third quarter of 2021. At the same time, the coverage of non-performing assets was growing stronger: the NPL coverage ratio rose to 73.2%, and the foreclosed assets coverage ratio to 65.7%, after including the haircuts incurred in foreclosure procedures.
Good business performance, supported by higher lending and the rate curve, drove the quarterly yield on loans and advances 11.1% higher, even though net interest income year-on-year recorded a drop of 4.4%, impacted by the reassessment of interest in the financing extended by the ECB through the TLTRO-3 programme facility in the second quarter of 2020 in the amount of €25 million. Without considering the TLTRO-3 remuneration, quarterly net interest income was up 25.1% over the same quarter one year earlier, and including that remuneration the quarterly gain was 5.2% year-on-year.
Meanwhile, the expansion of the customer base to 3.7 million and increase in cross-selling drove fee and commission income 19.6% higher year-on-year to €198 million, especially in disintermediation fees (insurance, investment funds, pension plans and consumer finance).
Gross income totalled €836 million, down from the same period of the previous year, due to a 71.9% drop in net trading income (NTI) and the above-mentioned recalibration of the TLTRO-3 facility. Stripping out this effect, gross income at 30 September was up 2.4% and 11.5%, respectively.
The cost-to-income ratio stands at 53.6%, reflecting the optimisation of operating expenses, which rose less than inflation, and stand at less than 1% of Average Total Assets (ATAs).
In the image, the interior of a Grupo Cajamar branch.
Successful marketing of the Group's products and services is reflected in year-on-year growth of 9.9% in total assets, which reached €63,273 million, and the increase in the total volume of business managed to €97,835 million.
Customer funds under management rose €2,546 million, 5.7% higher year-on-year, to €47,012 million, mainly driven by the 10.4% increase in sight deposits and 3.3% gain in investment fund assets managed, with a lower impact of market volatility than in the rest of the sectors.
Performing loans to customers grew 5.6% to €35,035 million, led by lending to strategic sectors such as agri-food, which recorded an increase of 6.9%, and companies, where lending was up 5.2%.
It also bears emphasis that Grupo Cajamar has a diversified loan book, with households accounting for 36.5%, the agri-food sector 18.6% and businesses 28.4%; the exposure to Russia is not significant, accounting for only 0.03% of the loan book.
Thanks to buoyant sales activity, the Group continues to widen its domestic market shares, which now stand at 2.9% in investment and 2.6% in deposits.
As regards the financial solutions that the Group delivers and the payment flexibility policy offered to customers facing temporary difficulties as a result of the pandemic, the volume of ICO guarantee loans continued to decline, down to €1,536 million, accounting for 4.2% of the total; with 95.1% of the transactions classified in the performing portfolio.
Preferential attention to seniors and disabled persons
On a year-on-year basis, the number of customers grew to 3.7 million and the number of members is now over 1.6 million. They are served face-to-face by 5,254 professionals in 868 branches, 30% of which are in municipalities with fewer than 5,000 inhabitants. During this quarter two new branches were opened in Conil de la Frontera (Cádiz) and Pontevedra.
To protect vulnerable groups from financial exclusion, and in response to the financial needs of smaller rural communities, the Cajamar cooperative bank has 158 agencies and six mobile branches (vehicles travelling from place to place), and has taken up new ways of delivering financial services to senior citizens and disabled persons, both in the branch and agency networks and through the free 900 telephone number exclusively dedicated to these customers. These are complemented by new media and resources that facilitate access to the electronic banking services, app and ATMs, with special designs, in addition to the Senior Digital School in which digitally proficient Grupo Cajamar inform and train customers in the use of the media and channels at their disposal, and provide them with basic advice on cybersecurity.
In addition, the digital banking, electronic banking, and mobile banking channels, together with the 1,517 ATMS operated by Grupo Cajamar now have more than one million digital customers, 8.7% more than one year earlier, and 555,000 of whom are Bizum users, an increase of 16.6% from one year ago.
Grupo Cajamar maintains its position in the Net Promoter Score (NPS) recommendation indicators used to measure customer satisfaction in the financial sector. And the STIGA indicators place Cajamar above the sector average in the cumulative benchmarking study for the third quarter of 2022. The Group now stands fifth in the NPS metric and third in the ranking that measures satisfaction with account managers.
Solvency and liquidity
The solvency ratio stands at 15.5%, with a phased-in CET1 ratio of 13.1% and fully loaded ratio of 12.9%, easily meeting all regulatory requirements, with a buffer of €685 million in the phased-in ratio and of €630 million for CET1/AT1.
According to its commitment to sustainable development, in September Grupo Cooperativo Cajamar carried out its first ESG debt issue of €500 million in senior preferred social bonds. The capital raised will be used to finance social economy enterprises and projects promoting economic and social development, as mandated by the Group's Sustainable Bonds Framework. This issue has also contributed to lifting the MREL ratio to 20.1%, a full 1.6 percentage points higher than the MREL requirements stipulated by the supervisor for 1 January 2023.
At the same time, continued growth in customer deposits brought further improvement in the loan-to-deposit ratio (LTD), which now stands at 84.5%, 0.4 percentage points below the level recorded in the same period of 2021.
Grupo Cooperativo Cajamar also has adequate liquidity levels with available liquid assets of €12,023 million, including both high-quality liquid assets (HQLA) and other discountable liquid assets and central bank deposits. Moreover, it has mortgage covered bond issuance capacity of de €3,444 million. With these resources it easily meets the requirements set by the European Banking Authority, with a liquidity coverage ratio (LCR) of 160.9% and a net stable funding ratio (NSFR) of 139%.
Grupo Cooperativo Cajamar remains a Top Rated enterprise in the Sustainalytics ranking, having received that highest distinction in 2022 that places it among the top 50 companies with the highest rating for environmental, social and governance (ESG) risk management. This recognition comprises three distinctive badges that place it among the top performers at global (ESG Global 50), regional (ESG Regional – European) and industry (ESG Industry – Banking) level, according to the Sustainalytics ESG Risk Rating report.
Grupo Cooperativo Cajamar belongs to different organisations working to promote sustainable finance and the fight against climate change. It is an adherent to the Principles of the United Nations Global Compact, member of the UNEP FI, founding signatory to the Responsible Banking Principles and has recently adhered to the Net Zero Banking Alliance (NZBA) initiative as part of the United Nations Environment Programme Finance Initiative (UNEP FI). Grupo Cajamar also reports its carbon footprint to the Carbon Disclosure Project (CDP) and supports and follows the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) in sustainable finance matters. Other initiatives embraced by Cajamar include Science Based Target, in which it commits to setting Net Zero emissions reduction targets.
Grupo Cajamar's cooperative banking model and its dedication to supporting people, businesses and local economies are grounded in a sustainability policy based on its environmental, social and governance commitments. The goal of the Sustainable Finance Master Plan is to consolidate and strengthen its sustainability culture and contribute to charting a decarbonisation roadmap to cut CO2 emissions to zero by 2050, and partner with its members and customers as they transition to a low-carbon economy. At 30 September 2022, 28.8% of its loans and receivables are associated with environmental mitigation activities and 28.5% with adaptation activities, and the Group has included a sustainability section in its new lending activities.
The funds raised with the issue of €500 million of social bonds will be used for local economic and social development projects that combat situations of social exclusion and support job creation and protect employment in economically depressed areas. The Sustainable Bonds Framework, under which it plans to issue green and/or sustainable bonds, is focused on promoting sustainable agriculture, renewable energies and sustainable construction and mobility. The Framework also sets out criteria for exclusion, assessment strategies and undesired associations, with a series of exclusions for an ecological and ethical transition.
Grupo Cooperativo Cajamar is the bank of choice for the agri-food sector, with a domestic market share in the primary sector (agriculture, fishing and livestock) of 15.2%, to which it offers specialised financial products and services, as well as technical advice and knowledge transfer programmes for businesses, cooperatives and producers to help improve their competitiveness and information management.
Through the Plataforma Tierra, Cajamar supports and promotes actions to foster innovation, digitisation and sustainability in the agri-food sector, through research, investigation and testing in its experimental centres in Almería and Valencia, having conducted 67 visits and knowledge transfer events, both face-to-face and online, with the participation of more than 7,200 persons.
Grupo Cajamar has also taken part in international and national trade fairs, such as Fruit Logistica, Fruit Attraction, Alimentaria, Meat Attraction, Agroexpo and FIMA, among others, accompanying agri-food companies to support their promotion and national and international expansion. It has participated in organising business forums and meetings, creating awareness of the challenges facing Spanish companies and the opportunities afforded by the Next Generation European funds to modernise and innovate in their business.
Grupo Cajamar continues sharing knowledge with the business community and society in general with new publications. In the first nine months of the year it has brought out seven new books, highlighted by ‘Sustainability indicators in the agri-food sector’; ‘Sustainable and innovative wine tourism. Success models around the world’, which was recognised by the International Organisations of Vine and Wine as best publication in the ‘Vitivinicultura Economy’ category, and ‘The dairy sector in Spain’, in addition to 175 articles and 34 reports on markets and subsectors.
In addition, Cajamar Innova, an incubator of high-tech businesses in water management, continued carrying out its activities to support innovation-based companies and start-ups and enhance the viability of projects that can deliver effective water management solutions. To date 68 initiatives have signed up for these support programmes.