Unicaja Banco (Madrid:UNI) Q3 2026 Earnings Call

0:00 Good morning and thank you for joining us for our third quarter results presentation. Before we begin, I would like to confirm that we published this presentation and the rest of financial information on the CNNV and our corporate website earlier this morning before the market opened. As usual for our third quarter results, our chief financial officer, Pablo González, will take you through the presentation today. This will take around 25 minutes. Follow it by our usual Q&A session. So, without further ado, I will hand over to Pablo.

0:33 Thank you very much, Jaime. I will start on page three, where we show the main highlights of the quarter. Starting with our business activity, I would highlight that business volume growth has accelerated to almost 5%. Thank you very much. Cedric Blanchetiere Asset quality continues to show positive trends one more quarter.

1:48 The NPL balances fell 15% year-on-year, leaving the NPL ratio at 1.8%, and its coverage improved further to 85%, significantly above the 74% reached a year ago. The cost of risk also remained positive at 19 basis points. Lastly, on solvency and shareholder remuneration, we are announcing today a second interim dividend of 6.4 cents that will be paid next 17th of December. This will leave 2026 interim dividends at 382 million euros, which is 126% above last year.

2:43 Our seed 1 fell in the quarter to 15.5% due to the impact from valuation adjustments, higher risk-weighted assets, and the accrual of our 95% payout ratio. A strong solvency position that supports the high level of shareholder remuneration. Finally, let me highlight that our tangible book value per share adjusted for dividends grew 10% year-on-year to 2.62 euros. In summary, there were positive trends in the quarter, confirming the acceleration of commercial activity that will continue to improve our results.

3:28 During last months, interest rate movement was impressive. In the short term, our sensitivity to rates is very small because our liabilities reprice faster than our assets. But as time goes by, more assets will be repriced at higher rates, supporting positive revenue trends in the future. In slide 4, we confirm this morning. For 2026, we have decided to pay around 25% of net income in what we call additional remuneration, something that together with the ordinary dividends will leave the payout at 95%.

4:13 That is why we are announcing today a cash dividend of 6.42 euros in December. It is the second interim dividend of this year and together with the ordinary dividend that we will pay in April after the AGM. Jose Ramon Sanchez Serrano and the higher payout, something that is possible because of our best-in-class solvency position.

5:10 If we move now to page 5, you will find some of the steps that we are taking in the execution of our strategic plan, where innovation, customer focus and diversification of revenues are the three main levers. Starting with innovation, we have already explained to you in previous quarters the work that we are doing on conversational banking supported by market leaders like Nvidia or Google Cloud. During last months, we have also made a lot of progress with Rosetta, which is Unicaja's technology knowledge and AI platform, integrating code, Thank you very much.

6:20 On the customer focus, we have increased our payroll market share from 4.2% to 4.7% over the last 12 months. We have also improved a lot our NPS, which is partially explained by the strategy followed with our loyalty campaigns that has a short-term impact in banking fees, but that we believe that will be much more positive in the long term. Let me also highlight that we have more than 1 million clients using Bithum with us, which is the most relevant instant payment app in Spain, with around 800,000 clients using it every month. In terms of commercial activity, I would also highlight that we are growing at a very positive rate in some of the strategic segments and products, like incorporate loans, consumer, and mutual funds. All in all, a very positive trend that is a consequence of the execution of our strategic plan.

7:31 I will continue with the commercial activity on page seven. As you can see, total customer funds increased by 4.6% year on year. Thank you very much. On the next page, you can see the details regarding our assets under management and insurance business.

8:22 As highlighted in the previous slide, assets under management increased by 10% year over year, with mutual funds showing particularly strong growth of 14%. Despite a challenging environment in this quarter, net influx continued to grow and reach 1.6 billion euros, representing a 15% market share. Living Unicaja as the second asset under management company with the highest net inflows year to date. On the right side, we show the revenues from these two businesses, which have risen by 9% compared to last year and account for 19% of total revenues.

9:11 In page 9, you have lending trends. As you can see, loan volumes grew year on year in all segments. Total performing loans were 5% above September 2025. Corporate loans grew 11% and household loans grew In household, while consumer trends remain strong, mortgages balances grew 2% year-on-year, showing more stable trends owing to the strong competition. In quarterly terms, private sector loans grew 1.2% when excluding the seasonal advances of the second quarter.

9:58 On page 10, you can find the details regarding new loan production. During the first nine months of the year, new loan production reached 8.1 billion, 12% above 2025. New corporate lending was very stable at around 4.5 billion, However, in household, new lending improved around 30% year-to-date and in quarterly terms, third quarter 26 also showed positive performance compared with the same quarter of last year. The next slide highlights the strong progress we're making in our ESG strategy this quarter.

10:43 Starting with sustainable business, The ESG corporate portfolio has grown by 16% this year, and regarding responsible investments, 79% of the mutual funds are classified as Article 8 or 9. On the social side, our commitment remains a key priority. This quarter we carried out 17 volunteering activities and a Dufinet project to promote financial education had close to 25,000 beneficiaries in the first nine months of the year. We continue to finance green buildings and renewable energy through our green bond framework, with eligible collateral that has grown by 92% since our first green bond issuance in 2022.

11:36 Finally, we continue our decarbonization pathway with six portfolio targets on track, covering 80% of our private sector loans. We now continue with the review of the P&L in the next session, in slide 13. Net interest income grew 3.5% quarter on quarter, helped by the ongoing repricing of assets that more than compensated the increase in the cost of deposits. Fees fell 3.8% in the quarter, mainly because of lower banking fees following the additional implementation of loyalty plans at the beginning of the quarter. In cumulative terms, net interest income grew 3% in the first nine months of the year, while fees improved by 1%.

12:37 Thank you very much. Now, let's review the P&L in details. Starting with the net interest margin on page 14, as we show in the slide, customer spreads bottomed in the second quarter of 26.

13:23 As you can see, it grew from 226 basis points to 228 basis points in the quarter, owing to a slightly higher increase in loan yields than in the cost of deposits. Thank you very much. Net interest margin also grew 7 basis points in the quarter to 180 basis points.

14:10 As you all know, in our case, the net interest margin is also a good reference for our commercial activity because we have a 70% loan-to-deposit ratio and the excess of retail funding is invested through our debt portfolio. On the following page, we show the breakdown of the quarterly evolution of net interest income. The 13 million euros growth was mainly explained by higher contribution from loans and the debt portfolio than more than offset the increase on the cost of deposits.

14:55 Deposit costs grew 11 million, while interest from loans increased by 16 million, and the debt portfolio and liquidity management explained the remaining 9 million. Thank you very much. As you can see in the bottom of the slide, since the end of 2024, we have increased the percentage of high engaged customers from 32% to 41%.

15:48 And as we mentioned before, we have improved the net promoter score significantly. And all this is a consequence, among others, of the loyalty programs that we have launched. These programs include lower transactional fees for more loyal clients, and as you can see in the bottom right, the percentage of clients benefited has grown from 22% to 53% in less than two years. This is a long term strategy similar to the investment that we are implementing in other segments and businesses that have a short term negative impact in P&L but will pay back in the future.

16:38 This strategy explains the dual trend mentioned in fees, with banking and transactional fees decreasing in the short term, but with non-banking fees with more value for clients, like the mutual funds and insurance, improving almost 12% year-on-year. This strategy is also what explains our low single digit to flat guidance in fees for the coming quarters. However, we believe that in the long term will allow us to enhance long term profitable relationship with more clients. In slide 17, we show you the details of the rest of revenues where all lines improved compared to 2025 except trading income, whose contribution decreases owing to market conditions.

17:32 Other revenues improvement is explained by several factors. Among others, there is a small positive one-off from affiliates, mainly from one of the hotel industry, and also a slightly lower real estate assets cost this quarter. Regarding total costs, personal expenses continue to grow due to the salary increases agreed with the unions and new hirings. Other administrative expenses growth is a consequence of the initiatives and investments that we are making in the context of our strategic plan. All in all, total costs grew 5% year-on-year, in line with our mid-single-digit guidance.

18:20 On the next page, we continue with the cost of risk and other provisions, which together with higher revenues are more than compensating the mentioned effort in costs and allow us to keep on reporting higher results. As you can see on the left-hand side, the cost of risk was stable at 19 basis points. Thank you very much. Thank you very much. Moving to page 20, you have the profitability trends where you can see that have improved significantly during the last couple of years. On the left, we compare the reported return on tangible equity with the one Thank you very much.

19:46 As you know, we consider the return on Seed 1 to be a reliable benchmark for us, as it effectively isolates this impact. In September, the return on Seed 1 adjusted for excess capital stood at 16.6%, that as you can see is well above the 11.1% that we had two years ago. On the right-hand side, you will also find our tangible book value per share plus dividends. The higher net income and dividends supported by our strong solvency position have allowed us to increase this metric by 10% in the last 12 months. Let's move now to the credit quality section on page 22.

20:35 As you can see on the slide, positive trends remain in place. NPLs are down 15% year-on-year with their coverage growing to 85%. Overall, NPAs are also down 22% year-on-year with coverage also improving to 83%. A very positive evolution that leaves total net problematic exposure at a symbolic 0.5%. Moving to solvency, on page 24, you have a quarterly breach. Seed 1 fell 28 basis points in the quarter owing to higher risk-weighted assets and valuation adjustments. The risk-weighted assets increase was mainly explained by the long growth and the commercial trends.

21:28 In the case of the valuation adjustments, the nine basis points impact is a consequence of the negative mark-to-market of our debt portfolio. However, this was partially offset by a positive impact from EDP, which had a seven basis points impact. All in all, seed one remained at a very comfortable level of 15.5% at the end of September. On the next page, you will find our solvency requirements and our MREL position. As you probably know, earlier this week we published our solvency requirements for 2027, including a 10 basis points lower Pillar 2 requirement.

22:15 As you can see on the left, this is the third year in a row that our Pillar 2 requirement has decreased, clear evidence of the improvement of the bank. Our MREL ratio stood at 26.6% at the end of the quarter, providing a substantial buffer above the key requirements listed on the right, including an MDA buffer that was higher than 620 basis points. In terms of liquidity, oil ratio remained among the highest in the sector, with the NSFR at 151% and the LCR at 239%. Finally, our loan-to-deposit was 71%, summarizing the excess of retail funding of the bank that, among others, explains the size of our structural ALCO portfolio that we show on the following page.

23:17 The yield of the portfolio continues to grow from 2.6 of last quarter and 2.6 of the same quarter last year to 2.8% at the end of this quarter. An improvement explained by the reinvestment and active management. Duration and size also presented a modest increase in the quarter. It is also worth noting that 82% is public debt and 84% is classified in the amortized cost portfolio. Finally, on page 28, we show you how current trends compare with our 2026 final year guidance.

24:03 We won't be providing 2027 guidance until the fourth quarter, 26. However, for 2026 all trends remain supportive. Net interest income is growing at 3% in line with our guidance. Total fees grew 1% owing to the loyalty programs that we have explained. A strategy that in the short term will leave net fees Thank you very much. Finally, net income grew 8% year-on-year, again a positive trend when compared to the mid-single-digit guidance.

25:07 All positive trends that are in line are slightly above our current guidance. Finally, let me finish on page 29 with some remarks. The execution of the strategic plan is working and is already showing some of the expected targets. Thank you very much. Thank you very much.

26:19 This concludes my quarterly update. Thank you very much. And I will hand now over to Jaime for the Q&A session. Thank you very much, Pablo. We will now begin with the Q&A session. Please remember to limit yourself to two questions and also kindly mute your line after asking your questions. Operator, please open the line for the first question. Thank you. Ladies and gentlemen, we will now begin the Q&A session. If you wish to ask the question, please press star 5 on your telephone keypad. If you change your mind, please press star 5 again. Please ensure that your device is unmuted locally before proceeding with your question.

27:05 And our first question comes from the line of Max Missing from JB Capital. Please go ahead.

27:13 Hello, good morning. Thank you very much for the presentation and taking our questions. Two from me, please. The first one is on growth in loan volumes. You seem to be growing in corporate segments and large corporates especially. Can you provide more color on the type of lending and how sustainable you think it is? And the second question is on the customer spread. Given the current interest rate curve, where do you think your customer spread can go in the coming quarters? Thank you.

27:43 Thank you, Max. Regarding the growth within our strategic plan, we have the view of diversifying our revenue source and increase our presence in corporates and consumer lending. And in that sense, we were focusing on improving the working capital share of wallet of our customer base. So we're mainly focusing on working capital lending and maintaining customer acquisition in the sense of trying to cover all the major industries and with the best performance of the corporates that we lend.

28:29 Thank you very much. We improved this quarter. I think the second quarter of this year was the bottom on the customer spread evolution and we expect this customer spread to keep growing in the following quarters for the next few, at least for the next year. Thank you, Max. Operator, please, can we keep on moving to the second question? Thank you. Next question comes from the line of Carlos Peixoto from CaixaBank BPI.

29:18 Please go ahead.

29:24 Yes. Hi. Good morning. So a couple of questions from my side as well. The first one would actually be on NII, and I recognize you don't provide Outlook for 2027, but I was just looking at concerns, which is now at 1.55 billion euros for next year, so slightly above the strategic plan targets. I just wanted to understand how comfortable are you with that, or if you think that concerns has become a bit overheated. Then, basically on fee income, I was just trying to understand if I understood correctly, you see fee income more towards flat to low single-digit growth versus the previous guidance of low single-digit growth, just to understand that.

30:13 That part, and then, sorry, just to follow up on what Max asked before, I just wanted to confirm that on the corporate lending growth that we've seen in this quarter, there isn't any one-off effect.

30:26 Thank you, Carlos. Regarding the NII, I think the NII should continue to grow as I mentioned due to the customer spread improving and volumes that you have seen have improved materially in the last few quarters and will keep improving in the future. So we have quite a positive view on the evolution on NAI. We are not going to give you guidance for 27. We will give the guidance in the final year result presentation. But what I can say is what I've been saying in a higher interest rate environment, We have implemented new loyalty programs That has an impact in transaction and typical banking fees, and these will be maintained in the coming quarters. Obviously, those programs are not for only one quarter.

31:48 They will be maintained throughout the year. So when I said low to flattish, I was referring to quarterly evolution of the fee income more than year on year. So it's not one-off, it's more a structural evolution of the fee because the trend for the coming years will be similar with improvement in wealth management fees, asset under management, mutual funds and insurance will keep growing at a very good pace as it has been happening so far, but also some stabilization going forward on the banking fees but from a lower level.

32:33 Thank you, Pablo. There was a follow-up on corporate lending that I can take. You were asking if there is a one-off in the quarter. There is not a one-off. Of course, there is some volatility. But if you can see during the last quarters, the trend in corporate lending has been improving quite a lot. And as Pablo was explaining in one of the previous answers, this is a consequence of some of the measures that we have taken as part of the strategic plan. Among others, we are more active in short-term financing and in working capital, as he was explaining, but this is not a specific one. So, please, operator, can we move to the following question? Next question comes from the line of Sophie Petersen from Goldman Sachs.

33:19 Please go ahead.

33:23 Hi, here is Sophie from Goldman Sachs. Thanks a lot for taking my question. And I'm sorry to go back to net interest income. But at the beginning of the call, you mentioned that rate sensitivity is a little bit lower and then it increases. Could you kind of just remind us on your rate sensitivity and how we should think about year one and year two? And then my second question would be on mortgage pricing. You hike the prices in the summer, but the mortgage volumes are holding up quite well quarter on quarter. Maybe if you could talk a little bit about kind of what you're seeing on the mortgage pricing side, what you're seeing on volume outlook, or kind of peers following you on the pricing side, that would be super helpful.

34:22 Thank you.

34:26 Thank you. Going back to NII and the evolution, as we said, we have unstructural rate sensitivity due to the duration of our non-maturity deposit, and these... The deposit duration rolls over with the time, so on the asset side, the duration of our asset side is related to contractual duration, which is mainly the fixed income portfolio and the loan book at fixed rate, which usually matures and renew at higher level when the Thank you very much.

35:30 This is more or less the same level that we have. And I will take the one on mortgages. Sofia, as you probably are aware, there is an ongoing investigation from the competition authorities, so we don't want to discuss into much detail pricing trends. What I can tell you is that overall trends, not only mortgages, in overall loan trends in the spreads on the new production and the loan yields on the new production have been growing significantly. As a consequence of the higher rates, as you can understand, the overall sector tries to pass through the higher rates in some of the loans as much as we can because it's the contest we're dealing. But apologies for not being more specific on the mortgage segment.

36:38 I understand. I believe that you understand this. So please, operator, can you please move to the following one? Next question comes from the line of Borja Ramírez from Citi. Please go ahead.

36:54 Hello. Good morning. Thank you very much for taking my questions. I have two, please. Firstly, on deposits, if you kindly provide any color on how should we expect the deposit growth going forward and maybe on the mix between site and term. And then my second question would be if you could kindly remind me on the bond portfolio, what are the unrealized gains or losses as of today? Maybe net of hedges and net of taxes, please.

37:34 Thank you, Borja. On deposit, we're comfortable with the evolution and we think if you think the Juan Medina Serramitjana, José Ramon Sanchez Thank you very much. We'll defer a little bit. We expect, we think we have bottom and start to increase in term deposit.

38:33 We were coming down in term deposits due to the lower rates environment. Now this will increase in the coming quarters, but the non-cost deposit will increase as well. Thank you very much. Thank you very much. Thank you very much.

39:33 This is all good news from our point of view because we will have even higher NII evolution that initially expected for the coming years. And the full impact of this evolution will be felt in 28 more or less, 29 probably still increasing, but so that we will have good numbers in 27 and 28 and so the repricing of that portfolio due to the Thank you, Borja. Please, operator, can we move to the following question? Next question comes from the line of Ignacio Largui from BNP Paribas.

40:38 Please go ahead.

40:42 Thanks very much for the presentation and for taking my questions. I just have two questions. One is on cost of risk. I mean, you have proven, Craig Quality has proven a very good performance in the year. How should we think about the 19 basis points cost of risk using material scope to decrease that cost of risk from here, or we should be close to the bottom of the cost of risk of the bank? The second question is linked to potential initiatives that you could do on costs. I mean, you have still a very comfortable capital ratio, and you have a headcount Where there could be some early retirement initiatives given the age of the bank headcount, should we expect any incremental measures like the one that you took in 2026?

41:33 And will that be visible in costs in your view or not? Thank you.

41:41 Thank you, Nacho. Regarding cost of risk, we have a very sound and we have a strong view that the credit quality of the portfolio is very strong. That has allowed us to keep beating even our own guidance on cost of risk. We were expecting between 20 and 25. After reviewing Is this the bottom? We don't know. I think the Spanish economy still will be growing next year, slightly lower than this year, but we have been beating the expectation on the nominal growth of the Spanish economy. Employment keeps performing well. We still have a positive view on the Spanish economy, so we think this will be Thank you very much.

42:50 Thank you very much. Thank you very much. and diversify our business model and the revenue sources. This requires some investments, and what we have done in the past is renew part of our workforce and hire specialized teams to have corporate managers, wealth management managers, and a lot of people regarding IT developments and security and cybersecurity. So we maintain this view that we have to keep improving and training our workforce, but we haven't decided anything in terms of early retirement or voluntary retirement. Agreement with the workforce, this will be decided at the end of the year, as we usually do. So at the moment, we cannot say much about this.

44:19 Thank you, Nacho. Can we please move to the following one? Next question comes from the line of Ignacio Cerezo from UBS. Please go ahead.

44:32 Hi, good morning, and thank you for taking my questions. The first one is on the loan yield evolution from here. If you can share your views around if it's going to be very different, actually, to the percentage of floating rate lending you have in the book, if there is any reason, either positive or negative, for the lending pass-through to be very different to that percentage of floating rate loans. And the second one is on whether you can give us an update on the WeThink potential operation Not just on the outcome, but also in terms of when the timing basically for some information to be disclosed to the market. Thank you.

45:09 Okay. Ignacio, regarding... Juan Medina Serramitjana, José Ramon Sanchez Thank you very much. We think this customer spread evolution will be positive in the coming quarters and it's mainly due to the fact that we expect more repricing on the loan yield and higher level of the loan yields than the cost of deposits.

46:15 And we're confident on the evolution on the loan yield. Cost of deposit obviously is more uncertain, but the loan yield evolution obviously is quite certain that it's going to improve. And regarding the WeThink transaction, as you can imagine, we cannot tell you anything beyond what we have disclosed in the CNMV last April. If there are any new developments, we will communicate them through the appropriate channels in due course. Thank you, Nacho. Please, operator, can we keep on moving to the following question? Next question comes from the line of Hugo Cruz from KBW.

47:01 Please go ahead.

47:05 Hi, thank you for the time. So first of all, on fees, you know, the loyalty plans, I mean, can you give us a bit more color of the work? Because, you know, is the impact just sort of a one-off as the share of loyalties increases and therefore when you expect Are these plans to be fully implemented or are these plans sort of a sort of a promotion and like, you know, six months or a year and then when it runs out, you go back to the old fee regime. So just a bit more color, that would be great. And then, you know, your fee, your asset management sales have gone very well. Can you give us a bit of color on the equity gearing?

47:52 So, you know, any performance fees that get booked? or what's the share of equities within your AUM would be very helpful. And then if I could, just a final question. Any plans to do SRTs to improve your RWE density? Thank you.

48:09 Thank you, Hugo. I think regarding the fees, I think the trends are clear. We keep improving the value-added fees and the non-banking fees and the insurance fees. Thank you very much. Thank you. and we think the value added and the relationship that we're building with those customers will allow them to even use more our banking transactional structure. So it's not a one-off, it's more a medium-term strategy that will improve Juan Medina Serramitjana, José Ramon Sanchez This program will have a sustained

49:57 impact in the fee. And regarding the equity gearing, obviously at the end of the year there's always some seasonality regarding this, but we don't expect to be a very significant impact. On SRTs, as you know, we have a very strong capital position. We keep looking at the opportunities to further improve the capital, but at the moment we're focusing on deploying our capital in the way our excess capital in the way that we have always said, which are to allow us to maintain a larger growth of our organic growth of our business to improve profitability in the future and the other use to maintain a high level of shareholder remuneration.

50:48 So at the moment, we are not in the short term with the view to implement NESRT. Thank you very much, Pablo. I think that there are no more questions. Can you please confirm me, operator, that there are no more questions online? Oh, yes, there are, I think. Yes, we have a follow-up question from the line of Carlos Peixoto from CaixaBank BPI. Please go ahead.

51:18 Hi there again, sorry for the follow-up. I just wanted to ask on other provisions. We saw usually in the fourth quarter some pick-up in this line. Should we expect to see that as well in this quarter? Just basically trying to understand how should we see this quarter's levels as recurrent or expect a hike in the fourth quarter? Thank you. Thank you, Carlos. I'll take that one. This line has been improving as we've been guiding during the last years and the big bulk of the provisions are related to legal risk.

52:13 So we don't expect a significant change at least this year. There is an operator. Can we double check if there is one more analyst queuing? Can we check if we have some more questions, please? Yes, we do have a question from the line of Dan David from Autonomous. Please go ahead.

52:39 Good morning. Congratulations on the results. Just a couple of quick ones. Can we expect any emerald supply in Q4? And the second one is just on the LCR ratio, which has dropped quite significantly. I realize it's still high, but any details on the reduction in Q3, please? Thank you, Dan. On the emerald supply, here the funding plan, as you can imagine, is the same as in the past. It's to keep on refinancing what we've got ahead with some flexibility and keeping an eye on the risk-weighted asset trends depending on... Our expectations and what we see, we can always have some flexibility. And in that sense, if we look at the calls that we got ahead, the first stop is a subordinated, a tier two call that we got at the beginning of the year.

53:24 And in 2026, there is some senior also that we will probably refinance. So that's the plan to keep on refinancing what we got ahead. Cedric Blanchetiere So I think that's all from the questions. Thank you very much, Pablo.

54:12 Thank you very much, Jaime. Just one more thing before we finish. On behalf of UNICAJA, we would like to express our deepest sympathy and condolences to the families and loved ones of all those affected by this week's tragic train accident. Thank you. Thank you very much.