Grupo Cajamar reduces profit to bolster coverage and provisions

Its balance sheet and income statement at 31 December 2020 point to the business performing better, more lending, a rise in retail funds, a decrease in non-performing assets, a reduction in foreclosed assets, a smaller NPL ratio, higher NPA coverage ratio and greater solvency.

• At the end of 2020, Grupo Cajamar posted a consolidated net profit of €23.80 million – 74.3% less than in 2019, after pushing up its non-performing loan (NPL) coverage ratio to 58.9% and non-performing asset (NPA) coverage ratio to 56.7% – factoring in debt forgiveness in foreclosure procedures – and earmarking €75 million specifically as an extra provision to help mitigate against the impact of the pandemic.
•  The volume of performing loans and receivables grew 10% to €32,545 million, used to finance investments by corporations, SMEs and households, and especially the agri-food sector, while also supporting customers affected by the pandemic through loans and repayment holidays.
•  On-balance sheet retail funds are up 15.4% (€4,693 million) year-on-year (YOY), while off-balance sheet funds increased by 4.2% due to the decent performance of mutual funds and pension plans.
•  A streamlining of operating expenses left the cost-to-income ratio at 54.7%.
• The bank's successful handling of total non-performing assets, cutting them by €289 million YOY (down 14.8% YOY), and better performance of loans and receivables drove the NPL ratio down 1.3 percentage points (pp) to 4.8%. Meanwhile, there was a 3.9% YOY drop in gross foreclosed assets, despite the negative effects of the pandemic on property sales.
• During what was a challenging year, the capital adequacy ratio rose by 0.8 pp to 15.5%, while the phased-in CET 1 ratio reached 13.8% and the fully loaded CET1 ratio climbed to 13.1%, comfortably above the supervisor's requirements.
• The bank boasts over 3.5 million customers on its books, 1.5 million of whom are loyal. Digitalisation continues a pace and the number of digital customers has continued to grow to 934,000 – 14% more than in 2019. The bank now serves 720,000 mobile banking users (up 33.2%) and 377,000 Wefferent account holders (31% more).

Income statement

During a year shaped by Covid-19 since March, and in a complex and uncertain social and economic climate, the bank posted a net consolidated profit of €23.8 million – 74.3% lower YOY. This result reflects the decent performance of the main lines of business and prudent management, with much of the bank's revenue being used to bolster the NPL and NPA coverage ratios, and set aside a specific provision of €75 million for extra cover in light of the impact of the pandemic.

The cooperative bank Cajamar enhanced the quality of its assets and balance sheet, pared back the NPL ratio to bring it into line with the sector average, and strengthened its solvency, which is well above the ECB's regulatory requirements.

This result comes off the back of a 3% increase in net interest income, largely due to containment of the cost of retail funds and decent business fundamentals. Gross income now stands at €1,049 million – down 8.6% from the previous year because of the lower revenues from fixed-income portfolio sales.

The cost-to-income ratio is now 54.7% thanks to a streamlining of operating expenses, while net trading income has fallen as a percentage of average total assets to 1%.

Healthier balance sheet

Grupo Cooperativo Cajamar continues to make headway optimising its balance sheet by bolstering its credit risk coverage. The NPL coverage ratio is 58.9%, having improved by 9.8 pp, and the NPA coverage ratio is 56.7%, after factoring in debt forgiveness in foreclosure procedures.

The bank's handling of total non-performing assets, cutting them by €289 million (a 14.8% YOY decrease), and better performance of loans and receivables led to the NPL ratio shrinking by 1.3 pp to 4.8%: close to the sector average (4.6%). Meanwhile, gross foreclosed assets continue to be pared back (3.9% YOY), despite the negative effects of the pandemic on property sales.

Solvency and liquidity

At year-end, the phased-in capital adequacy ratio was 0.8 pp higher at 15.5%, the phased-in CET 1 ratio had risen to 13.8% and the fully-loaded CET1 ratio was up at 13.1%. Grupo Cooperativo Cajamar has therefore easily surpassed the levels required by the supervisor, with a high quality of eligible own funds and a buffer over and above the capital adequacy requirements of 499 basis points or €1,138 million.

The loan-to-deposit ratio improved by 5 pp over the last year to under 90%, with the bank maintaining a comfortable level of wholesale funding and a healthy liquidity position with high-quality available liquid assets totalling €8,166 million, a liquidity coverage ratio of 235.2%, and a net stable funding ratio of 128.6%, thereby complying with the limits imposed by the European Banking Authority. It also has maturities covered over the coming years and unfettered access to markets, and is well equipped to generate liquid assets with a mortgage-backed bond issuance capacity of €3,104 million.

Business growth

The business's success is reflected in the YOY growth of 13.1% in total assets to €53,617 million and an 11.1% increase in total volume under management, which is now €88,369 million.

On-balance sheet retail funds have grown 15.4%, €4,693 million more, especially sight deposits (+24.9%). Off-balance sheet funds have also increased by 4.2% after further growth in mutual funds (up 7.9%) alongside pension funds (5.2% higher).

On the funding side, there was YOY growth in performing loans and receivables of 10% to €32,546 million; notably loans to the agri-food sector and businesses, the balance of which has grown by 13.1% from the year before. Meanwhile, those sectors identified as most exposed to the impact of the pandemic, such as tourism and transport, only account for 7% of the retail loan book.

In 2020, Grupo Cajamar arranged prevailing repayment holidays to its customers on loans totalling €582 million and loans guarantees from the Spanish Official Credit Institute (ICO) of €1,812 million; in addition, having championed and participated in social and support programmes with other institutions and non-government organisations.

By turnover, Grupo Cooperativo Cajamar places 11th in the ranking of Spanish significant institutions, remaining the go-to bank for the primary sector with a market share of 15%. Its knowledge of the agri-food sector enables it to offer a wide and specialised range of products and services, as well as technical and specialist advice and transfer of know-how to companies, co-operatives and producers.

Branch openings and digitalisation

Grupo Cajamar's commercial business provides value products and services to its 3.5 million plus customers, served by 5,406 professionals at its 910 branches and 145 agencies.

Cajamar is continuing to open new branches in areas where it has less presence. Six new branches opened their doors in Lugo, Vitoria, Plasencia (Cáceres), Baeza (Jaén), Alcalá de Guadaira and Utrera (Sevilla) during 2020.

The bank boasts over 3.5 million customers in its commercial network, 1.5 million of whom are loyal. On the other hand, digital banking is moving on a pace and it continues to attract digital customers (a 14% rise from a year earlier to 934,000). It now has 720,000 mobile banking users (up 33.2%) and 377,000 Wefferent account holders (31% more).

Agro DNA 

Grupo Cajamar is forging ahead with its initiatives and activities to transfer know-how to the agri-food sector through its Agri-food Knowledge Community, revolving around its new Earth Platform https://www.plataformatierra.es/. Through the platform, Cajamar works with other entities, businesses and technology centres to share the latest agri-food innovations, technologies and know-how. 

It continues to promote and funds research, studies and testing at its experimental centres in Almería and Valencia, which received 915 professional visitors over the year. It has also hosted 15 knowledge transfer activities and classroom-based training, attended by 1,153 people. After the outbreak of the pandemic, it has hosted 61 virtual workshops and courses for its Agro DNA community, benefiting 5,010 attendees.

In 2020, it also published and presented new publications such as: 'Observatory of the Spanish agri-food sector in the European context: 2019 Report'; 'Analysis of the fruit and vegetable harvest in Almería.  2019/2020 harvest'; 'A roadmap for Spanish citrus farming', 'ANICE-Cajamar Barometer of the Spanish meat industry in the first quarter of 2020 and second half of 2019'; 'Comparative synthetic analysis of the agri-food sector in Spain’s various autonomous communities in 2019'; 'Comparative synthetic analysis of the Spanish agri-food sector in 2019'; 'Economic-financial diagnosis of agri-food cooperatives in Spain (2015-2017)'; 'Strategic aspects of agri-food cooperatives as a function of their size. An application to the Canary Islands'; 'Irrigation in the Spanish Mediterranean. A multi-dimensional approximation'; 'Analysis of the socio-economic impact of the values and principles of the social economy in Spain'; and 'Agrarian Economics and Natural Resources', as well as several Agronotas or analyses of the economic variables in the agri-food sector.

The Group also published a new volume of the collection of Mediterranean Economic Studies entitled ‘Marine Biodiversity. Risks, threats and opportunities', coordinated by the scientific writer Manuel Toharia.

Pledge to sustainability

In 2020, the cooperative bank Cajamar led the sector on managing environmental, social and corporate governance risks, according to ASG Sustainalytics' Risk Rating. This agency has highlighted the bank's robust corporate governance, with policies and programmes that are a step up from the sector average, and its decisive management of key factors such as business ethics, integrating ESG factors in finance, product governance and human capital. Its efforts to raise general awareness of ESG risks are notable, informing investors and the public of its duties in this regard and highlighting that environmental, social and corporate governance issues are intrinsic to its business strategy.

Moreover, Grupo Cajamar is a leading company in climate change management, as per the score given to it by the Carbon Disclosure Project (CDP). The CDP has acknowledged Cajamar's commitment to champion and develop actions related with the challenges and opportunities of a low-carbon economy, especially those related with transforming the agri-food sector, most notably through innovative programmes concerning more efficient and sustainable food production. The CDP has also applauded the launch of financial initiatives to measure and manage risks deriving from climate change, their impact on the loan book, and other steps to transparently disclose and manage the business's carbon footprint, and in doing so fulfil the new requirements on scoring methodologies and reporting.

In 2020, Grupo Cajamar also signed the manifesto for a green recovery in Spain as a member of the Green Recovery Alliance. The manifesto includes a pledge to mobilise investments to lay the foundations for a global economic recovery that protects the environment and fosters social inclusion.