Novacaixagalicia earns 18.5 million euros and increases generic provisions fourfold.

Novacaixagalicia obtained an attributed result of over EUR 18 million in the first quarter, following provisions of 45 million euros to the  generic insolvency fund, the caja's hedge against adverse circumstances, given that these provisions are not assigned to a particular loan.

The Caja's maximum prudence policy involves an insolvencies fund of EUR 326 million, almost four times the sum of those of the original entities twelve months ago. Total provisions made in the first quarter sum 107 million so that the insolvency fund exceeds €2.820 billion.

The board today analyzed the demanding write-offs made in the first quarter and an advance of April data. Q1 results reflect the strategic priorities established in the entity's merger and recapitalization plans:
Efficiency and austerity: operating costs reduced by 9.8%

-  Solvency: 118 million have been generated by the organic recapitalization plan
-  Asset quality: NPL rate reduced by 11 basis points to6.45%
-  Retail orientation: syndicated loans fell 13.4% while 4,779 new family mortgages were granted in just three months
-  Divestment: equities portfolio reduced by 8.4% in the quarter
-  Ample liquidity: term deposits grew by 2% in the quarter to increase the percentage of credit funded by retail customer deposits by three points.

Organic capitalization provides 118 million

The quarter saw the launch of various organic capitalization initiatives, which, along with the sale of 15% of Pescanova, reduced core capital requirements by 118 million toward an objective total of 502 million euros in September.

The divestment plan is one of the recapitalization project strategies aimed at achieving 10% core capital by September 30th to become one of the most capitalized entities in the sector. Besides organic capitalization, the project also includes the entry of private investors in the bank that the Caja is creating and the FROB II (Fund for Orderly Bank Restructuring) as temporary shareholder.

The improvement in solvency has been favored by the 8.4% reduction of equities investment in the quarter while the fixed income portfolio grew by 2.5%, reducing market risk exposure and the capital consumption. Main divestments included the sale of holdings in the Portuguese companies Energías de Portugal and Brisa.

Result of 52.4 million excluding extraordinary

The attributed result of 18.5 million euros is 71.7% less than last year due to the generic provisions made during the quarter and the high extraordinary income of 100 million euros obtained in 2010 fundamentally as a result of the capital gains generated by the sale of Galp. The operating result, excluding extraordinary income and costs is 52.4 million euros.

The interest margin is 178.4 million and reflects the reduction in certain margins of the sector caused by the rise in interest rates, general economic weakness and the high level of competitivity in the customer deposit sector. Income from dividends decreased by 17.8 million as a result of the gradual divestment in equities, while market operations added 91 million euros to the balance sheet, to take the gross margin to 361.3 million, a y-on-y reduction of 18.7%.

25.5 million in savings

Novacaixagalicia also reduced operating costs by 25.5 million euros in the first quarter, a y-on-y improvement of 9.8%, although this still doesn't reflect the synergies of the merger including the integration of branches and early staff retirements. This reduction in costs has allowed Novacaixagalicia to improve efficiency by 2.1 points in just three months. To 31 March 67 branches have been closed and 450 staff given early retirement, figures that will reach 153 branch closures and 666 staff taking early retirement in May.

Business grows by 3,000 million

In the first quarter, Novacaixagalicia increased business volume by 2.4%. From 1 January to 31 March the Galician entity increased its loan and deposit portfolio by 3.1 billion euros to 122.2 billion at the close of the quarter, including off balance sheet figures, such as guarantees and investment funds among others. Parent Company assets increased by 1.9%, to reach 69,972 million euros.

Customer credit grew 2.5% and the customer deposit balance by 7%, to reach 51.960 and 49.740 billion euros. This evolution shows the good progress of the new Galician Caja's business in its first quarter of life and the confidence in the new project shown by customers and the efforts to offer liquidity to SMEs and families in a general context of reduced financial activity.

In these three months the retail orientation of the new Novacaixagalicia, with the divestment in major capital operations and reinvestment in SME and family loans is patent. The volume of syndicated loans decreased by 470 million, while the mortgage loan portfolio grew 90 million euros.

In the first quarter Novacaixagalicia granted 4,779 new mortgages worth EUR 370 million to house buyers, despite the general weakness of this business line in the period. With regard to companies, Novacaixagalicia has already formalized 19,500 company loan operations worth over EUR 2.1 billion. The NPL rate dropped eleven basis points during the quarter, to 6.5%. The coverage ratio was 73%, almost 20 points above that of the two previous entities in March 2010 (53%) and more than 5 percentage points over the Spanish Savings Bank average.