Unicaja Banco Earnings Call Highlights Growth And Payouts

Unicaja Banco ((ES:UNI)) has held its Q1 earnings call. Read on for the main highlights of the call.

Unicaja Banco’s latest earnings call struck a cautiously upbeat tone, with management emphasizing steady commercial growth, strong mutual fund and digital activity, and best‑in‑class asset quality. They acknowledged cost and margin headwinds, as well as a more uncertain macro backdrop, but reiterated guidance and highlighted scope to lift shareholder payouts further.

Business Volumes and Customer Funds Regain Momentum

Business volumes accelerated above 3% year on year, driven by both lending and deposits, marking a clear improvement versus prior periods. Total customer funds rose 3.9% YoY, with on‑balance sheet funds up 1.6% and off‑balance sheet products advancing 10.6%, underscoring clients’ growing appetite for investment solutions.

Mutual Funds and Assets Under Management Drive Fee Growth

Mutual funds were a standout, with balances rising from about EUR 14 billion to nearly EUR 17 billion in 12 months and net inflows of EUR 468 million, equivalent to a 9% market share. Overall assets under management climbed 11% YoY, boosting mutual fund fees by 19% and lifting the contribution from funds and insurance to 19% of total revenues.

Loan Book Expansion and Healthier New Production Mix

Performing loans grew 2.4% YoY and 0.8% quarter on quarter, as the bank leaned into private‑sector lending. Corporate loans were particularly strong, up 3% QoQ, while new lending to households and businesses reached EUR 2.5 billion, a 10% YoY increase led by consumer credit, SME financing and improving mortgage origination.

Digital Sales and Customer Acquisition Gain Traction

Digitalization remained a core growth lever, with 65% of consumer loans now originated online versus 49% a year ago and digital consumer loan volumes up 82% YoY to EUR 160 million. The digital share of mutual fund sales jumped from 25% to 36%, while salary account campaigns doubled acquisitions and helped push Bizum users past the one‑million mark.

Profitability Holds Up with Slight Year-On-Year Improvement

Unicaja Banco delivered quarterly net income of EUR 161 million, up 1.4% YoY, on revenues of EUR 520 million, a 1% YoY increase. Net interest income rose 1.3% and fees 3% YoY, supporting profit before tax of EUR 232 million despite some pressure from higher operating expenses and softer trading income.

Asset Quality Remains Exceptional with Minimal Cost of Risk

The bank’s risk profile continued to impress, with a net NPA ratio of just 0.7% and an NPL ratio down to 2%, 20% lower than a year ago. Coverage levels improved to about 80% on NPLs and 79% on NPAs, while provisions dropped 19% YoY to EUR 43 million and cost of risk fell to a low 20 basis points.

Capital and Liquidity Ratios Stay Comfortably Above Requirements

Capital and funding metrics offer ample protection, with a CET1 ratio around 16% even after funding dividends and loan growth. The bank reported an MREL ratio close to 27% with more than 680 basis points of MDA buffer, alongside a robust NSFR of 159%, LCR of 292% and a conservative loan‑to‑deposit ratio of 69%.

Shareholder Returns and Tangible Book Value Move Higher

Shareholder remuneration is already generous, with EUR 443 million in dividends paid in 2025, implying a 70% payout and roughly 9% yield. Looking ahead, the bank plans to lift the payout ratio up to 95% of net income for 2026, while tangible book value per share adjusted for dividends has increased 9% over the past year.

Returns on Capital Improve as Excess Capital Weighs

Return on tangible equity reached 10% in the quarter, reflecting solid profitability against a still‑strong capital base. Adjusted for excess capital, the bank’s return metrics look even stronger, with RoTE at about 12% and return on CET1 near 17%, suggesting further potential as capital is put to work or distributed.

Operating Costs Rise on Wages and Strategic Hiring

Costs climbed in the mid‑single digits year on year, roughly 4.5–5%, and 1% quarter on quarter, mainly due to wage inflation and new hires in IT and specialized roles to support the business plan. These pressures lifted the cost‑to‑income ratio to about 46%, higher than in previous periods and a key area for investors to watch.

Net Interest Margin Faces Short-Term Pressure

Net interest margin eased to 1.69% quarter on quarter as higher repo balances and volume effects more than offset modest loan yield gains. Net interest income slipped around 1% QoQ, influenced by fewer interest‑accruing days and rising deposit costs, even though it still posted a 1.3% increase versus the same quarter last year.

Customer Acquisition Campaigns Bring Upfront Cost Burden

Aggressive salary account campaigns fueled strong client growth but weighed on short‑term funding costs, with about EUR 6 million spent this quarter, over EUR 4 million more than in the prior period. The bank is effectively paying around EUR 500 upfront per new salary account over a two‑year commitment, which adds more than 12,000 new relationships but temporarily lifts deposit costs.

Fee Mix Softness and Trading Income Volatility

Core banking fees showed a slight decline, though this was offset by stronger performance in non‑bank fee categories tied to investment and insurance products. Trading income was also a bit weaker, reflecting negative mark‑to‑market movements at quarter‑end, but management characterized the impact as limited and not strategically significant.

Prudent Provisioning Amid Growing Uncertainty

Despite the very low current cost of risk, executives flagged heightened geopolitical and macroeconomic uncertainty and kept a cautious tone on future provisioning. Guidance still assumes cost of risk below 30 basis points for the year and the bank continues to hold post‑model adjustments, leaving room for additional overlays if conditions deteriorate.

Headcount and Restructuring Create Transitional Cost Dynamics

The workforce increased modestly by around 100 employees as Unicaja Banco invested in technology and specialized teams to execute its plan. At the same time, a voluntary exit scheme booked last year is being implemented, creating a period of overlapping staff and complicating short‑term cost management until the restructuring fully filters through.

Guidance and Outlook: Cautious Optimism with Higher Payouts

Management reaffirmed 2026 guidance, expecting net interest income and business volumes to exceed 2025 levels, with net fees growing at a low‑single‑digit pace and costs rising mid‑single digits. They foresee cost of risk staying below 30 basis points and net income surpassing EUR 632 million, while maintaining strong capital and liquidity and raising shareholder remuneration toward 95% of earnings.

Unicaja Banco’s call painted a picture of a bank balancing growth with prudence, leveraging digital and investment products to offset margin and cost pressures. With robust capital, low risk metrics and an increasingly shareholder‑friendly payout policy, the group appears well positioned, though investors will monitor how higher expenses and acquisition costs evolve against the promised earnings growth.