Unicaja Banco, S.A. (UNI) Earnings Call Transcript

Good morning, and thank you very much for joining us for Unicaja's 2Q 2026 results presentation. Let me confirm that, as we typically do, earlier this morning before the market opened, this presentation was published together with the remaining financial information at the CNMV and on our corporate website. As in every semester, our CEO, Isidro Rubiales, and the Chief Financial Officer, Pablo González, are here with us. We estimate the presentation will take just under 30 minutes, leaving enough time for questions. Regarding questions, first of all we will give the floor to the analysts and investors who follow us by phone on the original line in Spanish, and afterwards we will turn to the telephone line in English. Isidro, the floor is yours.

Thank you so much, and good morning. It's a real pleasure to be with you once more today and to walk everyone through the key points of our second quarter 2026 results. These results represent the midpoint of our 2025 to 2027 strategic plan. We initially unveiled that plan when we presented our 2024 financial results, and later we updated it, fine-tuning a number of the targets at the 2025 presentation. Today we'll aim to walk you through the strategic plan, which, as it features an initial push on investments, keeps advancing in the right direction. While its aim is to establish the long-term foundation for Unicaja, we will see how it likewise lets us keep enhancing the bank's business momentum and financial standing right now. On page 3, you'll find the customary rundown of the quarter's key highlights. First, I'd like to point out that business activity keeps getting better and is picking up pace each quarter. Business volumes climbed 3.5% in June 2026, stepping up their rate of growth from one quarter to the next. Total customer funds increased 3.5%, driven by mutual funds, which delivered growth above 18%, letting us hold a 10% market share in net subscriptions during the first Q.

Loans had been somewhat behind in recent quarters, but they rose 3.7% over the past 12 months. So, as we've been explaining over the past few quarters, the pickup in business activity driven by the initiatives and levers of the strategic plan is now confirmed. On profitability, net income for the first half of 2026 totaled €361 million, up 7% from the first half of the previous year. That growth is driven by higher revenues and lower provisions, which offset the increase in operating costs, a reflection of the efforts and future-oriented investments that we are doing. Adjusted ROTE reaches 12% with an efficiency of 46%, below the 50% target. We expect that over the next few quarters, and mainly from 2027, we will start to see an improvement as revenues improve and we continue to crystallize the initial effort that we have made to attract talent, new processes, different agreements, and a set of missions that we have identified to develop the strategic plan. I would also like to highlight once again the ongoing improvement in the bank's credit quality, an aspect that, given its recent performance, had received somewhat less attention, but due to the international geopolitical context, we must continue to monitor closely.

Non-performing loans are still falling, marking one more quarter of improvement. The coverage ratio keeps getting stronger and now exceeds 80%, while the cost of risk is starting to level off at levels under the initial guidance we gave. That is the reason we chose to raise the initial guidance we issued at the start of the year. Regarding capital management, our solvency position remains comfortable, with CET1 at 15.8%, which, among other things, lets us announce the first interim dividend of €217 million, 28% higher than the previous year. In turn, we let you know that the board of directors has resolved to pay all of the additional remuneration for this year in dividends. This will let us make three cash dividend payments out of 2026 earnings, totaling 95% of the bank's net income. On the next page, we give more detail on the dividend. As you likely know, shareholder remuneration ranks among the bank's priorities. As I said earlier, we also reaffirm the details on the first interim dividend for the year approved by the board of directors, which will come to €217 million, equivalent to 8.4 euro cents per share, to be paid on the 24th of September.

Like I said, the interim dividend is up 28% compared with the 2025 dividend, and it's more than a 40% increase versus the 2024 interim dividend. That reflects growth in the company's net income, and also the larger share of net income we're putting toward dividends — a share we've been raising step by step over the last few years. You can see that in 2023, the dividend came to 50% of the company's net income. That figure climbed steadily to 70% last year, and this year it will keep climbing to 95%. At the bottom of the page, you'll notice that although the stock's value has tripled across the last three fiscal years, the positive earnings trend and the bigger share going to dividends have let us keep the dividend yield at extraordinarily high levels, between 9% and 11%. As you'd expect, that's been achievable, beyond earnings growth, because of the company's strong capital position. On the following page, we show you another key aspect of shareholder remuneration. As you'll recall, early in the year we updated the bank's dividend policy, establishing a structural distribution of 70% of net profit through dividends, plus additional remuneration of another 25% of the results in the form of dividends and/or share buybacks.

So as you can see, the board of directors has made the decision that for 2026, all additional remuneration will come by way of an additional cash dividend. So 95% of the 2026 results will be allocated to cash dividends, which we'll pay out in three payments: a first interim dividend in September, which we showed on the previous page; the dividend with the additional remuneration in December; and the complementary dividend, paid in April once it's approved by the General Shareholders Meeting. All told, dividend payouts will come to 95% of the company's net income for the fiscal year, which, taking the current net profit consensus estimate over the average share price for the first half of the year, would mean an attractive return of around 9%. On the next page, we share some of the advances and initiatives under the strategic plan that we think matter. On the innovation side, many of us are enhancing our technological ecosystem by bringing in Google Cloud together with NVIDIA and Deloitte to speed up our conversational bank model based on generative AI. This strategy is complemented by the bank's own AI infrastructure. We're also working on a hybrid integration of technology, combining dedicated infrastructure and cloud capabilities that provide elasticity, scalability, and improved resilience without compromising regulation or data governance.

With NVIDIA AI Enterprise, we have a solution on Google Cloud for running both open and commercial models, which lets us optimize efficiency while keeping sovereignty over our systems. We've put use cases into practice in areas including insurance, mortgages, software development, claims management, and back office automation, and we've achieved cuts in response times of between 40 to 80%, which frees up our time for tasks that add higher value. I'd also like to point out that we're taking part in pioneering work on multibank tokenized deposits in Spain, and in the pilot phase of the digital euro alongside other institutions, examining cases such as P2P payments and in-store payments. We stay customer-focused: we added 40,000 direct deposit payroll accounts in the first half of the year, we've significantly improved NPS in our digital channels, and we've earned top rankings in specialized rankings with our app for both retailers and businesses. All of these initiatives are powering the strategic plan, because the investments we are making let us grow above the sector in the first half of 2026, as is the case with investment funds, and here we are consistently holding market shares in net subscriptions that are double our natural market share. As you've noticed, the company's positive financial performance carried on during the first half of 2026, confirming that the investments and initiatives we're undertaking as part of our strategic plan are letting us accelerate business growth and boost results.

That, paired with our choice to distribute 95% of net income as dividends this year, lets us deliver an appealing return for shareholders. Put simply, we're delivering growth in the business and in shareholder returns alike, driven by better results and our solid capital position. Now I'll turn things over to Pablo, who will, as he always does, walk through the quarter's financial performance in greater detail. Pablo, over to you.

Thanks, Isidro. Moving on to business activity on page 8. As you can see, total customer funds are still growing positively — up 3.5% for the year and almost 2% for the quarter. On deposits, I think it's worth highlighting that the growth is concentrated in demand deposits, which stand 4% above June last year. Time deposits, by contrast, fell 5% over that same period. These are end-of-period balances, but if we look at average monthly balances, which smooth out some seasonality, private sector demand deposits rose by €3 billion, or 6%, versus June 2025, while time deposits were essentially flat. This movement also reflects what we're seeing in off-balance sheet funds, which climbed 12.7% in the year, driven by mutual funds, which passed €18 billion for the first time after an 18.2% increase. On the next page, we give more detail on this trend in assets under management and insurance. As you can see on the left, assets under management are up 13% over the past year, and for funds, growth has been 18%. Particularly striking is the significant improvement in net fund subscriptions, shown at the bottom, surpassing €1 billion, equivalent to a 10% market share of net subscriptions in the first half of the year, according to Inverco data.

Turning to revenue, as the chart on the right shows, both of our business segments lifted their contribution to earnings by 7%, and together they made up 19% of total revenue for the fiscal year. Now on lending, if you look at page 10, growth kept picking up speed during the second quarter of the year. Loans in a normal situation were up 3.7% for the year and by nearly 5% for the quarter, and if you strip out the seasonal effect of advances, that figure comes to 3.2%. Breaking it down by segment, the growth we had been posting in corporates is continuing, with a quarterly rise of 2% and an annual one of 6.6% — growth we achieved, among other things, thanks to implementation of certain measures set out in the strategic plan. For individuals, annual growth sped up to 2.6%, helped by better volumes in the mortgage segment, where the balance grew 1.3% quarter on quarter and 1.8% year on year — growth that is still below that of the sector, but as we have been saying, it is also improving gradually. Lastly, in consumer lending, the loan portfolio climbed 8% year-over-year and 3.6% quarter-over-quarter once we isolate the seasonal effect of payroll advances. In short, this is a trend of progressive improvement that we have been showing over the last quarters, explained by greater diversification and better commercial dynamics, along with an increase in new production, which we show on the following page.

As you can see, new production has once again improved across every segment. During the first half of 2026, new production in the private sector came to €5.515 billion, 19% above the same period a year earlier. Growth was 7% in the corporate sector and 26% in the consumer sector. With mortgages, as you can see, the trend has improved quarter after quarter, surpassing €2 billion so far this year — a 40% increase over the 1.5 billion recorded in 2025. So the first half of 2026 has seen new production keep improving, thanks to factors including the processes, measures, and investments we are implementing under the strategic plan. On the next page, you will find some highlights of our ESG strategy. As you can see, we continue to promote sustainable business, with a particular focus on corporates that have both environmental and social objectives — a portfolio that has grown 11% so far this year. On responsible investing, 77% of the funds we offer incorporate sustainability criteria. In the social sphere, we remain committed to financial inclusion, making it easier to access banking services in underserved areas. What is more, we believe it is especially important right now to promote access to housing for the younger segment of the population, backed by the agreements we have signed with the autonomous communities.

So because of that, close to 50% of the mortgages we granted in 2026 were to individuals younger than 35. Beyond that, we keep funding renewable energy projects along with green buildings by issuing green bonds — for instance, the recent €700 million issuance in senior non-preferred bonds. The impact of these bonds, measured as avoided CO2 emissions, is among the factors driving our decarbonization path, and they are supplemented by the specific targets we've established for 6 sectors in our finance portfolio, which make up 80% of our private sector lending. Put briefly, that's a solid commitment to sustainability, and we keep advancing on this front. In the next section we'll now examine the income statement in detail. Beginning with the quarter, net interest income was up 2%, an increase partly explained by the number of days, together with an extra effect coming from better returns on assets. Even though this growth is slow and gradual, this quarter made up for the modest rise in the cost of liabilities caused by higher interest rates. The remaining revenue lines benefited from second quarter seasonality, with a notable gain in the contribution from dividends and equity investments, which likewise compensated for the seasonal impact on fees, which usually run somewhat higher at the start of the year.

Gross margin increased 8.5%, while pre-provision profit climbed almost 15%. Along with reduced provisioning, that lifted quarterly net profit to €201 million — 25% above the prior quarter and 12% above the same quarter a year earlier. For the first half of the year, revenues were up 2.5%, powered by net interest income and fees. Costs kept rising at a mid-single-digit pace, consistent with guidance, which mirrors the investments we're making to build the groundwork for future growth. Provisions dropped substantially: loan provisions by almost 25% and other provisions by 8%, producing pre-tax profit of €506 million, equal to €361 million after tax, including €10 million from the IMIC net interest income and fee income tax. That net profit is 7% above the prior year. Let's now look more closely at the income statement. Beginning with net interest income on page 15, we show the trend in customer margin. As you can see, it declined by 2 basis points in the quarter, driven by the rise in interest rates during the quarter was was partially offset by higher loan yields, which, as shown, grew for the second consecutive quarter. This mirrors the same trend as in the previous quarter, and we expect it to gradually improve going forward.

Now looking at NIM — net interest margin on profitable assets — that came in at 1.73%, up 4 basis points. If you turn to the next page, we give you a different breakdown of how net interest income performed in the quarter, this time looking at financial income and expenses. You can see the margin went up by €9 million in the quarter. Roughly 1/3 of that gain comes from the number of days, and the rest, as the breakdown indicates, reflects the fact that better yields on loans, liquidity, and ALCO more than made up for the modest rise in deposit costs we mentioned before. Moving on to fees, what we see is that this quarter looks a lot like recent ones, with non-banking fees still expanding very strongly and offsetting the drop in collections and payments fees. That pattern stems from the strategy we've been executing to shift toward higher value-added services, like mutual funds and insurance, which now make up 54% of fee income. As you're aware, the plan here is to keep concentrating on the fees that deliver more value to customers, while at the same time launching loyalty programs and waiving charges for lower value-added services, including transaction fees.

This approach does constrain fee growth over the near term, yet at the same time it lets us strengthen customer relationships and expand our customer base, and over the long term that matters much more. These loyalty programs are delivering strong results, and we'll keep rolling them out as we move forward. That's the reason our fee guidance for the rest of the year points to low growth. Consequently, you can observe that during the first half of the year, fees from collections and payments declined by 6%, whereas non-banking fees climbed by a substantial 11.8%, which lifted the overall rise in fees to 2.6% across the first six months of the year. Picking up our review of the P&L, we'll now walk through the breakdown of other income, which mirrors the usual seasonality of the second quarter — a period in which dividend income and income from equity method investments typically pick up markedly. Other income totaled €50 million in the second quarter and €60 million for the first half of the year, a rise of 12.6% compared with the first half of last year. Turning to the next page on costs, as we've pointed out across the past few quarters, the 5% increase mirrors the investments we're making, among them new hires, which we see as needed to carry out the action plans set out in the strategic plan.

All the same, the efficiency ratio is still sitting at 46%. Moving to the next page, we move on to provisions, and this is really one of the brightest spots in the quarter. Once again, loan provisions declined, reaching €23 million in the second quarter, versus €25 million in the quarter before and far under the €32 million posted in the same quarter of 2025. A provisions level like this works out to a cost of risk of just 18 basis points, which shows credit quality moving in a favorable direction even with the geopolitical backdrop. Over on the right, we show total provisions, and these take in, beyond credit risk provisions, legal provisions and other impairment charges, which mostly reflect the results of real estate asset sales. As you can see, total provisions dropped 24% in the first half of 2026, with all three types of provisions coming down. When it comes to the real estate–related provisions, as you can see, there was a modest release stemming from the sale proceeds. To sum up, the trajectory for credit provisions specifically, and for total provisions more broadly, was very strong across the first half of the fiscal year. Turning to the next page, we give you a summary from the profitability standpoint.

On the left-hand side, there's a chart that makes the company's relative profitability clear. ROTE as reported, with no adjustment, comes in at 10%. The excess capital we hold relative to other similar institutions would lift this metric by another 2 percentage points, bringing it to 12%. And if we adjust for the excess shareholders' equity needed to offset deferred tax assets deductions, ROTE would rise to over 16% — a metric more comparable to other institutions, since it isolates the effect of the excess shareholders' equity we require to absorb the DTA deductions. On the right, we show how net profit has evolved. In the first half of 2026, it reached €361 million, up 7% from the first half of 2025 and 23% higher than in 2024. Over the past 12 months, tangible book value plus dividends has risen 8% to €2.59 per share. We now move on to the credit quality section, which, as we mentioned before, continues to maintain a very favorable evolution. The balance of NPLs continued to fall for another quarter. The quarterly drop was 4.6% and the annual fall was 14%, which places the NPL ratio below 2% at a new low of 1.8%.

NPL coverage, in turn, kept climbing—from 73% a year ago to 83% as of today. When we look at all non-performing assets, which we refer to as NPAs, on a net basis they represent just 0.5%, thanks to a substantial 23% reduction in their balances across the year, while coverage has moved above 80%—a very favorable trend that, as you can observe, keeps extending over time. Last, I'd like to go over the bank's solvency and liquidity position. On page 25, we lay out the quarterly progression for you. As you'll note, organic capital generation from earnings comes to 68 basis points, a touch above the dividends and AT1 coupons—we're accruing a dividend at 95% of results, which is the payout we anticipate making this year. Separately, crystallization of DTAs during this quarter adds another 14 basis points of CET1, which partly offsets growth in risk-weighted assets, chiefly credit risk RWAs, and leaves June CET1 at 15.8%. Turning to the following page, we present the entity's standing against its various requirements. Over the first half of the year, we completed two issuances: an AT1 totaling €500 million and a green SNP, or senior non-preferred, totaling €700 million.

The response to both of these has been really encouraging, and you can see that in the order books on the slide. Once these two issuances are refinanced, the MREL ratio comes to 27%, and subordinated instruments make up 24.4%. Over on the right, you can see the buffers we hold against the main requirements, and as you'll notice, those remain very comfortable. At the bottom, we've laid out the liquidity ratios, which are still among the highest in Europe — in particular the liquidity coverage ratio, still above 300%. And lastly, we give you the breakdown of the debt portfolio. Since our low loan-to-deposit ratio gives us a strong retail liquidity position, we put that into this structural portfolio, mostly in the amortized cost portfolio. As you can see, its size barely moved during the quarter, and it also kept up its profitability and duration. That's everything from me, Isidro. Over to you.

Thanks, Pablo. I'll pick up on the page with an update on the guidance we anticipate for the remainder of the year. To begin with net interest income: in the 2025 results, we indicated that we anticipated some growth in 2026, and on that growth we can now be a bit more precise. Given how the first half has performed, we anticipate net interest income climbing somewhere between low and mid-single digits in 2026, with growth picking up pace across the quarters ahead. On fees and commissions, our expectation remains low-single-digit growth, because, while the trend is somewhat more favorable, the loyalty campaigns we're running are delivering very well. Even though we're cutting the most transactional bank fees over the short term, those campaigns are letting us markedly strengthen the relationship and the future projection we have with our customers, and we plan to keep rolling them out. As for costs, these will keep rising at mid-single digits, which mirrors the investments we intend to make so we can carry on executing the strategic plan the way we have up to now. Cost of risk is another one of the guides we revised this quarter. At the outset, we anticipated a cost of risk below 30 basis points.

From the start of the year, the trend has come in a bit stronger, though we preferred to hold off until midyear before confirming that trend, which is now firming up. So we expect to close the year with a cost of risk of between 20 and 25 basis points, a touch better than what we first anticipated. Business volume — covering loans, deposits, and off-balance sheet funds — confirmed growth of around 3%, which, as you can see, is being delivered thanks to volumes picking up progressively and commercial momentum improving. Lastly, reflecting the update to our net interest income guidance and to credit provisions, we believe net profit will rise in 2026 by mid-single digits. To wrap up, let me give you a few quick takeaways before we go to the Q&A. With these results, and after a year and a half, we have hit the midpoint of our strategic plan. While we are pleased — very pleased — we believe there is still room to improve, since certain measures and investments we are making will need a bit more time to crystallize. In any event, these investments, even though they are built for the long term, are also letting us improve business volumes and commercial activity right now.

So these improved business dynamics are feeding through into stronger results, and that also lets us pay bigger dividends while keeping compensation appealing for our shareholders. In short, through the first half of 2026, we kept at it — we showed that investing in the future, bettering results, raising shareholder returns, and growing can all happen without weakening our solid financial strength. That has let us deliver a total shareholder return above 300% since the strategic plan began, counting dividends as well as share price gains. In short, through the first half of 2026, we kept laying the groundwork that will let us keep getting better over the long term, while over the short term we've already crystallized some of the benefits we're chasing for the future. Last, let me say once more that this progress comes thanks to our employees and customers, our most valuable assets. Beside them, we also count on the trust and commitment of our shareholders and board members. Thanks to all of them, we're advancing across all these areas we've tried to share with you in this presentation. Thank you so much, everyone, and if that's alright, we'll wrap up the presentation and move on to the Q&A session.

Thanks a lot, Isidro. Thanks a lot, Pablo. Now we’ll move to Q&A. We’ll begin with the Spanish-language phone line. Kindly state your name and please keep it to two questions so we’re able to get through as many as we can. Go ahead, please.

Thanks. We’ll begin with the Q&A portion now. To ask a question, press *5 on your phone’s keypad. If you decide not to ask, press *5 again to withdraw it. Before you ask, please check that your device isn’t muted. Our first question comes from Max Mishyn at JB Capital. Please go ahead with your question.

Morning, and thanks a lot for the presentation and for taking our questions. My first one concerns the financial margin. What are your expectations for 2027 — could you share those with us? The second is cost of risk. Many thanks for updating the guidance; I'd like to hear what you expect beyond 2027, assuming the macro scenario stays as it is. Thank you.

Thanks, Max. On margin, you've likely noticed that we've revised this year's guidance, though we won't provide guidance for 2027 — partly due to volatility in interest rates, and partly because we still need time to observe how things develop. We reaffirm our positive stance that margin will keep improving this quarter; in the prior quarter we saw an increase, and we expect that trend to persist, supported by a better contribution from credit in the quarters ahead. Turning to cost of risk — the present Spanish financial backdrop, updated this quarter to 2.8% of GDP versus the market estimate of 2.4%, rests on internal consumption alongside a decrease in public consumption, which makes it even more sustainable. These numbers let us take a more positive view, but we want to remain prudent. We're in a highly complex geopolitical environment, and the effects of that environment can shift. We observe a degree of deceleration, and we'll see this in the savings rate: households' savings rate has come down, yet it remains above average, which is favorable for asset evolution.

That has consequences for credit quality. Tariffs could flare up as an issue. Then there's the energy dimension. We prefer to stay cautious, and since the credit portfolio has performed positively, we've raised the guidance, yet we still want to remain prudent.

Thanks, Pablo.

Let's take the following question now. It comes from Francisco Riquel at Alantra Equities. The floor is yours. Good morning.

You've brought in 40,000 payroll accounts during the first half of the year. New customers are coming to you through mortgage contracts, and those are up by 40%. Current account balances, though, have held steady at 55 billion. Account remuneration is on the rise. Bringing in customers is largely a matter of lowering commission fees. Could you expand a bit on how profitable these new customers are that you're bringing on board, whether through payrolls or through mortgages — can we get some additional detail there? Thank you. For my second question, could you share a little more about the customer spread across the different parts in the first quarters, what kinds of deposits we should expect in terms of the credit book between fixed, floater, and hedges, and how that logic might evolve in the dynamics?

Good morning, Paco. This is Isidro. Thanks for your question. Our view is that bringing in new customers matters so that Unicaja becomes their primary bank. That dedication isn't something we approach with a short horizon; it's a commitment spanning the medium and long term. Customer loyalty is extremely valuable, and growing payroll numbers while continuing to win new clients via mortgages forms a strategy aimed at making Unicaja the reference bank and lifting transactionality. It isn't a short-horizon effort — rather, it's medium and long term. We see this strategy as profitable, and within it, achieving a balance with the non-banking financial fees also has to be sustainable over time. On customer spread, I don't know, Pablo, whether you'd like to add something there, but our expectation for the coming quarters places a larger impact on the cost of liabilities than on assets, yet what we're observing is some increases, and that customer spread will rise in the quarters ahead. I don't know whether, Pablo, you want to add anything on this.

Thank you, Paco. The way customers are distributed has developed in line with what we expected, and Isidro, my view is that this represents the floor, the base, and from that point we will build upward, though always depending on how deposits move. Credit is set to rise since repricing happens somewhat more slowly, and it will need to get better going forward. Even though we are seeing certain updates to reference values concerning the environment and interest rates, we do anticipate some rise in deposit costs, yet not to the same degree as others, given that we have done this previously. On portfolio profitability and issuances, the portfolio has enabled NIM to increase by 4 points, even as we have declined on customer spread, because we hold short-term positions to cover fixed positions in accounts, and we also cover certain deposits. Regarding strategy coverage, we have been covering long-term mortgages and fixed mortgages so as to convert them into variable, and we have likewise carried out some hedging, or some covering, of deposits to adjust the duration of assets and liabilities. We think this will steady the favorable trajectory of the margin over the coming years.

My question concerns the rates on fixed versus variable products. That’s going to shift. A portion of the mortgages will keep repricing, and certain mixed mortgages will convert to variable, and over the next two years, that 65% could rise to 50/50%. Let’s move on to the next question.

Our next question comes from Ignacio Ulargui at BNP Paribas. Please go ahead.