Lieberbank Cut Its Profits By 63% To Cover The Pandemic Reserve.
2021-02-02 | by CusiGO
Liberbank achieved a net profit of 41 million euros in 2020, a decrease of 63.1% compared with that in 2019. Before that, it used 241 million euros for write downs, of which 121 million euros were used to forecast the impact of economic deterioration in the next few years and hedge against the increase of customer risk. In a related report to the national securities and Market Commission (cnmv) on Tuesday, the bank explained that despite the impact of the coronavirus, its business vitality enabled it to increase all profit margins on its income statement while improving its solvency.
Liberbank is merging with unicaja bank, which is “on schedule”, to reduce its non-performing loans from 3.25% in 2019 to 2.9% and increase its portfolio coverage to 56%. Under the deal, liberbank’s shareholders will receive every 27705 new common shares issued by unicaja bank, which means that unicaja bank’s shareholders will control 59.5% of the capital of the new entity and liberbank’s shareholders will hold 40.5% of the capital.
Due to the increase in customer resources (8.9%) and productive credit investment (9.7%), the institution’s balance sheet grew by 13.3% in 2020, driven by mortgage activities, with outstanding balances up 7.5% and new forms of market share of 6.8%.
In 2020, the total amount of productive credit investment will reach 26.53 billion euro, up 9.7% year on year. The new form of transaction increased new financing by 7.855 billion euros, an increase of 14.7%.
The annual funding for production activities was EUR 6.454 billion, an increase of 13.4% over the previous year. This was due to the fact that the ICO guarantee of EUR 2.136 billion was provided to enterprises, SMEs and self-employed persons, with an average guarantee of 75%.
Liberbank explained that the company’s financing portfolio by business sector is very diversified, with exposure “limited to the sectors where covid-19 is expected to have the greatest impact.”. The interest margin of the main source of income increased by 9.6% to EUR 512 million.
The report stressed that in the fourth quarter of this year alone, the interest rate spread was 128 million euros, while the retail interest rate spread was 104 million euros, which was “the highest quarterly figure since the official interest rate was negative”.
On the other hand, commission income continued to improve, reaching US $235 million, an increase of 23.5%, covering almost all the additional commissions (38% of US $43 million) for renewal of contracts with caser insurance.
The performance of the financial business remained at a low level of EUR 6 million, while other business products (including contributions to deposit guarantee funds and single disposal funds, as well as deposit taxes, etc.) decreased by EUR 85 million.
As a result, the gross profit rate increased by 10% to US $704 million, while the management expenses decreased by 2% to US $333 million, which increased the efficiency of the bank by 8.3 percentage points to 53.8%.
As a result, the operating profit margin reflecting the development of pure banking business reached 328 million euros, an increase of 27.7%.