Unicaja Banco SA

MAD:UNI

Earnings Call Transcript 2021-Q1

[Jaime Hernández Marcos, Head of Investor Relations]

Good morning to everyone. Welcome to Unicaja Banco First Quarter 2021 Results Presentation. Let me start confirming, as usually, that we have published the quarterly financial report and the same presentation this morning before market opens in the CNMV website. Pablo González, our Chief Financial Officer, will go through the slides. And then we will answer all your questions. This quarter, we have splitted the presentation in 4 sections. The first one is a quick update of the merger with Liberbank. The second section includes the main highlights of the quarter. The third section includes the quarterly results and details. And as usually, we will finish with an update of our solvency, liquidity and asset quality. Pablo, whenever you want?

[Pablo González Martín, CFO & General Director of Finance]

Thank you, Jaime. Good morning to everyone. Before reviewing the quarterly results, let me give you a brief update on merger process in Slide 4. On the top of the slide, you can find the main terms of the transaction. We have explained the details at the end of last year and in last quarter results presentation. So I won't repeat them this quarter. However, in the bottom of the slide, you have the transaction calendar where you can see the following -- that following the announcement, at the end of December, we held Extraordinary General Meetings for the merger approval, the 31st of March. The Extraordinary General Meeting of Unicaja Banco had a quorum close to 75% with 99.99% of the shares represented voting for the merger. This is a historical step towards becoming one of the largest banking groups in Spain. And more important, a process that, as you all know, will enable the bank to improve in a very material way its profitability and shareholder returns, which are the main targets ahead. We are now waiting for all the formal regulatory authorizations. It doesn't depend on us, but we expect to receive the green light at the very end of the second quarter, beginning of the third one, something that will enable us to report half year results with the merger formally approved and being a single bank. So if everything evolves, as we are currently expecting, and there isn't any unexpected delay, we will provide final details and impacts of the merger next quarter. That will be the first quarter reporting results together with Liberbank as a single bank. If we move now to the quarterly results, I will start the second section in Page 6 with the main highlights of the quarter. Regarding the business, customer funds grew 9.6% year-on-year with off-balance sheet funds growing almost 9% year-on-year. Total performing loans were flat in the quarter. New loan production improved significantly in the first quarter '21 with corporate new loans, 36%, above the previous quarter; and individual new loans up 39% in that same period. From a P&L point of view, as we will see later, trends remain positive. Core income, that is net interest income plus fees, grew almost 3% quarter-on-quarter. NII was 3.6% above the previous year, owing to the lower cost of deposits, among others. Fee income also showed a positive trend, growing 1% compared with first quarter 2020, when we included some extraordinary fees. So the real comparison is better than the reported trend. Total costs continued to improve and fell an impressive 6.1% compared with 2020, with savings amounting to EUR 9 million. In terms of impairments, we have anticipated additional EUR 25 million of COVID provisions in the quarter. However, total impairments remained similar to the previous year. All in all, net income reached EUR 43 million in the quarter, which is EUR 3 million below first quarter 2020 despite reporting EUR 14 million lower trading gains. On asset quality, liquidity and solvency, NPAs continued to decrease in the quarter, falling 1%. In a year-on-year terms, NPAs fell 8% with NPLs decreasing 11%, and gross foreclosed assets by 5%. It is also worth noting that the NPAs coverage level continue to grow one more quarter to a level close to 66%, which is almost 7% above the previous year. From a liquidity point of view, the loan-to-deposit remained low at 64% and our LCR at 286%. Finally, our CET1 fully loaded reached 15.1% with regulatory total capital at 18%, implying a EUR 1.3 billion buffer over our SREP. All in all, we have started 2021 as we were expecting, confirming the previously anticipated positive trends. Core income grew compared with previous year; total costs decreased; impairments continue to be conservative, but decreasing compared to the previous quarter; and NPAs balance continue to decrease, while coverage was further reinforced. Quite positive trends ahead of the merger with Liberbank, which will enable us to further improve future returns through the crystallization of synergies. I will move now to Slide 8, where you have the P&L details. Starting with the quarterly trends, as I already mentioned, both NII and fees reflected, among others, the seasonality and the calendar effect of the quarter. Noncore income, despite the lower trading, was more than compensated by the higher contribution of other revenues and expenses. That include the contribution to the deposit guarantee fund in the fourth quarter of 2020, leaving gross margin 23.5% above last quarter. Total costs fell 2% quarter-on-quarter, mainly because of the lower personnel costs that fell 5% compared with the previous quarter. Pre-provision profit was slightly above EUR 100 million, almost twice the fourth quarter 2020. Total impairments also improved more than 20%, leaving net income well above the previous quarter. From an annual point of view, I would highlight that the net interest income and fees improved 3.6% and 1% year-on-year, respectively, leaving core income almost 3% above last year. Gross margin fell 5%, mainly owing to the lower trading gains that were quite high in the first quarter of 2020, although partially compensated by higher other revenues and expenses as a result of the higher contribution from one of our insurance affiliates included in this P&L line. Total costs showed a very positive trend, once again, falling almost 6% compared with 2020. And finally, we decided to book additional EUR million of COVID-related provisions this quarter, leaving total impairments in line with the previous year; and net income at EUR 43 million, slightly below the EUR 46 million of the first quarter of 2020. If we move now to Slide 9. You can see that total customer funds grew 9.6% year-on-year. This was explained by strong growth in deposits that grew almost 10% year-on-year, but also an improvement in -- of asset under management and off-balance sheet funds that have been growing each of the last 4 quarters, reaching almost EUR 13 billion in the first quarter of 2021, which is almost 9% above last year. In Slide 10, you have credit and loans details, where you can see that this quarter they were stable. Gross loans were flat in the quarter by segment. Loans to individuals fell 0.3%, while corporate loans grew 0.9%. On the right-hand side, we include the performing loan trends that were also pretty stable. As you can see, total performing loans were flat quarter-on-quarter. In terms of segments, corporate performing loans grew 0.7% in the quarter, while consumer loans fell a bit more than 2%. It is worth noting that mortgages showed a small increase in the quarter for the first time in quite some time, something that was supported by a significant improvement of the new mortgage loan production, as you can see in the next page. In Slide 11, here, you can see that private sector new loan production improved significantly in the quarter. New loans grew 38% compared with the previous quarter. As you can see in the bottom left side of the slide, new loans to individuals grew 39%, with new mortgages growing at that same rate of 39% quarter-on-quarter. If we compare with the third quarter of 2020, new loans to individuals grew 72% and mortgages 87%. New mortgage trends is, under my view, one of the positives of the quarter because it has been the first quarter in a long time that new mortgages are above amortizations leading to a quarterly growth, changing a long trend that started many years ago. New corporate loans also grew 36% compared with the last quarter of 2020. The improvement in private sector new loans compensated the lower public sector production and left total loans pretty flattish in the quarter. In Slide 12, we start with the regular P&L review with net interest income. As you can see in the top right, interest income from loans and the debt portfolio fell in the quarter, something that, together with the calendar effect, explain the quarterly decrease, although partially compensated mainly by lower cost of deposits because we still have redemptions of costly customer deposits. In the bottom of the slide, you can see that the front book customer spreads continues to be above the back book, that in the first quarter of 2021 was 155 basis points, only 1 basis point below the previous quarter, but still above the second and third quarter of 2020. In Slide 13, you have the debt portfolio details. As you can see, there are very little changes in this quarter. Overall balances reached EUR 22.6 billion with an average yield of 93 basis points, and most of the exposure still been sovereign debt classified in the amortized cost portfolio. If we move to Slide 14, you have fee income trends that continue to show a positive trend despite the seasonality of the quarter. Total fees grew almost 1% year-on-year despite including a one-off last year from a small deal related to our insurance business, something that explains the decrease in nonbanking product fees. On the other hand, payments and collections continued to improve and grew almost 10% year-on-year. If we move to Slide 15, you have the total expenses evolution that again continue to reflect a positive trend as a result of our cost-cutting measures. Total costs fell more than 6% in the first quarter '21 compared with the first quarter of 2020, with the personnel expenses falling 5% and general expenses decreasing by almost 15%. Finally, it is worth noting that branches and employees continue to fall, a historical trend that, as you can see on the right-hand side of the slide, since 2016 has been decreasing at a run rate of 7% for branches and a 4% for employees. In Slide 16, you can see the regular details of our impairments. In first quarter 2021, we booked EUR 25 million of additional provisions for COVID-19 potential future impacts. In the right of the slide, you can see that excluding these impairments, the recurrent cost of risk represented 16 basis points, increasing to 52 basis points when included all COVID provisions, which is well below the 85 basis points reported in 2020. We can now move to Slide 18, where we have the regular NPL information. As you can see, NPL balances were more stable this quarter, and this was partially explained by the transfer of almost EUR 60 million loans considered unlikely to pay into stage 3. The NPL ratio remained at 4.2%, as we show in the table in the bottom of the slide. Quarterly gross entries were a bit higher this quarter, something explained by the mentioned reclassification of the EUR 58 million considered unlikely to pay loans that we call subjective NPLs, following a prudent review formalized in this quarter. In Slide 19, we have updated the ICO loans and the moratoria balances. In the left of the slide, you can see that we have granted almost EUR 1 billion of credit and loans guaranteed by the state, of which the drawn down balance was EUR 656 million in March. This represents 9% of total corporate loans and 2% of total performing loans. In the right-hand side of the slide, we showed the moratoria details, which are mainly mortgages. As you can see, out of the EUR 863 million formalized, only EUR 580 million are currently outstanding, meaning that 1/3 of them have already finished, with the outstanding balance representing 2% of total performing loans. If we move now to Slide 20, you have our regular credit risk exposure and NPL coverage details. Overall NPL coverage continues to grow 1 more quarter. At the end of quarter, the NPL coverage reached 68.4%, almost 1 percentage point above the previous quarter and 12.5 percentage points above the previous year. This is very conservative coverage level, especially considering that 85% of our NPL balances are secured NPLs, as you can see in the right-hand side of the slide. In Slide 21, you have the foreclosed asset details. As it happens with NPL coverage, foreclosed assets coverage also continued to increase to 63.1% in the first quarter of 2021, one of the highest of the sector. Gross balances fell 2% quarter-on-quarter and 5% year-on-year. In net terms, foreclosed assets fell 2.5% quarter-on-quarter, from EUR 405 million in fourth quarter of 2020 to EUR 396 million in the first quarter of 2021. In Slide 22, you can see how overall NPAs continue to decrease 1 more quarter, reaching EUR 2.3 billion in gross terms and EUR 769 million net of provisions, representing only 1.2% of total assets with a coverage at almost 66%, one of the highest of the sector. In Slide 23. We update our liquidity position that, as you can see, it remains extremely comfortable with the loan-to-deposit ratio at 64%; the LCR, the liquidity coverage ratio at 286%; and NSFR at 143%. And finally, we include our solvency position in Slide 24. Our regulatory CET1 reached 16.5% in March and our total capital was 18%, representing almost EUR 1.3 billion buffer over our SREP requirement. In fully loaded terms, the ratio grew 12 basis points in the quarter, mainly owing to a small decrease in risk-weighted assets, reaching 15.1%. Finally and until we receive news from the ECB, let me remind you that our solvency ratios continue to be calculated in full under the standard approach, although we expect to change that in the very short term. So that was the quarterly summary. Under my view, very positive trends, ahead of the merger with Liberbank. Our core income grew compared with last year, total costs continue to fall and impairments were below the previous quarters. From a balance sheet point of view, very little to add, one of the highest coverage of NPAs and one of the highest CET1 ratio of the sector that have enabled us to merge with Liberbank, a merger that will bring us plenty of upside, hopefully, from next quarter onwards.

[Jaime Hernández Marcos, Head of Investor Relations]

Thank you, Pablo. We move now to Q&A.

[Jaime Hernández Marcos, Head of Investor Relations]

Let's start with those ones related with the merger with Liberbank. The first one is, Pablo, when it's more or less clarified -- it was clarified throughout the presentation, but just in case, when do we expect to receive the formal authorizations for the merger? And when we expect to report for first-time results together, Pablo?

[Pablo González Martín, CFO & General Director of Finance]

Yes. Thank you, Jaime. As I explained during the presentation, it has been approved, the merger with Liberbank, in their respective shareholders' general meetings and teams from both banks are currently working in the integration. We have established different teams to work, and they are in -- at full speed to be ready for the formal approval. And now we need to wait for all formal authorizations that we expect to have at the end of the second quarter or beginning of the third one. It doesn't depend on us, but we need to wait for the formal green light. If the authorizations arrive when we expect, we will publish half year results as a single bank. But as I said before, this is condition to the reception and confirmation of all the authorizations.

[Jaime Hernández Marcos, Head of Investor Relations]

Thank you, Pablo. The next one is also related to the merger. If we can provide an update on the final impairments and final impacts coming from the merger with Liberbank?

[Pablo González Martín, CFO & General Director of Finance]

Yes. As I said before, we are currently working in the integration, and we expect to explain the final details of the merger next quarter once we have received the authorizations and the required formal approvals. We have already anticipated the main details of the transaction. But as you can imagine, final impacts will be explained in detail once we receive the mentioned approvals.

[Jaime Hernández Marcos, Head of Investor Relations]

One is also related, but probably it's worth mentioning, also on the merger. If we can clarify more details regarding the potential capacity adjustment required to meet with the cost synergies that we have announced, Pablo?

[Pablo González Martín, CFO & General Director of Finance]

Well, at this moment, as you can imagine, we cannot provide more details regarding the specific measures, among others, because as we have made in the past, in different occasions, we want to discuss the terms and try to reach an agreement with the unions before. So it is not the moment to provide more details regarding this type of adjustment. That we will disclose at due time.

[Jaime Hernández Marcos, Head of Investor Relations]

Thank you, Pablo. We got several questions. Lots of them regarding guidance for different P&L lines for both on a stand-alone basis, but also for the combined entity going forward. If we can provide some color on guidance, Pablo?

[Pablo González Martín, CFO & General Director of Finance]

Well, under a stand-alone basis, we already provided an update last quarter on our guidance, and this has been confirmed with this quarter trends. But for the combined entity, it is too soon to be more specific. As I said before, we are expecting to receive all the authorizations of the merger before the summer break with the idea of reporting the second quarter '21 results together with Liberbank as a single bank for the first time. As you can imagine, the trends of the combined entity will be affected by the initial adjustments. So we prefer to wait until the formal integration before updating or providing any further guidance.

[Jaime Hernández Marcos, Head of Investor Relations]

Thank you, Pablo. A very specific one coming from Mario Ropero from Bestinver. If we can update Unicaja Banco high-yield deposits balances that will mature in the coming quarters?

[Pablo González Martín, CFO & General Director of Finance]

Yes. In this first quarter, we have around EUR 200 million that has matured, and we still have another EUR 225 million maturing this year. Around EUR 150 million will be in the second quarter, and the remaining EUR 75 million will be in the third quarter of this year. So as you know, these deposits have a very high cost of around 4%. So our cost of deposits will continue to benefit from these maturities during the next quarters.

[Jaime Hernández Marcos, Head of Investor Relations]

Thank you, Pablo. Can we provide an update on our debt portfolio ALM strategy?

[Pablo González Martín, CFO & General Director of Finance]

Yes. Going forward, the contribution of our debt portfolio, as we have seen this quarter, will be slightly below the current levels, as I mentioned in the previous presentation, mainly because of the maturity of plus EUR 2 billion, EUR 3 billion of bonds in 2021. As we explained in the past, the contribution of the debt portfolio in 2020 was slightly higher-than-expected as we bought in advanced bonds that were expected to be purchased in 2021. Now we expect its contribution to come back to a more normalized level throughout the year. Regarding the strategy, there are no changes with previous quarters and the main objective continues to be invest -- to be to invest the structural excess liquidity of the bank and mainly in European government bonds with medium-term maturity that will -- allows us to obtain a stable income contribution. We also manage and hedge the interest rate risk and credit risk of this portfolio on a regular basis. And just to give you some color, the unrealized capital gains in the amortized cost debt portfolio at the end of the first quarter were very similar to the year-end, although we made EUR 40 million of trading profit, and they are around EUR 800 million. So it's a very significant unrealized capital gains or gains in this portfolio, and we follow closely the evaluation of the portfolio and the market conditions, and trying to secure part of these current unrealized gains and lock some of them for the next 2, 3 years. So we have enough time to manage the portfolio in advance. Again, as a reminder, it is also worth noting that the big bulk of the portfolio is a structural bond portfolio that is accounted in amortized cost. So there's no impact on P&L or equity on the volatility of the prices of the bonds.

[Jaime Hernández Marcos, Head of Investor Relations]

Thanks, Pablo. The next one on TLTRO III. If we can update the situation and the strategy on TLTRO III?

[Pablo González Martín, CFO & General Director of Finance]

Yes. We fulfill the, as we were expecting, the TLTRO III requirements in March. So we will extend and benefit from the extra 50 basis points until June '21. The ECB announced in December last year the possibility to benefit with this extra 50 basis points of lower funding cost in the 12-month period that goes from June '21 to June '22, and we also expect to comply with that. Having said that, the measure of this requirement on December '21 will consider Unicaja and Liberbank loan growth together. In December, also -- it's worth mentioning that in December last year, the ECB also announced the possibility of increasing by 10% the TLTRO funding. So in March '21, we increased our balances of the TLTRO from EUR 5 billion to EUR 5.5 billion.

[Jaime Hernández Marcos, Head of Investor Relations]

Thank you, Pablo. The next one on funding plans. If we're going to update what are our plans regarding issuance ahead?

[Pablo González Martín, CFO & General Director of Finance]

Yes. And all the new issuance to come in the next years will be mainly to comply with the MREL requirement. In the merger project that we presented with Liberbank, we included a plan of the potential issuance to comply with MREL, and the transactions included were around EUR 500 million of Tier 1, EUR 300 million of Tier 2 to refinance the Liberbank redemption and around EUR 1.7 billion in senior. As you can imagine, this funding plan should be considered as a base case that could have some changes depending on the final requirements for the combined entity. And regarding the timing on the issuance plan, we will calendar the different issuance in a prudent approach. But at the same time, trying to be opportunistic with very good market conditions for the different instruments.

[Jaime Hernández Marcos, Head of Investor Relations]

Thanks, Pablo. The next one on interest rate sensitivity. If we can update our sensitivity, please?

[Pablo González Martín, CFO & General Director of Finance]

Yes. Considering a constant balance sheet on a parallel and instantaneous, 10 basis point drop in the rate curve. Once the balance sheet is fully repriced, we would have an impact in NII of around minus 2%. If this 10 basis point movement were upwards, the positive impact on NII would be also around 2%. And under this actual current negative short-term rates environment, an increase in short-term rates will have a positive impact in the net interest margin once the balance sheet is fully repriced.

[Jaime Hernández Marcos, Head of Investor Relations]

Thank you, Pablo. Moving to costs -- sorry, to fees. We got some specific questions on what was -- if we can explain what was the one-off that you mentioned in the presentation and the expected trends regarding fees?

[Pablo González Martín, CFO & General Director of Finance]

Yes. And as I said before, it's the -- to give a guidance on the combined bank, it's hard. But as you can see on -- in a stand-alone basis, we continue to expect a very positive trend for fees going forward. And obviously, this will apply for the combined entity as well. But regarding the one-off in the first quarter of 2021, net fees grew 1% year-on-year, but such growth was even higher if we consider, as I said, that there was a one-off of around EUR 3 million coming from our insurance unit business that is included in the nonbanking fees last year. That was included in the first quarter of last year. So this is important because excluding this one-off, the nonbanking fees will be growing at high single-digit. Well, they are decreasing, but they will be growing at low single-digit in the quarter, something that together with the 10% growth in payment and collection fees, explain the reported trend that make us feel confident with the significant positive trend expected in the future, as we mentioned in the previous quarter in our stand-alone guidance.

[Jaime Hernández Marcos, Head of Investor Relations]

Yes. Moving through the P&L, on other operating income and expenses, if we can please explain the strength of other operating income in the quarter, Pablo?

[Pablo González Martín, CFO & General Director of Finance]

Yes. As you all know, in our case, there's some volatility in this P&L line, mainly explained by the contribution of our real estate servicer. However, this quarter, the improvement was mainly explained by the higher contribution from Union Del Duero that, as you all know, is an insurance company in runoff that contributed in the quarter with EUR 8 million compared with EUR 5 million of the previous quarter and the previous year. It is also worth noting that this quarter, the trend is also supported by lower foreclosed assets maintenance costs and also higher income from the real estate rentals.

[Jaime Hernández Marcos, Head of Investor Relations]

Thank you, Pablo. Moving to costs. If we can update the cost trends? We can elaborate a little bit further on the trends regarding expenses.

[Pablo González Martín, CFO & General Director of Finance]

The total cost in the first quarter remained almost 6% below the previous year with general expenses falling more than 13%. We are not providing specific guidance for the combined bank because, as you can imagine, we will have to update the situation once we formalize the merger with Liberbank. However, the first quarter costs have been booked considering the stand-alone budget, and it is worth noting that in the first quarter of '21, annualized personal expenses are 5% below 2020, something that shows how committed we are with the cost cutting plan.

[Jaime Hernández Marcos, Head of Investor Relations]

Thank you, again, Pablo. Moving to asset quality. We've got several questions regarding the cost of risk. So I don't know if we can -- Pablo, if you can elaborate a little bit further.

[Pablo González Martín, CFO & General Director of Finance]

Yes. As you saw in the presentation, the trend remains positive. Quarterly loan loss charges included the EUR 25 million of additional COVID-related provisions, leaving the total cost of risk at 52 basis points. This was partially explained by the transfer of almost EUR 60 million of subjective NPLs into the stage 3, also known as unlikely-to-pay loans that, as you know, are loans consider NPLs, but that don't have 90 days overdue. And also, stage 2 loans grew around EUR 100 million in the quarter, something that also partially explain the provisioning effort of the quarter. Such provisioning effort also explain the additional improvement of our NPL coverage, as I mentioned in the presentation. And finally, I think it's worth noting that excluding these COVID provisions, the cost of risk decreases to 16 basis points, very close to last year recurrent cost of risk level.

[Jaime Hernández Marcos, Head of Investor Relations]

Pablo, also regarding asset quality, if we can explain the NPL trends and the NPL balance performance in the quarter?

[Pablo González Martín, CFO & General Director of Finance]

The asset quality trends remained stable in the quarter with the total NPAs still decreasing, although at slower pace than in previous quarters. As I explained before, this trend is partially explained by the reclassification of unlikely-to-pay loans into stage 3, following a very conservative review of the whole portfolio. And these loans are, what we call, subjective NPLs. In other words, these are loans that do not have 90 days overdue. But following a prudent analysis, we have found some kind of weakness in such loans, and we decided to consider them as NPLs. So they have been reclassified into stage 3 in the quarter. But the big bulk of these loans are still paying installments. This reclassification into stage 3 explain that NPL balances in the quarter were almost flat, rather than decreasing like in recent quarters.On the other hand, gross foreclosed assets fell 2% quarter-on-quarter. And in net terms, they are just representing 0.6% of our assets, so less than EUR 400 million. So overall NPAs, despite following a quite prudent approach, fell 1% quarter-on-quarter and 8% year-on-year in first quarter '21. A very positive trend, especially considering the economic impact of the pandemic.

[Jaime Hernández Marcos, Head of Investor Relations]

Also on asset quality, Pablo, a very specific one regarding the staging. If we can explain the trends of our risk exposure by stage?

[Pablo González Martín, CFO & General Director of Finance]

Yes. Stage 1 and 3 balances, as I mentioned, especially for the stage 3, we're pretty stable in the quarter. In the case of stage 2, as I said before, it grew for around EUR 100 million in the quarter, reflecting this conservative and prudent approach that we have in reviewing the portfolio. It is also worth noting that the stage 2 coverage remained stable in the quarter at 11%, which is one of the highest coverage for the stage 2, if not the highest of the sector.

[Jaime Hernández Marcos, Head of Investor Relations]

Thank you Pablo. A final one on asset quality. If we can provide more -- some more details on the moratoria and the ICO loans asset quality trends?

[Pablo González Martín, CFO & General Director of Finance]

Yes. As you saw in the presentation, we have relative small exposure to moratoria and ICO loans. And out of the moratoria loans that have mature and that is close to 1/3 of the initial balances, 4% have more than 90 days overdue, which represent EUR 17 million. So regarding the ICO loans, the situation, as you can imagine, is even better with 99.4% of the balances performing. So I think, considering the low exposure and what has happened -- what is happening with them, we are confident that the evolution will be positive.

[Jaime Hernández Marcos, Head of Investor Relations]

Pablo, moving to solvency. Starting with the IRB models, if we can update the situation from the approval -- expected approval of the IRB models?

[Pablo González Martín, CFO & General Director of Finance]

Yes. We expect to have the ECB approval very soon, probably before formalizing the merger. But it doesn't depend on us. So we need to wait, and we cannot confirm when it will happen. So however, this is only a matter of time. And hopefully, we will have news shortly, and our solvency will be -- improve even further and will become more comparable with the one of our peers.

[Jaime Hernández Marcos, Head of Investor Relations]

An update, Pablo, on dividends and dividend policy, please?

[Pablo González Martín, CFO & General Director of Finance]

Yes. As you probably saw, we approved in our AGM to pay EUR 17 million in cash against 2020 results. Out of these EUR 17 million, we have already paid EUR 12 million, the last 16th of April. And the remaining EUR 5 million to be paid after formalizing the merger with Liberbank. And the dividend was splitted in 2 different tranches in order not -- to not have an impact in the announced exchange ratio of the merger. And going forward, in the combined entity, as we said, our aim is to reach a cash payout ratio of around 50% as soon as possible and always, obviously, following the ECB recommendations.

[Jaime Hernández Marcos, Head of Investor Relations]

Thank you, Pablo. One final more -- also related to the dividend. If we are accruing, on what are we in terms of dividend in the quarter?

[Pablo González Martín, CFO & General Director of Finance]

Yes, yes. As we usually do, we only consider around half of net income in solvency. In other words, retain earnings in terms of solvency, reaching this quarter EUR 22 million compared with the EUR 43 million reported net income.

[Jaime Hernández Marcos, Head of Investor Relations]

Okay. That's all. The Investor Relations team will continue answering your questions off-line. Thank you very much for attending one more quarter, our results. Bye.

[Pablo González Martín, CFO & General Director of Finance]

Thank you very much.

[Jaime Hernández Marcos, Head of Investor Relations]

Bye.

[Pablo González Martín, CFO & General Director of Finance]

Bye.