Bankinter posts first half net profit of €102.3 million, best six months results in years

The Bankinter Group has posted net profit of €102.3 million for the six months ended 30 June, and a pre-tax profit of €139.1 million. These figures are respectively 4.5 and 6.8 times those by June of 2012. These strong results do not include any extraordinary income entries and are driven by good performance by all sources of revenue, especially those deriving from strategic businesses such as private and corporate banking, and by the improvement in the insurance activity, together with the efforts made to contain costs, which led to an improved cost/income ratio of 42% for the banking business. It is the best first half result of the Bank in the last three years.

In comparing results it should also be borne in mind that in the first half of last year the Bank made all the additional provisions required by the two Royal Decrees on the Restructuring of the Finance Sector, and was the only bank still to post a profit after making these provisions in full.

At the same time the Bank continues to maintain high levels of solvency, asset quality well above that of the sector as a whole -these two facts have been praised by the rating agencies- and a financing structure that has continued the strengthening trend set in previous quarters.

The high quality of the Bank's assets, particularly in comparative terms, is reflected in a non-performing loans ratio of 4.6% (considerably less than half the average for the sector), a small portfolio of troubled assets and high degrees of coverage - 46.1% for non-performing loans and 37.3% for repossessed assets.

It is also noteworthy that Bankinter's portfolio of refinanced loans represents just 3.5% of total lending, as against the 12.8% average for other comparable banks.

Bankinter's portfolio of repossessed assets is very small and of high-quality, half of which consists of residential properties. The gross value of the portfolio is €640.2 million, with 37.3% cover. Furthermore, the Bank is selling them at an exceptionally fast pace, with gross sales of these assets representing 80% of gross new additions during the first half-year.

As regards solvency, Bankinter continues to strengthen its CT1 Ratios, reaching a CT1EBA Ratio of 10.9% at the end of the first half-year thanks to the generation of profits and above all to the recent CT1 EBA increase, carried out entirely from the asset revaluation reserve.

We would also highlight the comfortable structure of maturities for wholesale issues that the Bank has to meet in the short and medium term (€600 million in the third quarter of 2013 and €1.2 billion in 2014), for which the Bank has €8.3 billon in liquid assets.

In line with this, the Bank has continued to improve its financing structure, reducing its liquidity gap by €1.6 billion in the first half-year, while at the same time considerably strengthening the ratio of deposits to loans, which stood at 70% as at 30 June 2013, compared with 61.1% one year earlier.

Solid performance from strategic businesses: private and corporate banking, and insurance

As regards the various margins making up the income statement, the interest margin for the first six months reached €288.4 million, representing a fall of 14.8% compared with the same period ending 30 June of 2012, essentially caused by the impact on the mortgage portfolio of the sharp fall in 1-year EURIBOR, which is the main reference rate for mortgage lending. However, margins are starting to recover slightly, after bottoming out in the first quarter, and look likely to continue to recover for the rest of the year. In this respect we should point out that the interest margin for the second quarter was €155.8 million, 17.5% more than the first quarter, due to lower retail financing costs and improved differentials on the lending portfolio.

Gross operating profit came to €657.4 million for the six months to 30 June 2013, representing an increase of 2.4% on the previous year, thanks to the good performance of net commissions, which grew by 18% in the year as a result of the success of the play on private banking and the impetus from corporate transactional business.

Profit before provisions (€322.3 million as at 30 June 2013), was 6.1% up on H1 2012, enabling the bank to further strengthen the balance sheet against any future deterioration.

Turning to the balance sheet, Bankinter's total assets at the end of the first half stood at €57,827 million, 4.1% less than at 30 June 2012. Resources under the Bank's control amounted to €45,963.8 million, representing an increase of 8.8%. Among these, we would highlight retail resources (sight accounts, deposits and promissory notes) which increased by 8.7%; and the spectacular increase in off-balance sheet resources, particularly investment funds, which grew by 42.9%.

Customer lending amounted to €41,191.9 million, 5% less than at 30 June 2012. In this regard we would add that Bankinter continues to shift the composition of its lending portfolio towards a greater weighting of non-mortgage lending and consequently towards improved margins.

As regards customer business, the Bank intensified the positive trend seen last year in winning over new customers. Thus in the first half of 2013 the Bank gained 4.3% more new customers than in the same period of 2012, a considerable portion of them in the private banking segment.

The success of the Bank's commitment to this segment is also reflected in the 8.1% increase in assets held with the Bank by these clients in the first six months of the year. Another positive figure is the number of SICAV open-ended collective investment funds managed by the Bank, which stood at 271 at the end of the first half of this year, 8.8% more than a year before. This figure is a good indicator of the success of Bankinter's business model in the private banking customer segment, given that SICAVs are one of the main investment vehicles.

A similar trend was also shown by the insurance sales and distribution business, and in particular the continuing good performance of Línea Directa, whose portfolio of policies grew by considerably more than the sector average, enabling the company to increase its market share quarter after quarter to 6.2% at the end of June.

The total number of policies of Línea Directa as at 30 June 2013 stood at 2.05 million, representing an increase of 6.5% compared with the end of the first half of 2012. New policy subscriptions showed a strong acceleration in this first half-year compared with last year: 75,600 new policies were sold in the half-year, which was 36.5% more than in the same period of last year.

One of the reasons for the good performance of customer business is the quality of service provided from all the Bank's channels and networks. According to EQUOS RCB's "Analysis of objective quality in commercial banking networks", Bankinter comes out on top at the end of the first half of this year, with 7.32 points compared with the market average of 6.06.