How was 2016 for Bankinter? 

I think it was a very positive and satisfactory year.  The data speak for themselves. The income statement reflects a net profit of 490.1 million euros, which is a 30.4% increase over 2015. Profits before taxes totalled 676.7 million euros, 30.1% more than last year. Naturally, such high increases were influenced by our new business in Portugal, the acquisition of which was completed on 1 April. It even without that extraordinary effect, net profits and profits before taxes showed very favourable development with 13.4% and 13.2% growth, respectively.

In terms of asset quality, solvency, profitability and efficiency the performance for the year was also very favourable. The non-performing asset rate fell to 4.01%, 12 basis points less than in 2015, despite the fact that we assumed the defaults in the Portugal business which resulted in an increase in this indicator. If this effect is eliminated, the rate fell to 3.56% Bankinter maintained a CET1 capital ratio (‘fully loaded‘, with the Basel criteria that will be enforcing 2019) of 11.2%, considerably higher than regulatory requirements.  Our return on equity ratio, excluding Portugal, was 10.9% and the highest in the sector in Spain. 

The listed price of our shares throughout 2016 reflected the market's confidence in our positive results and their sustainability over the coming years. Bankinter rose 12.5% in the stock market, which contrasts with negative returns (in some cases very notable), obtained by the great majority of the main Spanish and European banks during the year.

In summary, we ended an excellent year and this completes four consecutive years with high rates of growth and we have extended a trajectory of successes that initially allowed us to quickly overcome the economic and financial crisis to then allow us to attain the best results in our history.  

The Group's income statement has improved significantly over the past few years, despite the fact that the environment in the sector is not favourable. Are they sustainable results?

Without any doubt. In four years we multiplied net profits by four, which is a very notable increase, but I am sure that those results are sustainable over time for various reasons. On the one hand, because most of this growth is supported by recurring business profits, which guarantees the continuity of future earnings. Secondly, because both the lines of business that we can consider to be mature, as well as those that are not yet mature and have further to go, are continuing to reflect excellent performance. Over the past few years we have also been sowing seeds for the future through investments in strategic lines that we are sure will offer profits in the short and medium-term. We can also count on the entry of the business in Portugal, in which we have much hope. I believe that our results are therefore sustainable over time.

The commitment to Portugal is one of the most characteristic notes of the year. Almost one year after the acquisition of Barclays' business, our expectations being met?

Indeed, after nine months of operations Bankinter Portugal is meeting our expectations. The integration process is mostly completed and we have created a new organizational structure with the support of a very competent team of professionals. The problems in the Portuguese banking sector have not only not discouraged us but rather open a door to new business opportunities, as was the case in Spain in the middle of the financial and economic crisis. The results will be seen in 2017 and subsequent years.

Portugal now contributes 8% of our balance sheet and we intend to increase that percentage to 15% within a reasonable period of time. We have ambitious objectives to grow in mortgages and Personal Banking. We are also strongly committed to Corporate Banking, including international trade financing business and we intend to transplant our successful strategy in the Spanish market. We believe that Portugal has great potential.

In addition to Portugal, what were the most notable business areas in 2016?

Most of the lines of business responded well, since the strategic businesses continued to grow and their contribution to recurring revenues was maintained. The gross margin on consumer financing, which is an activity that we relaunched through Bankinter Consumer Finance to take advantage of the changing trend in domestic spending, increased by 40.7%. We have much hope in this area and to reinforce that we have prepared an ambitious business and development plan, which includes 100% online processes and an intensive use of techniques that associate data that are apparently unrelated, what is known as ‘Big Data‘ and is so important in mass markets. We have also made great efforts in Personal Banking and the results are there, with a 7.4% increase in the assets under management. 

In other traditional businesses, or those that we could consider to be mature, development has also been very satisfactory. In Private Banking, which for years has been one of our strong points, assets under management increased by 11.4%. If we look at our Corporate Banking business, the year was also positive since loan book, even excluding the Portugal business, increased by 6.7% and we obtained a 5.5% market share of new lending. I must note in this respect the expansion of the international trade financing business, whose gross margin grew by 27% last year when it already represented 20.4% of the Corporate Banking segment. 

As regards insurance, both policies and premiums in Línea Directa increased by 8.4% and 8.7%, respectively, with particularly significant growth in the home insurance policies and high profitability of the business was maintained, with an exceptional return on equity of 33.2% and the best margins in the market. I will not tire of noting that the contribution of Linea Directa to the Group's revenues and profits is, year after year, extraordinary and provides us with solid confidence in the future.

Speaking of the future, what is the outlook for 2017?

Once again the year is marked by uncertainty, which is one of the characteristic signs of our times. The Brexit, the new president in the United States and the coming critical elections in several countries in the European Union and the formation in Spain of a Government with limited parliamentary support are elements that make the national and international scenario more insecure. The situation in the banking sector is also complex, in an environment of very low interest rates, although there are now signs that the situation may start to reverse, and intense regulatory pressure for banks to reinforce their solvency levels and improve risk management. This is the framework of restrictions that we must manage and what we must do is to create a solid business base and be prepared for future events. I believe that the Group's foundation is strong and, therefore, I am confident that throughout 2017 we can maintain our growth in terms of the number of customers and the volume of loans, deposits and revenues. It seems to me that it is particularly relevant that we have been able to increase our loans to customers one more year, because I believe that it is the manner of helping to drive the economic recovery.

In this context of difficulty and uncertainty, what are the immediate challenges faced by the Bank? 

One of our fundamental priorities is to protect the profitability of the business, because low interest rates represent a great challenge to our margins. It is true that at Bankinter we depend less on interest rates than most Spanish and European banks, but net interest income still constitutes 55% of our gross interest margin. To offset the negative trend in the interest margin we are obligated to find new sources of revenues, maintain spreads and promote lines of business that do not excessively depend on interest rates. Increasing revenues through fees is an option in this connection. However, I believe that bank fees cannot be established or raised without justification. Fees cause great irritation if the customer does not perceive that added value is offered. For that reason any attempt to raise revenues in that way must be very well supported and justified by the added value perceived by the customer of the service. 

Another of our immediate challenges is to improve our efficiency. In our case this does not involve adjusting the workforce and reducing the number of branches, because the Bank is well sized but rather to find formulas to improve our processes and to be more productive. In addition, the non-performing asset ratio must be monitored. We continue to be, with a great difference, the Spanish bank with the highest quality asset portfolio, but we cannot let our guard down and we must be extremely prudent with our risk policy to avoid exchanging growth for non-performing assets. Our growth must be healthy and sustainable over time. The commitments deriving from Banking Union, which promotes the improvement of risk management throughout the organisation’s structure, may assist us in this respect. 

What role does the technological revolution play in these challenges?

It is absolutely key. The technological revolution is part of the problem and of the solution. It forms part of our problems because technology is changing the rules of the game in the financial industry and customer habits. The data is there: Only 9% of our customers are purely physical, 31% digital and 60% are both.  However, technology is primarily part of the solution. Technology allows us to manage more volume with fewer resources and brings enormous possibilities to make banking processes more efficient and to improve relationships with our customers. 

However, the projects with which we become involved must be selected very well. Historically, and by conviction, at Bankinter we are well trained to take on technological change and we know that the possibilities are infinite. Accordingly, we must use very rigorous criteria when selecting our investments and ensure that they provide measurable results in the shortest time possible. We must also adapt the profiles of our professionals to the new reality. With the introduction of new technologies we need fewer professionals in purely administrative positions and more dedicated to advisory services and the creation of services that provide value to customers. 

We must renew our technology platforms and perfect the structure of our operating processes, but without impairing or losing the focus on business needs, because the market is increasingly more competitive and does not allow for distractions. To take on these challenges, in 2016 we significantly reinforced our technology and operations service subsidiary, Bankinter Global Services, strengthening both the transformation efforts and attention to the day-to-day services. Innovation is one of our identity characteristics and we wish to again demonstrate that with group of transformation projects currently being implemented, which will lay the foundation for the Bankinter of the future. 

What is the Bank's position given the new international regulatory and supervision requirements?

I consider that we are in a good situation. As I have already mentioned, our capital levels are clearly higher than those required by the supervisor. I also believe that we are in a position to assume our future obligations to cover European regulations on resolution processes. While it is important to comply with those ratios and requirements, it is even more important that the inflationary spiral affecting capital requirements be stopped and that we know with absolute certainty what regulatory framework is applicable to banks. Regulatory stability is fundamental so that we can devote all of our energy to the management of the multiple challenges facing the financial industry. I believe that there must be an international debate regarding the advisability of extending the new regulation to technological financial companies, the so-called fintech, which today compete in some market segments under advantageous conditions compared with traditional credit institutions since they do not have to comply with capital obligations, risk controls and corporate governance regulations that are required of the banks.