Strategy

Bankinter's project is mainly geared towards sustained and balanced growth. It is therefore defined as a bank for customers, who ensure a solid and recurring income base and guarantee sustainable earnings over time.

Another of its strategic cornerstones is innovation, which forms part of the Bank's corporate genes and which over the past two decades has placed the bank at the forefront in terms of products and services offered in the Spanish financial sector. To support this line of work, in 2016 Bankinter promoted the digitalisation process, which provides a response to the growing demands of customers for more and better digital services, offers the possibility of improving efficiency and enables the Bank to compete in the areas where it would be at a disadvantage because of its size compared to other larger credit institutions.

Another important pillar of its strategy is the search for diversification, both in terms of revenue sources and lines of business, in order to obtain recurring income and sustainable results. As part of its strategy, in recent yearsBankinter has refocused its business in order to become less dependent on net interest income. Interest rates that are near zero limit the capacity of credit institutions to earn money by taking deposits and granting loans. The Bank has therefore strengthened its business lines that are less dependent on net interest income, such as added value products and services for Enterprise Banking (transactional banking, international business, investment banking, etc.), Private Banking and other businesses that respond positively to low interest rates, such as the insurance business, both with regard to bancassurance, through the joint venture with Mapfre, and with regard to direct sales, through its subsidiary Línea Directa.

The investment in Portugal also responds to the aforementioned diversification goal, whereby the Bank intends to reproduce the model that is giving us such excellent results in Spain in our neighbouring country, which will provide numerous opportunities for growth in areas such as private banking and asset management.

With these strategic lines as a guide, the results of the main business areas were as follows:

• Digital transformation. The Digital Banking division was created in order to accelerate the digitalisation process and improve customer relations. A plan was launched to improve the Bank's websites in order to facilitate sales and attract customers. In addition, the processes were redesigned with the aim of improving service and user experience and a technological transformation plan was launched in order to revamp and simplify the internal platform and make it more efficient.
• Integration of Portugal. The acquisition of the Barclays retail business was successfully concluded on 1 April 2016 and the migration process, which was especially complex from a technical point of view, has virtually been completed. Progress was also made on the implementation of Bankinter's cultural and business model. The results of the Portuguese business during these nine months of the year were even better than expected.
• Private Banking. This is one of the Bank's reference businesses due to its ability to compete in a very complex market. In 2016 the Bank continued investing in this area. Growth in customer assets increased despite the difficult investment climate, which offers good prospects in terms of return for 2017 and 2018.
• Enterprise Banking. The restructuring of this business segment carried out in 2015 is now starting to bear fruit. Corporate Banking, which was the core of its operations, is losing market share in favour of small and medium enterprises. This diversification, together with the launch of new innovative financing products (for example, the loan for tax payments), is benefiting business associated with financing, such as collections, payments, transfers and other business. Its activity is concentrated in companies with high and low risk ratings.
• Bankinter Consumer Finance. Another strategic lever. In 2016 new technological tools were incorporated to refine the risk analysis in order to drive a healthy rate of growth. Agreements with third parties (point-of-sale financing) expanded the scope of business.
• Insurance. Growth in the mortgage business benefited the related insurance business and the agreement reached with Mapfre continued to bear fruit. Línea Directa, which is a fundamental supplement to banking activities, also had another year with excellent results in terms of revenue, yields and solvency.