Another record year in profit

The Bankinter Group ended 2016 with a new earnings record, despite it being a year full of uncertainties both in Spain and abroad. Both before tax and net earnings grew by more than 30%. These results include data on the business acquired in Portugal from Barclays, which was effectively recognised by Bankinter on 1 April.

The results obtained in 2016 reveal that the typical customer business has maintained all of its potential, with sharp growth in lending, international business banking, salary accounts, mortgages and consumer loans, among others.

The Bank also revalidated its status as the most profitable listed bank in Spain and maintained its traditional competitive advantage in the quality of its assets (with a 4% non-performing loan ratio) and solvency (with capital much higher than required).

The notable information for 2016 is as follows:

• Earnings. Earnings before taxes totalled 676.7 million euros, 30.1% more than in 2015. Net earnings increased by 30.4% to 490.1 million euros. Excluding Portugal, earnings before taxes totalled 588.8 million euros and net earnings 426.5 million euros, which represents 13.2% and 13.4% increases, respectively, over last year.
• Share price. The share price began the year at 6.54 euros and ended at 7.36 euros. Capitalisation rose from 5.88 billion euros to 6.62 billion euros, which ranks Bankinter as the sixth bank by stock market value. An average of 2.9 million shares were traded daily.
• Return. If dividends are added to Bankinter's share price, return in 2016 rose by 16%, the highest in the Spanish banking sector. ROE reached 10.9%, excluding Portugal.
• Non-performing loans. Non-performing loans fell from 4.13% to 4.01%, despite including the figure for the Portuguese business, which is higher than that of the rest of the Group in relative terms. If this figure is excluded, Bankinter's non-performing loan ratio would have ended 2016 at 3.56%, less than half the average in the sector, thanks to the Bank's successful risk management model.
• Solvency. The fully loaded CET1 capital ratio ended the year at 11.2% and phased-in CET1 was 11.77%, much higher than the level required by the ECB for Bankinter in 2017.
• Financing structure. The Bank strengthened its financing structure with a deposit-to-loan ratio of 90.4% at 31 December, when one year before it was 83.5%. The liquidity gap dropped to 5.4 billion euros, 3.1 billion euros less than in 2015. Maturities of wholesale issues outstanding up until 2019 amounted to 2.6 billion euros, and to cover these maturities, the Bank had liquid assets valued at 10 billion euros and a bond issuing capacity valued at a further 6.7 billion euros.
• Margins. The interest margin contributed 979 million euros, up 12.6% over last year and the gross margin was 1.71 billion euros (+9.5). The operating margin totalled 815.1 million euros (+0.95), despite the expenses deriving from the integration of the Portuguese business and others relating to digitalisation. The efficiency ratio of the banking activity with depreciation stood at 45.1%, (42.9% excluding Portugal).
• Total customer loans and receivables. Including Portugal, the figure rose to 51.33 billion euros (+16.2%) and excluding Portugal the figure was 46.78 billion euros (+5.9%). This represents organic growth totalling 2.6 billion euros in a year in which the sector reduced its loan volume by 3.1%.
• Controlled resources. They grew by 15.5% to 75.41 billion euros. The performance of retail resources was notable at 44.13 billion euros (+27.5%), and off-balance sheet items (investment funds, pension funds and asset management) increased by 12.1%. Retail resources excluding Portugal improved by 16.9%, up 14 percentage points on the sector average.

The results in 2016 revealed that Bankinter's customer business has maintained all of its potential, has expanded its scope after the strategic opening of the Portuguese market, and continues to be the primary contributor to the Group's revenue. The results of its main business lines are as follows:

• Enterprise Banking. Enterprise Banking made the largest contribution to gross income. The lending portfolio amounted to 21 billion euros at 31 December, not including Portugal, which represented growth of 6.7%, greater than that of the Spanish banking sector as a whole (5%). The international business was consolidated as one of the strongest areas of Enterprise Banking, as it increased its gross margin by 27%.
• Retail Banking. In this segment, which refers to individuals, the results of the two products that the Bank has targeted are noteworthy of mention, given their strong ability to connect with customers. At 2016 year-end the salary accounts portfolio amounted to 5.59 billion euros (+33.1%) and new residential mortgages reached 2.33 billion euros (+25.7%, compared to the average 8% growth for the sector).
• Private Banking. The assets managed reached 31.2 billion euros (+11.4%), after capturing 3.5 billion euros. Bankinter's image of solvency decisively contributed to this increase, along with the role played by the Luxembourg office, which enables customers to diversify their investments in one of the countries with the greatest legal certainty worldwide.
• Consumer Finance. This business is operated through Bankinter Consumer Finance, which ended 2016 with 898,000 customers, up 23% on 2015. Its investment climbed to 1.05 billion euros (+46%).
• Línea Directa. This segment ended the year with 2.75 million policies (2.37 million in 2015). This growth was due to a 7.1% increase in car insurance and a 13.5% rise in homeowners insurance. Insurance premiums generated 738.7 million euros, compared to the 679.7 million euros of the previous year. The company maintains the business' high return, with a ROE of 33.2%.
• Bankinter Portugal. The result in the nine-month period from 1 April to 31 December offers high hopes regarding its potential: customer funds increased by 24% and investment rose by 3%. Gross income totalled 90.2 million euros and profit before taxes amounted to 7.7 million euros.

Lastly, the progress made in the digital transformation is noteworthy of mention. Thanks to this transformation process, 31% of Bankinter's customers are now only using online banking. Traditional channels and digital channels are indistinctly used by 60% and only 9% use solely branch offices or telephone banking. The Coinc digital savings platform, which is primarily directed towards young people, expanded and improved its services, thus giving rise to a 34% increase in the number of customers.