The economic reality of the year was shaped by the pandemic and the restrictive measures put in place to contain it. These resulted in an unprecedented contraction of the Spanish economy, which was affected more than others because of our greater dependence on severely hit sectors such as tourism, leisure and consumption.
Banking has played a crucial role in this difficult situation, guaranteeing financing for households in vulnerable situations and companies in the worst affected sectors, ensuring the continuity of their businesses.
These measures, together with those launched by public authorities, have cushioned the impact of the crisis, which will continue to generate economic uncertainty over the coming quarters.
In anticipation of this change in the macroeconomic scenario and to strengthen their balance sheets, in 2020 financial institutions made provisions to cover potential impairment of their profits. This will force the sector to redouble its efforts to improve the profitability of its business, which has long suffered from low interest rates, and improve efficiency.
Although this pandemic arrived when the financial sector was much more solvent than at the time of the last crisis, it is still accelerating ongoing restructuring and digitalisation processes. Some of these are well established but others have yet to be defined.
As in previous crises, Bankinter has been able to absorb these adversities due to its strong positioning in terms of risks, business strategy and type of customers.
Despite the extraordinary provisions made by the Bank – amounting to 242.5 million euros – which reduced annual earnings, the results of our business with customers were very positive. There was strong growth in all margins compared to the previous year, demonstrating our commercial drive and the strong results of all business lines. This was despite there being very little business activity during almost a whole quarter of 2020.
Bankinter has developed a strategy based on close relationships with customers, promoting advice and marketing products that contribute greater value and, consequently, higher returns for the Bank. These include investment funds and pensions, brokerage for fixed-income and equity securities, wealth management and alternative investment, where the Bank has become a leader in the Spanish market.
In the Corporate Banking area, the Bank's loan book received a major boost from ICO loans. It was also involved in active management of its customers' balance sheets. The Bank also consolidated the strong performance of some of its main sources of income, such as international and transactional business. It achieved this by applying exhaustive models to contain incidents and non-performing loans.
The result of this strategy on the Bank's two major areas is set out in detail in the Commercial Retail Banking and Business Banking chapter of this Report.
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