How would you sum up Bankinter's 2022 financial year?
Without wishing to sound triumphalist, I think the year can be described as very successful. The net result was 560.2 million euro. Excluding the capital gain of 895 million euro generated in 2021 from the spin-off of Línea Directa Aseguradora, net profit grew by 28.1%. This means that the Bank's objective of restoring the profit levels obtained before the pandemic and the spin-off of Línea Directa has been achieved one year ahead of schedule.
The favourable results reflect the solid performance of the Bank's business areas, which in turn led to an improvement in all income statement margins.
Net interest income amounted to 1.5367 billion euro by the end of the year, 20.5% more than in the previous year, thanks to an improvement in net interest margin. Gross operating income, which in addition to net interest income includes fees from asset management and other operations, reached 2.0843 billion euro, 12.3% more than in 2021. The contributions to gross operating income made by the Group's new businesses, such as Portugal, Avant Money in Ireland and EVO Banco, are growing and already constitute a significant part of the total. Operating profit before provisions increased by 16.4% to 1.1663 billion euro.
Lending to customers reached 74.2434 billion euro, 9.1% more than the previous year, reflecting Bankinter's support for household and business initiatives, and retail funds rose by 3.7% to 75.1643 billion euro.
I would like to stress that these results, which are the fruit of a homogeneous and consistent development in the Bank's different business areas, were achieved in a complicated environment for the world economy in general and for the Spanish economy in particular. Following the invasion of Ukraine, a combination of imbalances, such as difficulties in the supply of commodities and rising energy prices, led to a persistent bout of inflationary pressures, forcing central banks to raise interest rates and slowing the ongoing economic recovery. Spain was also affected, although the resilience of the labour market and the strength of exports allowed the economy to grow faster than the European average.
Bankinter has been able to adapt to this highly complex scenario and increase its operating margins in the process, strengthening all its business areas and growing its market share.
What other indicators from the year can you highlight?
The balance sheet for the year was also very satisfactory in terms of asset quality, solvency, profitability, efficiency and liquidity.
The non-performing loan ratio fell to 2.10%, 14 basis points lower than in 2021, despite the worsening economic environment, and well below the sector average. I would like to highlight this aspect because we are used to Bankinter having the lowest NPL ratio of all Spanish banks and sometimes we do not give the figure the importance it deserves. In addition, in 2022 we increased the NPL coverage from 63.6% to 66.3%.
Regarding solvency, Bankinter closed 2022 with a CET1 fully-loaded capital ratio of 12%, with a wide margin over the minimum level of requirement set for our entity by the ECB, which will remains at 7.726% in 2023, the lowest among listed Spanish banks. Our profitability ratio, measured in terms of RoE, rose to 12%, compared to 9.6% in the previous year, and was among the highest in the sector in Spain.
The Bank's efficiency ratio, i.e. the ratio of operating costs to revenues, was 44%, which compares favourably with 45.99% in 2021. As regards liquidity, the customer funding gap remained negative, meaning that the bank has more customer deposits than loans, with a ratio of 102.8%.
In more detail, what were the business units and products that performed best?
As regards the more mature businesses, where we have been operating for a longer period of time, performance was very positive. In Corporate Banking, lending increased by 9.3%, thanks above all to a greater commercial drive, the good performance of international business, favoured by the boost in exports, and the strong expansion of transactional activity, which is a true reflection of the Bank's closer ties with the business fabric.
Bankinter has been able to adapt to this highly complex scenario and increase its operating margins in the process, strengthening its business units and growing its market share.
Bankinter has been able to adapt to this highly complex scenario and increase its operating margins in the process, strengthening its business units and growing its market share.
As for our venture in Ireland, our most recent international venture, it is growing exponentially both in consumer finance and, above all, in mortgages, a market in which we have been competing for a short time. EVO Banco, the Group's digital brand, also showed off very dynamic growth. Its loan book increased by 45%, reaching 2.7 billion euro, and we expect it to break even in 2023.
Apart from these, there many other businesses we continue to consolidate, creating new opportunities for them. This is the case of Bankinter Investment, which boasts a new alternative investment manager, enabling us to expand the pool of potential customers in a business where we are already a reference. We also expect great things from our insurance business, based on the new alliance we have signed with Liberty, as well as in consumer finance, which we operate through Bankinter Consumer Finance.
The bank tax has come into force in 2023. What impact can it have on institutions?
The tax damages the profitability of the bank, and therefore damages our employees, our customers and our shareholders. But, most relevantly, it has a negative impact on the economy as a whole and on the confidence in Spain as a country. We believe that this is an unfair, arbitrary and discriminatory tax. This has been recognised by numerous national and international bodies.
It also penalises a sector that already pays the increased corporate tax rate of 30%, as opposed to the generally applicable 25%. Its entry into force will make Spanish banks less competitive than their counterparts in Europe, where similar legislation does not exist, and will reduce their attractiveness to investors, which will undoubtedly end up hurting their ability to continue lending to businesses and households.
All this generates uncertainty in regulation, makes markets distrustful of the Spanish tax system and damages the image of our economy, which is of particular concern to us. That is why we from Bankinter are going to appeal and we hope that the courts will end up agreeing with us.
To what extent does the tax also damage the reputation of the banking sector?
It obviously has a negative impact, but not so much because of the tax itself as because of the false arguments used to justify its creation. We are back to being "the bad guys in the movie". The aftermath of the 2008 crisis affected the image of the sector very negatively, sometimes fuelled by ideological or political reasons. Later, during the pandemic, we fought in the front lines, worked in precarious health conditions and demonstrated our unreserved support for businesses and households. I would like to think that this extraordinary effort had a favourable effect on the sector's reputation.
But now the banks are once again being presented as the unfair beneficiaries of a crisis situation, when the reality is that our current results are the fruit of a great collective effort, a search for efficiency and innovation, developed over many years. An effort for which, in Bankinter's case, we must thank the more than 6,000 professionals who make up our team. The reputational issue is not a trivial one, because the business of banks is based on trust, and we must continue to work to restore the image of the sector if we want our customers to trust us.
Is the framework agreement with the government on mortgage relief for vulnerable taxpayers going in that direction?
At Bankinter we will always seek solutions to help customers who find themselves in difficult situations. We proved it during the 2008 crisis, we proved it again throughout the coronavirus pandemic and we will of course prove it again now.
We have adhered without reservations to the framework agreement, as we adhered to the Code of Good Practice to help companies renegotiate their ICO-backed loans. But I think it is also relevant to ask whether this is a solution to the problem or simply a postponement. In any case, this is a new effort by the banking sector, because the agreement means taking on more provisions and higher operating costs.
Bankinter has increased its size thanks to organic growth and also with some acquisitions. What is the growth strategy for the near future?
Bankinter has increased its size thanks to organic growth and also with some acquisitions. What is the growth strategy for the near future?
But rather than thinking about new acquisitions, we want to consolidate these operations, which are working very well, while developing new avenues of business. To this end, we have very interesting projects, some of which are already bearing fruit. With all the plans we have in place, we are not considering new acquisitions. We are committed to organic growth, as has historically been the case in the Bank.
In these circumstances, what are Bankinter's forecasts for 2023?
For Bankinter, the 2023 financial year is especially important. In terms of results, having already met ahead of time the objective of exceeding our pre-pandemic results, when we still had Línea Directa in the Group, we will focus our efforts on consolidating the path of growth. The results for 2022 allow us to be very optimistic in this respect; we have seen that the dynamism of the different business units can, not only offset Línea Directa's income contributions, but also overcome the crisis and then meet the various imponderables that have come after it. Moreover, the adjustment in the prices of the investment portfolio to the new environment brought about by the developments in the interest rates will also make a positive contribution to our accounts, especially in the first part of the year. However, this rise in interest rates, together with an inflation that will remain high for some time, may eventually harm the demand for credit and at the same time increase non-performing loans. The impact of the bank tax, which could amount to between 80 and 100 million euro per year for the bank, must also be taken into account. All these factors suggest that we exercise extreme caution and carefully manage the associated risks, although we remain optimistic about our future.
Can these good expectations be passed on to Bankinter's share price on the stock exchange, which already performed excellently in 2022?
It is always risky to make forecasts about stock markets, because their performance is affected by multiple factors, macroeconomic, microeconomic, geopolitical and even emotional, and many of them are outside the institution's control. But as far as we are concerned, I think there is every reason to believe that the price of the Bankinter share, which has indeed developed very positively in 2022, will continue to rise.
It is always risky to make forecasts about stock markets, because their performance is affected by multiple factors, macroeconomic, microeconomic, geopolitical and even emotional, and many of them are outside the institution's control. But as far as we are concerned, I think there is every reason to believe that the price of the Bankinter share, which has indeed developed very positively in 2022, will continue to rise.
It is always risky to make forecasts about stock markets, because their performance is affected by multiple factors, macroeconomic, microeconomic, geopolitical and even emotional, and many of them are outside the institution's control. But as far as we are concerned, I think there is every reason to believe that the price of the Bankinter share, which has indeed developed very positively in 2022, will continue to rise.
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