2018 ANNUAL REPORT CONTENTS
00 INTRODUCTION
Chairman’s statement 8 The Board of Directors 13 Basque Country Advisory Board 13 Nomination and Corporate Governance Committee 14 Remuneration Committee 14 Audit Committee 15 Global Risk and Technology Change Committee 15 Credit Risk Committee 15 The economy in 2018 17 The outlook for 2019 25
01 FINANCIAL RESULTS
Key figures 30 Banca March Group 33 The consolidated balance sheet 38 Customer funds 40 Customer loans 42 Capital markets 44 Capital instruments 45 The consolidated income statement 46
02 NON-FINANCIAL STATEMENT
More than 90 years of success 52 Our values 53 An unparalleled business model 55 Main non-financial risks 57 Core action policies 59
2 3 CONTENTS
03 MAIN BUSINESS LINES
Wealth Management 68 Joint Investment activity 70 Retail and Private banking 73 Corporate Banking and Markets 81 Insurance Area 91 Subsidiaries: 97 - March A.M. 97 - March R.S. 100 - March Vida 101 - Banco Inversis 102
04 HOLDINGS OF CORPORACIÓN FINANCIERA ALBA
Investment portfolio 107 Affiliated companies 109 LISTED COMPANIES 109 - Naturgy 109 - Acerinox 109 - Ebro Foods 110 - Cie Automotive 110 - Viscofan 111 - Bolsas y Mercados Españoles 111 - Parques Reunidos 112 - Indra 112 - Euskatel 113 NON-LISTED COMPANIEs 113 - In-Store Media 113 - Terberg Ros Roca 113 - Alvinesa 114 - Satlink 114 - Monbake 114 Real estate activity 115
4 5 00 INTRODUCTION
Chairman’s statement 8 Board of Directors 13 Basque Country Advisory Board 13 Nomination and Corporate Governance Committee 14 Remuneration Committee 14 Audit Committee 15 Global Risk and Technology Change Committee 15 Credit Risk Committee 15 The economy in 2018 17 The outlook for 2019 25
6 7 Chairman’s Statement
CHAIRMAN’S STATEMENT
2018 will be remembered as a complex year for the financial markets, particularly the final few months of the year. The shadow of a possible recession loomed over all market players and put asset managers in a very tight spot. Despite this difficult backdrop, at Banca March we were able to overcome many of the obstacles generated by market volatility and chalk up a new record in banking activity, which grew 9.5% versus 2017 – when we posted the best results in the bank’s history – to stand at 111.3 million euros.
At the beginning of the year, Banca March was confronted with the need to take a quantitative and qualitative leap towards becoming the bank we aspire to be. A modern, agile, engaged bank which is a point of reference for its target customers: family businesses and entrepreneurial families. It was crucial, with this goal in mind, to ensure our structure was a clear reflection of the bank’s culture and strategy. In the process of cementing the structure we need to effectively deploy our strategy, we were completely determined to eliminate any components which did not prioritise shared growth for the bank, thereby avoiding conflicts of interest both with Banca March customers and with the rest of the organisation. At the same time, to reinforce our team of talented professionals, we rolled out intensive efforts to recruit profiles in our specialist areas, Wealth Management and Corporate Banking, and in the technology and digital sphere.
Our business model continues to be backed by our solid assets and the lowest NPL ratio in the sector. At the end of 2018, we had more capital and stronger liquidity and solvency ratios than any other bank in the sector
Juan March de la Lastra Chairman In 2018 we created and grew our Digital Transformation team, which is intended to equip the bank with the stronger capabilities to tackle this strategic transformation. To that end, we rolled out an ambitious plan featuring a total investment of 75 million euros and the incorporation of 50 professionals by the end of 2020, with a view to reinforcing the bank’s digital and technology strategy. At Banca March, we seek to identify, across all areas of the organisation, any opportunities offered by digital technologies to enhance customer experience and allow us to engage even more closely with our customers, responding ever more efficiently to their needs.
Another way in which we fortified our organisation was by creating the Banca March Advisory Board in the Basque Country, which is formed of renowned professionals with strong track records and great prestige in the business, social and cultural arenas. This initiative is a reflection of the Group’s determination to continue to grow in the Basque Country, a market which is crucial to Banca March’s business model.
8 9 Chairman’s Statement
The robust health of our organisation and our effective strategy are clearly reflected in the results of the Financial Sector Customer Satisfaction Benchmarking undertaken by the independent firm STIGA. This report reveals that Banca March’s managers secured the strongest customer ratings out of the entire Spanish banking sector. We are deeply proud of this leadership position, which is the result of the outstanding degree of professionalism of the Banca March team and a Human Resources policy that ensures a meritocracy and prioritises the professional development of the workforce. We are the Spanish financial institution that invests the most in training per employee, which translates to exceptional customer service.
Our business model continues to be backed by our solid assets and the lowest NPL ratio in the sector. Our solvency has always been, and continues to be, one of our key strengths. At the end of 2018, we had more capital and stronger liquidity and solvency ratios than any other bank in the sector. It is vital that we safeguard this advantage, which is a clear guarantee of security for our customers.
The year 2019 holds no shortage of exciting challenges. The banking sector will continue to be restructured as it seeks to secure a profitability that remains elusive. At Banca March, we enjoy the advantage of having clear goals and ever more tools to implement a winning strategy. We are different; we are the only bank in the Spanish financial system which is wholly family owned, we know exactly what we want, and our goal is simply to achieve our objectives in an effective, timely manner. We keep our sights set firmly on our customers’ needs, and we work to make their lives easier, affording innovative solutions to ensure we remain their bank of choice.
These outstanding results are, without doubt, thanks to the unwavering values shared by every one of us at Banca March: commitment, ambition, integrity, effort and rigour
In conclusion, I would like to thank the entire team of professionals at Banca March Group for their huge dedication and engagement with the exciting project. The excellent results we have achieved are, without a doubt, thanks to the unwavering values shared by every one of us at Banca March: commitment, ambition, integrity, effort and rigour.
Our clear, ambitious goals – to be Spain’s leading bank in private banking and corporate advisory –, our unique, inimitable business model – based on shareholder commitment, exclusive products, outstanding quality service, specialist advisory services and robust financial ratios–, and our excellent, motivated workforce all comprise the foundations on which to build the bank we aspire to be.
Juan March de la Lastra Chairman
10 11 Structure of Boards and Committees
THE BOARD OF DIRECTORS
Chairman Mr. Juan March de la Lastra (executive)
Executive Vice Chair Ms. Rita Rodríguez Arrojo (executive)
Chief Executive Officer Mr. José Luis Acea Rodríguez (executive)
Directors Mr. Juan March Delgado (non-executive) Mr. Carlos March Delgado (non-executive) Mr. Juan March Juan (non-executive) Mr. Javie Vilardell March (non-executive) Mr. Juan Carlos Villalonga March (non-executive) Ms. Agatha Echevarría Canales (independent) Mr. Albert Esteve Cruella (independent) Mr. Moisés Israel Abecasis (independent) Mr. Santos Martínez-Conde Gutiérrez-Barquín (non-executive) Mr. Vicente Moreno García-Mansilla (independent) Mr. Nicolás Villén Jiménez (independent)
Company Secretary Mr. José Ignacio Benjumea Alarcón (executive)
BASQUE COUNTRY ADVISORY BOARD
Chairman Mr. Juan March de la Lastra
Chief Executive Officer Mr. José Luis Acea Rodríguez
Directors Mr. Jorge Bergareche Busquet Mr. Mariano Úcar Angulo
Mr. Antonio Barandiarán Prado Mr. Álvaro Videgain Muro Mr. Miguel Zugaza Miranda
Company Secretary Mr. José Ignacio Benjumea Alarcón
12 13 Structure of Boards and Committees
NOMINATION AND CORPORATE AUDIT COMMITTEE GOVERNANCE COMMITTEE Chairman Mr. Nicolás Villén Jiménez (independent) Chairman Mr. Albert Esteve Cruella (independent) Members Members Ms. Agatha Echevarría Canales (independent) Mr. Moisés Israel Abecasis (independent) Mr. Albert Esteve Cruella (independent) Mr. Vicente Moreno García-Mansilla (independent) Mr. Moisés Israel Abecasis (independent) Mr. Vicente Moreno García-Mansilla (independent) Secretary Secretary Mr. José Ignacio Benjumea Alarcón (executive) Mr. José Ignacio Benjumea Alarcón (executive)
REMUNERATION COMMITTEE GLOBAL RISK AND TECHNOLOGY CHANGE
Chairman COMMITTEE Mr. Vicente Moreno García-Mansilla (independent) Chairman Members Mr. Moisés Israel Abecasis (independent) Mr. Albert Esteve Cruella (independent) Mr. Moisés Israel Abecasis (independent) Members Ms. Agatha Echevarría Canales (independent) Secretary Mr. Albert Esteve Cruella (independent) Mr. José Ignacio Benjumea Alarcón (executive) Mr. Nicolás Villén Jiménez (independent) Mr. Vicente Moreno García-Mansilla (independent)
Secretary Mr. José Ignacio Benjumea Alarcón (executive)
CREDIT RISK COMMITTEE
Chairman Mr. Santos Martínez-Conde Gutiérrez-Barquín (non-executive)
Members Mr. José Luis Acea Rodríguez (executive) Mr. Nicolás Villén Jiménez (independent)
Secretary Mr. José Ignacio Benjumea Alarcón (executive)
14 15 The Economy in 2018
The Economy in 2018
2018: ANNUS HORRIBILIS FOR THE FINANCIAL MARKETS
Financial assets performed poorly across the board in 2018 and volatility returned to the markets. Setting the backdrop for this scenario were the underlying doubts around the possible end of the current global growth cycle, which is a lengthy process but one that features certain specific characteristics: a preceding economic recession which is far more intense than previous downturns and subsequently, a weaker-than-usual growth rate.
Intensity of recessions in the United States (drop in % of real GDP)
0
-1
-2
-3
Average pre -2007 (since 1950)
-4 Financial crisis (2008) Source: Bloomberg and Banca March
Growth cycles of the US economy (growth in real GDP following a recession)
%
160 1969
150 2000 1990 140
130 Actual 1979 2007 120 1973
110
100
1 2 3 4 5 6 7 8 9 10 Number of years
16 17 The Economy in 2018
Global economic growth continued in 2018, avoiding a hard landing despite signs of a slowdown Globally, inflation closed 2018 at a six-year high, although still at moderate levels in historical towards the end of the year. The global economy expanded by 3.7% in 2018, chalking up almost terms, with an annual average CPI of 3.7% versus 3.1% in 2017. the same rate as in 2017 and outperforming, once again, the average annual increase observed since 1980. This performance was underpinned largely by robust activity in the US, which offset weaker The developed economies saw a moderate increase in prices again in 2018, failing to reflect the growth in the eurozone and Japan. As for the emerging economies, India registered impressive GDP impact of rising wages and favoured by the drop in the energy component at the end of the year. growth and Brazil and Russia both posted positive economic growth for the second year running. Specifically, in December, the CPI stood at 2.1% in the US and 1.6% in the eurozone, versus 2.1% These figures were able to offset the slightly slower pace of economic growth in China over the year. and 1.5% respectively in December 2017. In the major emerging economies, China and India both saw an increase in prices with an average CPI of 2.2% in China and 4.7% in India, versus 1.5% and 3.6% respectively in 2017. Inflation in Russia and Brazil was more moderate, despite the increased economic activity. Brazil closed 2018 with an average CPI of 3.6% versus 3.4% in 2017, whilst in The global economic growth Russia the average CPI was down from 3.6% in 2017 to 2.8% in 2018. rate stood at 3.7% in 2018
Inflation rates The developed economies as a whole grew by 2.3% in 2018, just one tenth of a percentage point less than the growth registered in 2017. On the negative side, the eurozone closed 2018 at a growth rate of 1.8%, the slowest since 2014, reflecting the weaker performance of the region’s main economies, 7.0 particularly Germany and Italy. This rate comes in stark contract with the 2.4% growth posted in 2017, the strongest growth rate of the last decade. The trend in Japan was similar; the country’s GDP 6.0 growth fell from 1.9% in 2017 to 0.9% last year. On the flipside, US growth was strong; the economy 5.0 bore testimony to the fiscal stimulus measures brought in at the end of 2017, closing the year with GDP growth of almost 3% in 2018, versus 2.2% the previous year. 4.0
Growth continued at a healthy clip in the emerging world, down by just one tenth of a percentage 3.0 point versus the previous year at 4.6%. On a positive note, economic growth stepped up in India to 2.0 7.3% versus 6.7% in 2017, when demonetisation measures and new taxes came into force. Brazil and Russia enjoyed their second year running of positive economic growth – 1.3% and 1.7% respectively 1.0 – following the contraction suffered by both countries in 2015 and 2016 and in spite of the weak 0.0 performance of commodities. In China, we saw a continuation of the soft landing that began back in 2017; in 2018, the country’s economy grew at a rate of 6.6%, which was three tenths of a percentage -1.0 point lower than the rate reported in 2017. This is, nonetheless, the lowest growth rate registered by -2.0 the Chinese economy since the year 1990. 10 11 12 13 14 15 16 17 18 19
Inflation BRICs (YoY) Source: Bloomberg and Banca March Increase in GDP. Main economies. 2017 2018 2019 Inflation USA and eurozone (CPI YoY) 5
4.5 Against this ongoing positive economic backdrop, including rising but still moderate inflation levels, 4 monetary policy remained loose on the whole, with the adoption of further stimulus measures by central banks, except the Fed. 3.5 In December, the European Central Bank wound up the sovereign debt purchase programme it 3 launched in 2015, which involved the acquisition of bonds issued by eurozone member states 2.5 worth a total of 2.6 trillion euros. It will, however, continue to reinvest maturing bonds for a certain period of time. The official price of money and the penalty rate on deposits remained at record 2 lows over the year, at 0% and -0.40%, respectively. Expectations of rate hikes in 2018 gradually 1.5 diminished over the year, in light of the latest macroeconomic data and increased uncertainty. 1
0.5
0 Global Developed Emerging USA Eurozone Spain Source: Bloomberg and Banca March.
18 19 The Economy in 2018
The Federal Reserve maintained its restrictive monetary policy in 2018, with four successive rate In the commodity markets, crude in particular suffered periods of significant volatility. Brent hikes taking interest rates to the 2.25%-2.50% range, inching ever closer to the 3% considered approached four-year highs in 2018, but closed the year down by 19.5% versus 2017 at $53.8 per normal by the US central bank. Since its rate-raising cycle began in late 2015, the Fed has hiked barrel (see graph). Doubts around the slowdown in global demand, the potentially diminished official rates a total of nine times. Against a backdrop of gradually rising inflation and an improving impact of sanctions on Iran and the increased production of crude in the US – which partially labour market, the Fed also continued with the process of slowly shrinking its balance sheet, offset the output cuts agreed by Russia and OPEC – were partially responsible for this drop in oil which it began in late 2017. prices, which took place largely towards the end of the year. Gold prices closed the year down slightly, falling by 1.6% to $1,282/ounce. Elsewhere, the Bank of Japan left its aggressive monetary policy programme untouched. The official deposit rate remained unchanged at -0.1%. The BOJ also maintains its explicit policy of yield curve control at the long end, with targets to keep 10-year rates at around 0% through asset purchases. Oil prices
160
MARKETS 140
On the whole, the markets performed very poorly in 2018, hampered by uncertainty stemming 120 from the trade war between the US and China, the struggle to reach an agreement on Brexit and expectations of the end of the economic cycle. Europe in particular suffered huge losses in 2018, 100 which was the worst year in a decade for indices such as the EuroStoxx 50 (-14.3%), the German 80 DAX (-18.2%) and the Italian MIB (-16.1%). Spain’s blue-chip index, the Ibex, closed the year down 15%, its weakest performance since 2010. The US markets also posted losses in 2018, albeit more 60 moderate losses in comparison; the S&P 500 lost 6.7% and the Nasdaq was down by 4.5%. The situation was not dissimilar in the emerging world, with major losses for the MSCI Emerging 40 Markets (-16.6%) and MSCI China (-20.3%). 20
0 Uncertainty stemming from the US-China trade war, Brexit and the possible end 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 Brent crude prices Source: Bloomberg and Banca March of the economic cycle hampered the performance of global equity markets SPAIN The main part of the world’s fixed income markets also put in a poor performance in 2018, reflecting the expectations of future withdrawals of liquidity support as central banks began to taper asset The Spanish economy grew at a rate of 2.5% in 2018. This was the lowest rate since 2014, after three purchases. The year saw particularly significant losses for investment grade US corporate bonds years of growth rates of 3% and above. Although the growth posted in 2018 was more moderate, (-2.5%), European high yield (-3.8%), and emerging market fixed income in the indices for US the decline in Spain was minimal compared with the country’s main neighbouring economies. By dollar-denominated government bonds (-4.8%) and local currency bonds (-3.8%). An excellent components, domestic demand contributed 2.9 percentage points to Spain’s economic growth, a performance towards the end of the year allowed the government bond indices for Europe and similar contribution to last year; on the flipside, the foreign sector dragged down the final growth the US to close with moderate gains of 1% and 0.9%, respectively. figure by 0.4 points, versus a small positive contribution in 2017. The ongoing positive backdrop in 2018 was underpinned by strong trade and employment figures, another record year for tourism In the currency markets, the resurgence of political risk in the eurozone, the slower economic and the tone of a more expansionary fiscal policy. growth in the region and the rate hikes and favourable tax reform in the US all hampered the euro’s performance against the dollar, culminating in a loss of 4.6% over the year. Sterling remained under pressure due to uncertainty around Brexit, allowing the euro to gain a further 1.2% against the pound over the course of the year. Finally, the increased volatility observed in 2018 helped the yen secure its new status as a haven, with the euro losing 7.1% against the Japanese currency. As for the emerging market currencies, both the Argentine peso and the Turkish lira fell sharply against the single currency; the former lost almost half its value against the euro over the year, and the latter lost a quarter.
20 21 The Economy in 2018
In the Spanish labour market, 2018 was the fifth year running of job creation following six prior The real estate sector continued to perform well, thanks once again to the strong employment years of net job losses, and also the fifth consecutive year of falling unemployment rates. According figures registered in 2018 and to investment demand from foreign markets. According to INE to data put out by the Spanish National Statistics Agency (INE), the unemployment rate closed figures, house purchases were up by 10.1% year on year, rising for the fifth year in a row but 2018 at 14.45%, down by two percentage points versus 2017; this was the lowest rate registered growing at a slightly slower rate than the 15.4% registered in 2017. A total of 515,051 transactions since 2008, with 462,000 fewer people out of work. There was also an increase in the number were carried out over the year, the highest number since 2008, including both new-build and pre- of people contributing to the social security system: 564,000 new workers signed up over the owned properties. Spain’s Association of Property Registrars reported an 8.2% increase in house course of the year, taking the total number of contributors back up to 19 million. This is the second prices in 2018, the largest price hike for a decade. Prices have increased by 30% over the last four best figure since official records began, outperformed only in the year 2007. years, but remain below 2007 highs.
The Spanish economy grew at a rate of 2.5%
As regards the foreign sector, Spain saw its largest trade deficit in 2018 for the last eight years, up by 36.8% to 33.84 billion euros. This larger deficit came despite the new record set in exports this year, which increased at a slightly more moderate rate of 2.9%; imports grew more rapidly, at an outstanding rate of 5.6%. Almost three quarters of the total deficit can be attributed to the accumulated energy deficit, which is up by 21% versus 2017 and is due to the increase in oil prices registered since October.
Spain’s tourism sector chalked up another record year in 2018. A total of 82.8 million international tourists visited Spain over the year, an increase of 1.1% versus 2017. Total tourist spending was also up, increasing by 3.3% year on year to a total of 89.86 billion euros. The three Spanish regions that accounted for the strongest visitor and spending figures were Catalonia, the Balearic Islands and the Canary Islands.
The Spanish economy remained on track in terms of the correction of Spain’s public accounts in 2018. The budget deficit was reduced as per target and closed 2018 at around 2.7% of GDP, in line with the reduction agreed with Brussels. Public debt remained high and closed 2018, according to the Bank of Spain, at 97% of GDP, versus 98.1% in 2017. Elsewhere, the deleveraging process in the private sector – households and businesses – was completed in 2018, following a reduction of almost 600 billion over ten years.
The budget deficit closed 2018
at around 2.7% of GDP, in line At the end of December, the annual inflation rate stood at 1.2%, five tenths of a percentage point lower than the rate registered in December 2017, mainly due to the drop in fuel prices. Following with the reduction agreed with the steep peak around the middle of the year, the average annual CPI for the year stood at 1.6%, Brussels almost three tenths of a percentage point lower than in 2017. Core inflation remained more stable, and once again came in at average levels of around 1%.
22 23 The outlook for 2019
THE OUTLOOK FOR 2019
NAVIGATING A LONGER ECONOMIC CYCLE Last year was shaped by fears that the end of the current global economic growth cycle could be nigh. Risk aversion soared in the final quarter of 2018, with investors proving fearful that an erroneous economic policy – which could take the form of an excessive rate hike by the Fed and/ or an escalation of the trade war between the US and China – could end up pushing the global economy towards a hard landing.
Whilst there can be no doubt that the current economic growth cycle has been a long one, we believe it is still too soon to talk about the end of the global economic expansion.
It is true that trade tensions remain latent and we must not ignore the fact that should the current negotiations between the US and China fail, these tensions could escalate further. However, the truce agreed in December demonstrated that both leaders are keen to reach an agreement and avoid further tariff hikes, which would be harmful to their economies.
It is still too soon to talk about the end of the growth cycle
In terms of monetary policy, the Fed continues to have substantial room for manoeuvre and at its meeting in December 2018 it demonstrated a more flexible position in terms of impending rate hikes, which will now be more closely tied to the performance of macroeconomic data. The message conveyed by the Fed is therefore that it will no longer apply an “automatic pilot” approach to rate increases, and its decisions will be more flexible going forward.
Macroeconomic indicators are currently deteriorating, but current levels do not point to a recession in 2019. As our baseline scenario, therefore, we continue to expect the current growth cycle to be the longest in US history, but also the least intense period of recovery.
With this in mind, we believe global economic growth peaked last year and we will now see an economic slowdown, which will be somewhat more intense given the deterioration of financing conditions in the month of December. That said, the slowdown will be gradual and the main global economies will maintain a sustained rate of activity: our estimates indicate that the pace of global growth will gradually diminish to stand at 3.4% for 2019 as a whole, lower than the 3.7% registered in 2018.
In terms of inflation, the sharp decline in energy prices – the barrel of Brent crude is down 22% since the high registered in October last year – will put downside pressure on consumer prices. This lower inflation in energy costs should help offset the strength of core inflation, which will continue to be underpinned by rising labour costs as unemployment continues to fall.
Looking ahead to 2019, the risks to this scenario stem from various different sources. Firstly, US growth could potentially disappoint: the uncertainty stemming from the large budget deficit and the failure by Donald Trump’s government and the Democrats to reach an agreement to renegotiate the debt ceiling will hamper the activity of the world’s largest economic power and, in turn, global economic growth.
24 25 The outlook for 2019
Secondly, a steeper rise in salaries could drive up inflation, forcing central banks to withdraw liquidity from the system quickly. In this case, financing costs for companies and households would rise sharply, driving down global stock markets and economic activity.
We expect to see global economic growth stand at 3.4%
However, the main risk facing the global economy over the coming months would be a failure by the US and China to reach an agreement, which could spark a trade war between the two global powers with reciprocal tariff hikes. If this were the case, the global economy would go into stagflation, with rising inflation and dwindling economic growth, which would also be highly detrimental to the performance of the financial markets.
It is, however, important to bear in mind that these risks all have the potential to act as catalysts for the global economy. For example, in the likely event that the trade talks between the US and China are eventually successful, this would allow for a recovery in business confidence and as a result, the growth forecasts for the second half of the year would improve.
26 27 01 FINANCIAL RESULTS
Key figures 30 Banca March Group 33 The consolidated balance sheet 38 Customer funds 40 Customer loans 42 Capital markets 44 Capital instruments 45 The consolidated income statement 46
28 29 Key figures
KEY FIGURES
BANCA MARCH GROUP BANCA MARCH, S.A.
€M €M
2018 2017 Change 2018 2017 Change
KEY BUSINESS FIGURES KEY BUSINESS FIGURES
Equity 1,807.8 4,871.5 -3,063.7 Shareholders’ equity 1,155.2 1,058.7 96.5
Customer deposits and off-balance sheet AuM 18,303.0 19,473.7 -1,170.7 Customer deposits 10,479.4 10,292.4 187.1
Loans to customers 7,771.9 7,983.4 -211.4 Loans to customers 7,833.2 8,042.1 -208.9
Investments in affiliated companies 609.1 2,381.3 -1,772.2 Total assets 12,913.8 12,504.0 409.8
Total assets 15,532.9 18,620.2 -3,087.3
RESULTS
RESULTS Net interest income 121.7 117.0 4.6
Net interest income 144.8 146.6 -1.7 Gross income 305.3 304.2 1.0
Fee and commission income 323.0 325,0 -2.0 Operating income 133.4 112.3 21.0
Operating income 137.2 244.3 -107.1 Net income for the financial year 164.3 62.9 101.4
Consolidated profit for the financial year 106.6 554.5 -447.9
Profit attributable to the Group 105.2 177.8 -72.6 NUMBER OF EMPLOYEES AND POINTS OF SALE
No. of employees 1,401 1,322
CAPITAL ADEQUACY AND SOLVENCY RATIOS (%) No. of branches 177 180
Total capital ratio 16.02 21.10 No. of ATMs 432 488
NPL ratio 2.56 3.15
NPL coverage ratio 52.85 52.23
Foreclosed assets coverage ratio 59.49 56.16
NUMBER OF EMPLOYEES
No. of employees 1,867 2,042
30 31 Banca March Group
BANCA MARCH GROUP
The structure of the Banca March Group is geared primarily to the undertaking of Banca March’s banking activity, alongside Banco Inversis. The Banca March Group also delivers the insurance and asset management businesses. The bank owns a significant holding in Corporación Financiera Alba, one of Spain’s largest industrial investment holding companies.
Banca March S.A., the parent company, has been undertaking the Group’s banking activity since 1926. Our business model, which is geared towards family businesses and entrepreneurs as well as high net worth individuals, is implemented through the bank’s different specialist units: Wealth Management, Private Banking, Retail Banking and Corporate Banking. In the Basque Country and La Rioja, our financial asset management products and services have historically been distributed through our investee company Consulnor, S.A., and are now distributed directly following the absorption of Consulnor.
The Group boasts a retail network of 177 branches, including one in Luxembourg
The bank’s insurance operations are delivered through March Risk Solutions (March R.S.) and March Vida, S.A. de Seguros y Reaseguros. The asset management line is handled by March Asset Management, S.G.I.I.C., S.A., March Gestión de Pensiones, S.G.F.P., S.A. and Artá Capital S.G.E.C.R., S.A.
In the first half of 2019, Banca March acquired 25% of the insurance broker March JLT Correduría de Seguros, S.A.. This transaction increased Banca March’s stake in the broker’s share capital to 100%, clearly evidencing its commitment to the future development of the business, which it considers to be a strategic component of its activity. As it embarks on this new era, the insurance broker will undergo a change of name, becoming March Risk Solutions (March R.S.).
Banca March, S.A. also owns 100% of the shares in Banco Inversis, S.A.U.. This Spanish financial sector leader specialises in investment services related to the execution, custody and settlement of securities (including investment funds), depository and administration services for investment and pension funds, and the distribution of the main international asset management houses’ products via its fund platform.
BRANCH NETWORK BY SEGMENT 31-12-2018 31-12-2017
Retail and Private banking 162 166
Wealth Management 9 8
Corporate banking 5 5
International branches 1 1
Total branches 177 180
32 33 Banca March Group
Banca March is controlled by Juan, Carlos, Gloria and Leonor March Delgado, who together own 100% of the bank’s share capital; none of the shareholders exercises individual control, be it via share ownership or by any kind of agreement.
In addition, as referenced above, the Group holds a 15.02% stake in Corporación Financiera Alba, S.A., which undertakes stable, long-term investments in sector leaders including Acerinox, S.A., Naturgy Energy Group, S.A., Ebro Foods, S.A., Indra Sistemas, S.A., Bolsas y Mercados Españoles, S.A., Viscofan, S.A., Parques Reunidos Servicios Centrales, S.A., Euskaltel, S.A. and Cie Automotive, S.A..
We are We are At 31 December 2018, the total assets present in 85% of our potential present in 85% of our potential on the consolidated balance sheet Private Banking market. We are Private Banking market. stood at 15.53 billion euros present in 85% of our potential LUXEMBOURG Private Banking market. 1 In 2018, the ninth clause of the Bank’s Shareholders’ Syndication Agreement on the exercising of syndicated shareholders’ voting rights in Corporación Financiera Alba, S.A. ceased to be effective, meaning they no longer have contractual voting rights in Corporación Financiera Alba, S.A.. This meant that the bank no longer had control of the holding, which is now accounted for using the equity method. Thanks to this change in the consolidation model, Banca March’s consolidated income statement will reflect the results of its banking activity more transparently, in line with the 177 bank’s strategic goal of positioning itself as the leading provider of private banking and corporate Branches advisory services in Spain. It also means that both Corporación Financiera Alba, S.A. and Banca 177 March will enjoy greater independence in terms of accounting and decision making. Branches BILBAO At 31 December 2018, the total assets on the consolidated balance sheet stood at 15.53 billion 2 SAN SEBASTIÁN euros. The change versus 2017 is due to the loss of control of Corporación Financiera Alba, which 177 1 in 2017 was accounted for using the consolidation method (integration of all assets and liabilities). VITORIA Consolidated loans and advances stood at 8.51 billion euros, down 10.50% year on year as a result Branches 1 LOGROÑO of the lower balances held with credit institutions and reverse repurchase agreements, both of
1 ZARAGOZA which registered variations due to the Group’s ordinary liquidity management, whilst customer 2 CATALONIA deposits and off-balance sheet AuM stood at 18.30 billion euros. The Group’s shareholders’ equity 10 stood at 1.82 billion euros 31 December 2018. The profit attributable to the Group for financial MADRID 17 year 2018 was 105.2 million euros. VALENCIA For the purposes of calculating the capital ratio, at 31 December 2018 Banca March Group 10 BALEARIC ISLANDS accounts for the 15.02% holding in Corporación Financiera Alba using the equity method (until 102 ANDALUSIA 2017, proportional consolidation was used). Pursuant to current regulations, the Group’s total
CANARY ISLANDS 9 capital ratio at 31 December 2018 was 16.02%. Capital requirements stood at 538.3 million euros, 22 with a tier total capital surplus of 539.7 million euros.
Number of branches at 31.12.2018
34 35 Banca March Group
Thousands of € SOLVENCY RATIO 2018
CET 1 1,077.968 16.02% MARCH CANARIAS IGALCA CORPORACIÓN Core Capital (Tier 1) 1,077.968 100% 100% FINANCIERA ALBA Consolidation Consolidation 15,02% Tier 2 capital - method method Equity method Tier Total 1,077.968 16.02%
MARCH GESTIÓN MARCH ASSET CET 1 surplus 539.705 DE PENSIONES MANAGEMENT Tier total surplus 539.705 100% 100% Capital requirements: 538.263 Consolidation Consolidation method method
MARCH MARCH Banca March’s NPL ratio (credit risk and OBS exposures) fell by 60 basis points versus year-end INMUEBLES PATRIMONIOS INM. MARHIGAL 2017 to stand at 2.56%, among the lowest in the Spanish banking sector. The NPL coverage ratio 100% 100% 75% was up by 0.63% versus the end of the previous year, to 52.85%. Consolidation Consolidation Equity method method method NPL RATIO AND NPL COVERAGE RATIO 31-12-2018 MARCH DE PRODUCCIONES INVERSIONES PRINVER NPL ratio 2.56% 100% 74% NPL coverage ratio 52.85% Consolidation Consolidation method method
PRINVER 43 MARCH VIDA Solvency ratio NPL ratio 100% 100% Consolidation % Equity method method 18 4.5 16 4.0 16.02 4.0% BANCO INVERSIS 14 3.5 MARCH JLT (*) BAROJA 100% 12 3.0 3.15% 75% 100% 11.90 Consolidation Equity method Equity method 10 2.5 method 2.56% 8 2.0 8 6 1.5 INVERSIS GESTIÓN ASERPLAN 4 1.0 100% 100% 2 0.5 Consolidation Equity method 0 method 0 2018 2016 2017 2018
Banca March solvency ratio Spanish financial sector CONSOLIDATION METHOD EQUITY METHOD Minimun legal requirement
(*) In the first quarter of 2019, Banca March bought back the 25% of March JLT that was owned by JLT Group, thereby raising its stake in the insurance broker - which will now be called March Risk Solutions (March R.S.) - to 100%.
36 37 The Consolidated Balance Sheet
THE CONSOLIDATED BALANCE SHEET THE CONSOLIDATED BALANCE SHEET €M Change On 31 December 2018, the assets side of the consolidated balance sheet totalled 15.53 billion 31-12-2018 31-12-2017 Absolute %
euros. Customer loans stood at 7.77 billion euros. Customer deposits were also up, climbing 2.65% Cash, cash balances with central banks and other demand deposits 2,137.3 1,458.8 678.5 46.51% to 10.47 billion euros. Equity totalled 1.81 billion euros at 31 December 2018. Financial assets held for trading 176.3 310.1 (133.8) -45.15% Financial assets not held for trading measured mandatorily - Breakdown of assets Breakdown of liabilities At fair value through profit or loss 26.8 0.0 26.8 - Financial assets designated at fair value through profit or loss - 165 (165.3) -100.00%
€M €M Financial assets at fair value through other comprehensive income 3,045.0 3,051.3 (6.4) -0.21% 20,000 20,000 - Debt securities 2,883.1 2,843.3 39.8 1.40% - Equity instruments 161.8 208.0 (46.2) -22.21% 18,000 18,000 2,74.1 Financial assets at amortised cost 8,760.4 9,864.2 (1,103.8) -11.19% 4,900.4 16,000 16,000 - Debt securities 252.1 357.8 (105.7) -29.55% 2,294.6 4,871.5 - Loans and advances 8,508.3 9,506.4 (998.1) -10.50% 14,000 4,099.8 14,000 2,754.6 1,807.8 Credit institutions 736.3 1,540.0 (803.7) -52.19% 12,000 787.5 12,000 Customers 7,771.9 7,966.4 (194.4) -2.44%
10,000 10,000 Fair value changes to hedged items in a portfolio of interest rate hedges 5.6 0.0 5.6 25490.91% Derivatives - Hedge accounting 85.2 129.2 (44.0) -35.05% 7,771.9 7,966.4 8,000 8,000 10,850.0 10,647.7 Investments in subsidiaries, joint ventures, and associates 609.1 2,381.3 (1,772.2) -74.42%
4,000 4,000 Assets covered by insurance or reinsurance contracts 1.2 0.9 0.3 33.03% Tangible assets 182.4 449.0 (266.6) -59.38% 2,000 2,873.7 2,998.8 2,000 Intangible assets 121.9 128.4 (6.5) -5.07% 580.5 726.9 0 0 Tax assets 141.4 344.1 (202.7) -58.91% 2018 2017 2018 2017 Other assets 159.7 132.7 26.9 20.30% Non-current assets and disposal groups classified as held for sale 80.7 204.9 (124.2) -60.61% Other assets Other liabilities Total assets 15,532.9 18,620.2 (3,087.3) -16.58% Holdings and capital instruments Equity Financial liabilities held for trading 176.9 116.2 60.7 52.22% Customer loans Customer funds Financial liabilities designated at fair value 8.5 2.9 5.7 2 Interbank Interbank Financial liabilities at amortised cost 11,922.8 11,988.2 (65.5) -0.55% - Deposits 11,045.2 10,921.7 123.5 1.13% Credit institutions 580.5 726.9 (146.4) -20.14% Consolidated Balance Sheet Customers 10,464.7 10,194.8 269.9 2.65% - Debt securities issued 376.8 452.9 (76.1) -16.80% €15.53bn - Other financial liabilities 500.7 613.6 (112.9) -18.40% Derivatives - Hedge accounting 58.1 28.5 29.7 104.27% Liabilities covered by insurance or reinsurance contracts 1,269.2 1,255.8 13.4 1.07% Customer loans Provisions 117.9 122.5 (4.5) -3.70% Tax liabilities 23.3 97.4 (74.1) -76.07% €7.77bn Other liabilities 148.4 137.3 11.1 8.08% Shareholders’ equity 1,819.8 1,707.9 111.9 6.55% Accumulated other comprehensive income (16.7) 13.5 (30.2) -223.77% Customer deposits Minority interests 4.6 3,150.0 (3,145.4) -99.85% €10.46bn Total liabilities and equity 15,532.9 18,620.2 (3,087.3) -16.58%
38 39 Customer Funds
CUSTOMER FUNDS €M Change
At 31 December 2018, the off-balance sheet assets under management by the Group’s asset 2018 2017 Absolute % managers were down by 1.42 billion versus year-end 2017 at 6.19 billion euros. This decline was Customer funds 11,734.5 11,406.6 327.9 2.9 largely due to lower AuM in the SICAVs managed as a consequence of falling prices in the markets. Total assets under management at 31 December 2018 stood, on a consolidated basis, at 18.30 On-balance sheet deposits 11,620.3 11,215.5 404.8 3.6 billion euros. - Public Administrations 234.7 255.8 -21.1 -8.2 Management by the Group of off-balance sheet AuM (investment and private equity funds, SICAVs and pension funds) is undertaken through March Asset Management, S.G.I.I.C. and March Gestión - Demand deposits 7,494.7 6,628.4 866.3 13.1 de Pensiones E.G.F.P. - Time deposits 1,984.0 2,635.6 -651.6 -24.7
- Repurchase agreements 637.1 483.9 153.2 31.7 Deposits and off-balance sheet AuM - Insurance-based saving plans 1,269.8 1,211.8 58.0 4.8
€M Valuation adjustments 114.2 191.1 -76.9 -40.2 20,000
18,000 Marketable debt securities 376.8 452.9 -76.1 -16.8 16,000 7,614.2 6,191.7 On-balance sheet deposits 376.0 452.4 69.1 15.3 14,000 - Commercial paper and bills of exchange 76.0 6.9 69.1 1002.0 376.8 452.9 12,000 - Mortgage-backed securities 100.0 100.0 0.0 0.0 10,000 - Structured bonds 200.0 200.0 0.0 0.0 8,000 11,734.5 11,406.6 - March International Issuances 0.0 145.5 -145.5 0.0
4,000 Off-balance sheet AuM Valuation adjustments 0.8 0.5 0.3 57.4 Marketable debt securities 2,000 Bank deposits 0 2018 2017 Off-balance sheet Assets under Management 6,191.7 7,614.2 -1,422.5 -18.7 Investment and private equity funds 1,866.7 2,140.7 -274.1 -12.8
SICAVs and private equity firms 3,870.9 4,968.8 -1,097.9 -22.1 Customer deposits and Pension funds 454.1 504.6 -50.6 -10.0
off-balance sheet AuM Total customer funds managed 18,303.0 19,473.8 -1,170.7 -6.0 €6.19bn
40 41 Customer loans
CUSTOMER LOANS €M Change
At 31 December 2018, total customer loans managed by the Group stood at 7.78 billion euros. 2018 2017 Absolute %
At 31 December 2018, the balance of mortgage loans stood at 3.15 billion euros. LENDING
Other secured loans – primarily backed by cash and securities – closed the year at 950.8 million Total lending (broken down by type) 7,646.2 7,852.0 -205.8 -2.6 euros. On the same date, the balance of other term loans stood at 2.55 billion euros. - Commercial bills 232.2 250.6 -18.4 -7.4 At 31 December 2018, gross impaired assets totalled 208.4 million euros, down by 56.3 million - Secured loans: 4,105.2 4,371.1 -265.9 -6.1 versus 2017, thanks to the bank’s prudence in terms of risk appetite, as well as the sufficiency, optimal quality and adequate diversification of the available assets. The NPL coverage ratio stood - mortgages 3,154.4 3,278.7 -124.3 -3.8 at 52.85%. - other collateral 950.8 1,092.3 -141.5 -13.0
- Other term loans 2,552.3 2,285.1 267.2 11.7 Total gross lending - Other demand and miscellaneous loans 136.9 277.8 -140.9 -50.7 €M - Financial leasing 86.1 192.2 -106.1 -55.2 10,000 - Reverse repurchase agreements 256.9 334.9 -78.1
8,000 1,007.9 - Other financial assets 276.7 140.3 136.4 97.2 928.4 264.7 208.4 192.2 Impaired assets 208.4 264.7 -56.3 -21.3 86.1 6,000 Valuation adjustments 25.9 4.3 21.6 501.8 2,552.3 2,285.1 Less: impairment losses -108.5 -137.6 29.1 -21.2
4,000 Other loans Total loans managed 7,771.9 7,983.4 -211.4 -2.6
Impaired assets Of which: off-balance sheet securitised assets 0 17.0 4,105.2 4,371.1 2,000 Financial leasing Other term loans
Secured loans 0 2018 2017
Customer loans: € 7.77bn
42 43 Capital Markets Capital Instruments
CAPITAL MARKETS CAPITAL INSTRUMENTS
Throughout 2018, the Group held a substantial buffer of liquid assets in Banca March. At 31 As mentioned above, Banca March no longer has control of Corporación Financiera Alba, and as December 2018, these assets stood at a total of 3.29 billion euros, with solid diversification such has proceeded to derecognise all net assets and liabilities from the consolidated balance between fixed income securities, the balance available on the European Central Bank (ECB) facility sheet, including the book value of its investment portfolio (stable, long-term investments in well- (granted in exchange for pledging certain assets to the Bank of Spain) and cash. None of the run sector leaders with a strong international footprint). Given that the bank still has a significant financial institutions comprising the Group drew down from the European Central Bank (ECB) influence in Corporación Financiera Alba, this holding is accounted for using the equity method: facilities in 2018.
The Group’s liquidity coverage ratio (LCR) remained stable throughout the year at substantially €M above 200%, complying comfortably with regulatory limits. 31-12-2018 31-12-2017
€M Voting rights held Cost Voting rights held Cost by the Group by the Group 31-12-2018 Consolidated costs: Liquidity Buffer (I + II): 3,291 Corporación Financiera Alba, S.A. 15.02% 609.1 - - - Level 1 Liquidity Buffer (I) 3,117 Acerinox, S.A. - - 18.96% 574.3 - Level 2 assets pursuant to Article 9 (II) 174 Indra Sistemas, S.A. - - 10.52% 211.9 Net total cash outflows (denominator) (III) 1,121 Euskaltel, S.A. - - 11.00% 166.1 Liquidity Coverage Ratio (%) (LCR) (I+II) / (III) 293.57% Viscofan, S.A. - - 11.32% 248.5
Ebro Foods, S.A. - - 12.00% 334.4
Bolsa y Mercados, S.A. - - 12.06% 304.8 Liquid assets: Parques Reunidos Servicios Centrales, S.A. - - 20.01% 241.7 CIE Automotive, S.A. - - 10.00% 299.6
€ 3.29 bn 609.1 2,381.3
44 45 Consolidated Income Statement
CONSOLIDATED INCOME STATEMENT CONSOLIDATED INCOME STATEMENT €M Change Profit attributable to the Group stood at 105.2 million euros on 31 December 2018. This year, certain 31-12-2018 31-12-2017 Absolute % extraordinary items were registered as a result of the impact of deconsolidating Corporación Profit from operating activity 137.2 244.3 (107.1) -43.84% Financiera Alba. Impairment or reversal of impairment of investments in jointly-controlled entities or associates (net) - 29.9 (29.9) -100% Income from fees and commissions stood at 323 million euros, which is substantially in line with Impairment or reversal of impairment of non-financial assets (net) - 1.9 (1.9) -100% the amount reported in 2017. Profit/(loss) on disposals of non-financial assets and holdings (net) (269.9) 338.1 (608.0) -179.84% Negative goodwill recognised in profit or loss 240.3 - 240.3 - CONSOLIDATED INCOME STATEMENT Profit/(loss) on non-current assets classified as held for sale not qualifying as discontinued operations 30.5 11.0 19.4 176.19% €M Change Profit/(loss) before tax from continuing operations 138.1 561.6 (423.5) -75.42% 31-12-2018 31-12-2017 Absolute % Tax expense/income on profits from continuing operations 31.5 7.1 24.4 342.50%
Interest income 234.5 238.4 (3.9) -1.62% Profit/(loss) after tax stemming from continuing operations 106.6 554.5 (447.9) -80.78% Interest expenses 89.7 91.8 (2.1) -2.30% Profit/(loss) after tax from continuing operations - -
Net interest income 144.8 146.6 (1.7) -1.19% Profit/(loss) for the year 106.6 554.5 (447.9) -80.78% Dividend income 9.5 13.2 (3.7) -28.17% Attributable to the parent entity’s owners 105.2 177.8 (72.6) -40.81% Share of profit/loss from companies accounted for using the equity method 1.3 118.9 (117.6) -98.89% Attributable to minority interests (non-controlling interests) 1.3 376.6 (375.3) -99.64% Fee and commission income 323.0 325.0 (2.0) -0.62% Fee and commission expenses 114.0 93.2 20.8 22.30% Profit/(loss) on disposals of financial asset and liability accounts not carried at fair value through profit and loss 4.1 12.7 (8.6) -67.77% At 31 December 2018, profits from companies accounted for using the equity method stood at 1.3 million euros. These figures stem from the consolidation of the bank’s holding in Corporación Profit/(loss) on financial assets and liabilities held for sale (net) 21.4 6.3 15.1 239.32% Financiera Alba using the equity method in December 2018, the point at which the bank lost Profit/(loss) on financial assets not held for trading measured mandatorily at fair value through profit or loss 2.3 - 2.3 - control of the company. In 2017, this item on the consolidated income statement included the results of Corporación Financiera Alba’s portfolio of investments in associates. Gains on financial Profit/(loss) on financial assets and liabilities designated at fair value through profit or loss (net) (3.3) 27.1 (30.3) -112.05% transactions, stemming from trading activity and the disposal of securities from the available-for- Profit/(loss) from hedge accounting (net) 0.8 (0.1) 1.0 -869.09% sale portfolio, as well as from the increased value of the portfolio of other financial assets at fair Exchange differences (net) 35.4 24.8 10.6 42.75% value through profit or loss, totalled 25.4 million euros. Gains on foreign exchange transactions amounted to 35.4 million euros. As a result, gross income stood at 408.0 million euros as at 31 Other operating income 6.7 68.7 (62.0) -90.21% December 2018. Other operating expenses 19.3 40.4 (21.1) -52.18% Income from assets under reinsurance or insurance contracts 439.7 328.4 111.3 33.91% At 31 December 2018, personnel expenses and other general administration expenses amounted Expenses from liabilities under reinsurance or insurance contracts 444.4 339.0 105.4 31.09% to 237.3 million euros, down by 15.75% versus the previous year, mostly as a result of the deconsolidation of Corporación Financiera Alba. Gross income 408.0 598.8 (190.8) -31.86% Administrative expenses 237.3 281.7 (44.4) -15.75% Thanks to the bank’s quality, efficiently structured balance sheet and as a result of the application of the provisioning criteria outlined in IFRS 9 and Bank of Spain Circular 4/2017, in 2018 the Depreciation and amortisation 25.6 37.9 (12.3) -32.57% Banca March Group reported a reversal of impairments on financial assets not carried at fair value Provisions or reversal of provisions (net) 17.7 28.2 (10.5) -37.13% through profit or loss of 9.8 million euros. Impairment or reversal of impairment of financial assets not carried at fair value through profit or loss (9.8) 6.8 (16.5) -244.43% On 31 December 2018, operating income stood at 137.2 million euros. Losing control of Corporación Financiera Alba meant derecognising assets, liabilities, minority interests and other items recognised in valuation adjustments contributed by the sub-group Corporación Financiera Alba at the date of derecognition, as well as the recognition of the fair value of the consideration received and of the remaining investment. This generated a loss amounting to 271.2 million euros.
46 47 Consolidated Income Statement
CONSOLIDATED INCOME STATEMENT
Following the loss of control, the holding in Corporación Financiera Alba has been reclassified from a controlled entity to an associate entity and is now accounted for using the equity method. This initial consolidation using the equity method gave rise to a negative consolidation difference - bad will - of 240.3 million euros.
The Group also sold 7.52% of its stake in ACS, Actividades de Construcción y Servicios, S.A. in 2017 for a total of 743.4 million euros, harnessing capital gains of 332.4 million euros.
Consolidated profit for the period Net interest income
€M €M 180 177.8 147.0
160 146.6 146.5 140
120 146.0 105.2 100 145.5 80 144.8
60 144.5
40 144.0 20
0 143.5 2018 2017 2018 2017
48 49 02 NON-FINANCIAL STATEMENT
More than 90 years of success 52 Our values 53 - Commitment 53 - Ambition 53 - Integrity 53 - Rigour 54 - Effort 54 An unparalleled business model 55 - Shareholder commitment 55 - Exclusive products and services 55 - Outstanding quality service 55 - Excellent professionals 55 Main non-financial risks 57 Core action policies 59 - Environmental management 60 - Policies and commitments 61 - Pollution 62 - Circular economy and waste prevention and management 62 - Climate change 63 - Indicator scorecard 63 - Inclusion and disability 64
50 51 More than 90 years of success Our values
MORE THAN 90 YEARS OF SUCCESS OUR VALUES
Banca March is the only Spanish bank which is wholly family-owned, specialising in private banking Throughout the nine decades of effort and dedication since the bank’s foundation, Banca March has and corporate advisory services for businesses, family businesses and entrepreneurial families, remained fully committed to a business philosophy based on Shared Growth with all stakeholders: with a business model based on prudence and long-term relationships. customers, employees, shareholders and society as a whole. The consolidation and success of this business model have been made possible by our long-term approach and our unwavering The guiding principle behind our strategy is an alignment of interests between customers, commitment to our core values: commitment, ambition, integrity, effort and rigour. These values professionals and shareholders, with a clear commitment to shared growth. afford us the determination we need to face the substantial challenges ahead in the coming years, Banca March, the parent company of one of Spain’s top financial groups, emerged as Europe’s as we seek to achieve our most ambitious goals. most solvent bank in the two stress tests undertaken by the European Banking Authority (EBA) in 2010 and 2011. It currently has the lowest NPL ratio in the Spanish financial sector and one of the highest solvency levels in Europe. COMMITMENT
The clearest reflection of our transparency and commitment are our Joint Investment initiatives. Banca March’s guiding principle At Banca March, we invite our customers to invest in projects that we consider to be compelling investment opportunities and which allow for diversified portfolios. In other words, we share the is the alignment of interests benefit of our experience and knowledge to pool resources and ensure continued shared growth. between customers, professionals and shareholders, with a clear AMBITION
commitment to shared growth After 90 years of operations, we continue to be the only Spanish bank which is wholly family owned. What that means is that we are not bound by the urgencies and fluctuations of the markets, as listed banks are, and can be guided exclusively by our customers’ interests. Banca March’s robust business model has received recognition from Moody’s rating agency, which has upgraded the bank’s long-term debt rating to A3, the highest rating in the Spanish financial The service-based, highly-engaged approach to the management of everyday customer relations sector and a better rating than Spanish sovereign debt, which is currently rated Baa2. that tends to characterise family businesses is a top priority for our team.
Banca March is one of the main shareholders in Corporación Financiera Alba, which has significant The March family has been at the helm of the Group for four generations, and has remained fully shareholdings in Naturgy (indirect), Acerinox, Indra, Ebro Foods, BME, Viscofan, Euskaltel and committed to a management style which is rooted in prudence. We specialise in seeking sustained Parques Reunidos, among other companies. returns over the long term, minimising the impact of market fluctuations and prioritising capital preservation.
INTEGRITY
At Banca March, we build close, lasting relationships, which is why we are the best-rated financial institution in terms of overall satisfaction with managers by our customers*.
Our advisory model eschews standard solutions and is based on an exhaustive understanding of our customers’ needs and painstaking monitoring of their investments.
This tailored service requires our complete availability to our customers, but it also requires that we take the time to understand their needs and to explain our products and services with the utmost clarity and transparency. To ensure they are able to do so effectively, our managers each advise a very limited number of customers.
* Source: Stiga - 2018 report
52 53 An unparalleled business model
AN UNPARALLELED BUSINESS MODEL RIGOUR
Banca March enjoys outstanding financial ratios underpinned by one of the strongest solvency Banca March’s unique business model is underpinned by four pillars: shareholder commitment, positions in the whole of Europe, and its core capital stands at almost double the Spanish banking exclusive products and services, outstanding service quality and excellent professionals. Our goals sector average. extend far beyond our income statement; we aspire to be a bank that offers cutting-edge services as part of a sustainable, long-term project. A bank that will only ever be satisfied with excellence. As a family bank, our management criteria has always responded to a long-term approach, and as a result we have very low debt ratios and a lending policy that has afforded us NPL ratios which are far lower than those of the rest of the banking sector. SHAREHOLDER COMMITMENT
We are a family business founded in 1926; the fourth generation of the March family is currently EFFORT at the helm.
We have been working with the utmost effort and dedication for over 90 years, and are leaders in wealth management and private banking. We have been voted Spain’s best private banking institution for eight years running. Our business philosophy and degree of specialisation have been EXCLUSIVE PRODUCTS AND SERVICESS recognised through a whole range of awards and accolades in the specialist banking sector: These include our Joint Investment products, which are unique and inimitable in the Spanish financial sector and virtually unparalleled at the European and global levels. These opportunities, which allow our customers to invest in the same projects as the bank does, are exclusive to Banca March. Industry accolades
Banca March was named Best Private Banking Institution in Spain in 2010, 2011, OUTSTANDING QUALITY SERVICE 2012, 2013, 2014, 2015, 2016 and 2017 by the UK’s World Finance magazine, Banca March is one of the Spanish financial institutions that invests the most in training per which bestows the World Finance Banking Awards to financial institutions employee, which translates to provide exceptional customer service. worldwide.
Global Banking and Finance Review Awards for Best Spanish Private Banking Institution in 2014, 2015, 2016 and 2017 and Best Asset and Wealth Management EXCELLENT PROFESSIONALS Institution in Spain in 2013. Banca March’s managers secured the strongest customer satisfaction ratings in the Spanish At the AIAIR European Awards, Banca March took the award for Best Private banking sector in 2018. According to the Financial Sector Customer Satisfaction Benchmarking Banking Institution in Europe for sustainable growth in 2013 and 2014. by the independent firm STIGA, Banca March was at the forefront of the Spanish financial sector in overall satisfaction and identification with managers. Named Best Asset and Wealth Management Institution in Spain 2012, Best Private Banking Institution in Europe 2014, 2015 and 2016 and Best Private Banking Institution in Spain 2017 by The European. Innovation is allowing Banca March to transform its sales model to secure ever more loyal and digital customers, generating a more profitable, sustainable business model. Banca March is utterly committed to effectively integrating ethical, social and environmental criteria into the performance of its financial activity
To that end, in line with global best practices in CSR, Banca March has a robust corporate governance structure in place, under which the Board of Directors is the Group’s highest decision- making body and must approve the Group’s general policies and strategies, including in the area of sustainability, and cannot delegate these decisions.
54 55 Main non-financial risks
MAIN NON-FINANCIAL RISKS THAT COULD ADVERSELY IMPACT THE ACHIEVEMENT OF BUSINESS OBJECTIVES
Efficiently identifying and assessing risk is a crucial component of the Banca March Group’s risk strategy, with a view to appropriately outlining its risk profile.
All risks to which the Group is exposed are taken into account, including financial – such as credit, market, liquidity, structural interest and exchange rate risk – and non-financial – such as reputational, regulatory, operational and technology risk.
Non-financial risks:
Compliance. Risk stemming from non-compliance with legal provisions, rules, self-regulatory organisation standards and codes of conduct applicable to its activities. Reputational. The risk arising from negative perception on the part of customers, counterparties, shareholders, investors, debt-holders, market analysts, other relevant parties or regulators that can adversely affect a bank’s ability to maintain existing, or establish new business relationships and continued access to sources of funding. Reputational risk also may affect a bank’s liabilities, since market confidence and a bank’s ability to fund its business are closely related to its reputation. The key priority in terms of reputational risk is therefore to undertake active management to mitigate this risk in any situation that could generate potential exposure. Operational and technology. Operational risk is defined as the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events. This risk is associated to the administration and management of the Group’s products and services and the internal management thereof. Technology risk is defined as the risk associated to Information and Communication Technology (ICT). Specifically, this risk covers the possibility of incurring losses as a consequence of inadequate technology and information processes. This risk is inherent to all of the Group’s activities, which means there is a need for continuous, systematic identification, outlining the procedures required for this risk to be managed centrally, undertaking risk analyses and reviewing internal processes. The framework for risk management and control is designed based on three key pillars: operational risk, the business continuity plan and information quality and security. Strategic and business. This risk is defined as the possibility of a change in the Group’s course of business affecting its ability to generate profit and growth, due either to internal factors, such as inefficient strategy design, misjudged pricing strategy, erroneous targets or excessive concentration, or to external factors, such as changes in the economic or competitive landscape. For the analysis and assessment of strategic and business risk, the bank undertakes a review of the viability and sustainability of its model: its ability to generate acceptable returns over the next 12 months, not only focusing on the short-term outlook using ROE, CIR, etc., but also taking into account the bank’s financing, liquidity and capital profile and analysing said capacity over a long-term horizon.
56 57 Core action policies
MAIN POLICIES GOVERNING BANCA MARCH’S ACTIONS IN RELATION TO ASPECTS COVERED IN THE NON- FINANCIAL STATEMENT
Areas Policies/Commitments Description
Alignment of interests Value proposition Long-term relationships Outstanding advisory services Unique advisory services underpinned by close customer engagement and an in-depth understanding of customer needs. This methodology will allow us to gain a detailed insight into our customers’ goals and work together to design How do we work? the right investment plan to help achieve them. Customers Customers are guided at all times by their personal manager, a highly-qualified professional who affords them access to all the bank’s technical resources to make their investments a success. In accordance with the provisions of Article 32 of Law 10/2014, of 26 June, on the regulation, supervision and solvency of credit institutions, Banca March Reports of prudential has defined an identified group, whose composition is revised annually by the relevance Board of Directors, upon the proposal of the Remuneration Committee, taking into account the criteria established in Commission Delegated Regulation (EU) 604/2014 of 4th March 2014.
• Articles of Association • Regulations of the General Shareholders’ Meeting • Regulations of the Board of Directors Shareholders Corporate governance • Internal regulations for Conduct in the Securities Market • Ethical Code of Conduc • Internal Audit Charter
Responsibility and respect for work-life balance, support for equal opportunities, and for raising awareness and promoting the integration of disadvantaged people, Banca March has created a Work-Life Balance Plan with a view to facilitating a positive work-life balance for its professionals. The Plan is based on the legislation currently in force and also reflects our own voluntary internal regulations in the field. At Banca March, the commitment to work-life balance Work-Life Balance Measures reflects a social, employment and business culture which is underpinned by Social and the concepts of shared responsibility and mutual trust, flexibility, respect and personnel- commitment. Ensuring a positive work-life balance is not about working less; it’s about working differently, with a better quality of life, more flexible working related hours, support from new technologies and training in leadership styles and in issues values. In short, it is about taking greater responsibility to achieve our common goal: Shared Growth. Equal treatment must feature in every one of the Human Resources policies Equality Plan undertaken internally throughout the field of Employment Relations. Garantíza la igualdad de oportunidades y no discriminación entre las personas, Private Banking Collective mediante el mandato de que las relaciones laborales en las empresas estén Agreement presididas por la no discriminación por razón de nacimiento, raza, sexo, religión, adhesión sindical o cualquier otra condición o circunstancia personal o social Human Rights Supplier Management Policy
Principles of conduct to which we must all adhere in our professional Corruption and Ethical Code of Conduct undertakings to reflect, at all times, the values of commitment, effort, rigour, Bribery integrity and ambition. Society Agreements Agreements with various universities, foundations, NGOs, etc. Environment Procurement portal Sustainable supply chain.
58 59 Core action policies
In recent years, corporate governance has become increasingly important for all financial POLICIES AND COMMITMENTS institutions, and is now a key pillar in their management, forming part of their strategic plans. The policies applied by the Group in relation to environmental management, including the due The Group’s corporate governance system is a crucial factor in the creation of value by the company, diligence procedures used to identify, assess, prevent and mitigate risks and significant impacts, and as such, it is inspired by and rooted in adequate, transparent management based on the ethical as well as verification and control procedures, all form part of the general risk policies in place at principles of good corporate governance. It reflects the main recommendations of the domestic Banca March and its subsidiaries. It has not been necessary to adopt any measures at the present and international financial markets and is designed to support and promote the corporate purpose, time. to enhance economic efficiency and to reinforce the confidence of shareholders, customers and investors. To date, the annual report and financial statements have not included a specific breakdown of information on environmental issues. As of this year, however, the report will include all pertinent non-financial information in relation to the environment. Environmental factors are included in Banca March is committed to our risk map in the section on regulatory and reputational risk. A distinction is drawn between long-term risks (risks stemming from a change of legal regulations increasing the requirements developing analytical tools and to undertake environmental activities) and short and mid-term risks (failure to comply with obligatory requirements or the poor image that this could generate from the perspective of the specific indicators to assess bank’s stakeholders). and evaluate the potential Banca March is committed to developing analytical tools and specific indicators to assess and evaluate the potential impact of climate change. impact of climate change Banca March, in conjunction with the Spanish Banking Association (AEB), participated in the EC public consultation on the revision of the Directive on Non-Financial Reporting, as well as working on the EBF Task Force on Climate-related Financial Disclosures and its alignment with other international standards such as the Global Reporting Initiative (GRI) – which is included ENVIRONMENTAL MANAGEMENT in the recently approved law on non-financial reporting law – the CDP initiative, the Carbon Disclosures Standards Board (CDSB), the Sustainability Accounting Standards Board (SASB) and The Group’s activity is not exempt from environmental risks, as its business relationships, products the International Integrated Reporting Council (IIRC). and services can all potentially generate a negative environmental impact. The sector can act as a conduit to channel funds into companies which are socially and environmentally responsible, Results of the application of policies and indicators but there is also the risk of financing activities which do not manage these aspects appropriately. The Banca March Group’s strategy is aligned with the UN’s Sustainable Development Goals (SDG) In the field of environmental management, the Group faces both credit risk and reputational and as such, it will implement an environmental policy that gauges the current and forecasted risk stemming from potential social controversy, environmental damage and default rates, among impacts of the company’s activity on the environment and, where applicable, on health and safety. others. The environmental assessment procedures for the relevant indicators for the bank are outlined Environmental protection, sustainability and environmental efficiency are all highly important to below. The resources allocated to environmental risk prevention and the number of people and/ the Banca March Group, which – as part of its Corporate Social Responsibility plans – is now or investment in euros is not calculated individually, as this is an overarching activity which applies set to roll out an environmental policy with a view to minimising the impact of our professional to the financial institution in its entirety. activity. In our professional conduct we must always behave responsibly in terms of protecting the environment, adhering to Group recommendations and processes to reduce our environmental The application of the precautionary principle was adopted following a dialogue process with footprint, to offset our environmental impact and to optimise the management of waste generated various stakeholders, including CSR experts, the media, NGOs and universities. through our activity. The Group will carry out actions to raise awareness and provide training in No provisions or guarantees have been allocated to environmental risks, as these are not deemed environmental best practices. material for the company. No especially significant environmental impacts have been identified. Given the nature of the Group’s activity, it has no environmental liabilities, expenses, assets, provisions or contingencies that could be significant with respect to the Group’s equity, financial situation and results. 25% of the Next Generation portfolio will be invested in Sustainability and the Environment
60 61 Core action policies
Banca March has a substantial capacity to influence society. Beyond ensuring the sustainable use CLIMATE CHANGE of its resources, it can also promote investment in sectors that undertake efficient environmental management. For that reason, in 2019 the bank intends to launch Next Generation, an advanced The Banca March Group complies fully with the law in terms of climate change. However, we are discretional portfolio management service investing in the megatrends of the future: Industry 4.0, keenly aware of the importance of this issue and as part of our CSR policy, we plan to go one step Sustainability and the Environment, and Demographics and Lifestyle. Banca March is seeking to further. In future annual reports, we will outline our policies to tackle climate change and detail all afford its customers investment opportunities that will generate returns and contribute to shaping systems, tools and controls in place to identify, assess and reduce risks or impacts, as well as the the future. Next Generation was built on the principles of prudence, a long-term approach and medium- and long-term goals we have set voluntarily to cut greenhouse gases (GHG). shared growth with customers, employees, shareholders and society as a whole; the same values The lighting systems in the main branches has been reformed using energy efficient bulbs and solar that underpin the bank’s business philosophy. A total of 25% of the portfolio will be invested in light sensors. opportunities related to Sustainability and the Environment. Funds are selected in the fields of energy, climate change, agriculture, water and sustainability. As of 2019, the Banca March Group will be setting quantitative emissions reduction targets. The Group also implements awareness raising and training activities in environmental best practices, and is actively involved in environmental conservation and improvement. The RSC training programme to be delivered in 2019 will include a module on the environmental and climate change. The transition POLLUTION towards a low carbon economy represents a major business opportunity for the Group, mainly in the form of financing renewable energies and energy efficiency projects. No risk was identified of emissions that severely damage the environment, taking into account any form of atmospheric pollution stemming from an activity, including noise and light pollution. CO2 emissions are indicated in the section on Climate Change. INDICATOR SCORECARD
Given the nature of the activity undertaken by the Group companies, the measurement of CIRCULAR ECONOMY AND WASTE PREVENTION AND environmental impact indicators is not considered a material issue. Nonetheless, these indicators are MANAGEMENT being calculated at the main buildings where energy efficiency measures can be implemented.
The Banca March Group has put in place measures for waste prevention, recycling and reuse, as Indicators (unit) 2018 (at 31 December) well as other forms of waste recovery and disposal. Non-hazardous waste (t) Not available (1) As part of its commitment to protecting the environment and fighting the risks associated with Hazardous waste (t) Not available (1) climate change, Banca March has undertaken the end-to-end development of technology allowing Water use 6,837 (2) for digital signatures on all contracts and documents generated by the sales network. This has (3) pared down the bank’s paper consumption, as well as reducing the use of other IT consumables Paper use (t) 802 that are damaging to the environment, such as toner, ribbons and colour ink cartridges, among Electricity use (kWh) 3,429,611 (3) other items. In 2018, the financial institution was able to digitalise over 78,000 documents. This Fuel use Not available (4) policy will be extended to include the digitalisation of all document types over the coming years. Renewable energy use We do not purchase certified green energy. All white A4 paper used by Banca March complies with the EU’s FSC eco-labelling system, certified However, according to the energy mix on by SGS. Banca March’s electricity bills, 55% of the energy used by the bank stems from March R.S., thanks to its “Zero Paper” campaign, recycled 21 tonnes of paper in 2017, and since then renewable sources, versus 33% for the rest it has continued to pare back the amount of paper used in its everyday activity through initiatives of the sector (Source: Iberdrola) such as: Greenhouse gas emissions from direct (4) A printing system which is codified by individual employee, and which reports paper use energy use (Scope 1) Not available (t CO2e) statistics and allows for actions to be taken to address any misuse. Greenhouse gas emissions from generating 1,269 (5) Recommendations for responsible printing. energy (Scope 2) (t CO2e)
Campaign for the renovation of portable IT devices that allow for mobility when giving Other indirect GHG emissions (Scope 3) Not available (6) corporate presentations and remove the need for printed resources. (t CO2e) Other emissions (NOx, SOx, Actions to combat resource wastage will include an initiative to raise awareness among our Not applicable Ozone Depleting Substances) employees. * Notes to table on following page
62 63 Core action policies
INCLUSION AND DISABILITY
The Banca March Group is committed to the inclusion of people with disabilities in the workplace, and is utterly convinced that employment plays a key role in promoting equal opportunities. In response to this commitment, the Group has signed a range of cooperation agreements with social organisations to support social and labour market inclusion and promote employment for people with disabilities. Thanks to initiatives like these, we have enhanced our diversity management, building an environment of equality and non-discrimination to support efforts to attract and retain people with disabilities to our workforce.
NUMBER OF PEOPLE WITH DISABILITIES 18
BANCA MARCH 15
MARCH R.S. 0
INVERSIS 3
MARCH AM 0
MARCH VIDA 0
Alternative measures are also adopted, including donations to and the use of services provided by Special Employment Centres, always with a view to supporting activities to promote integration into the workforce and create jobs for people with disabilities. The beneficiaries are foundations, public associations or Special Employment Centres whose purposes include professional training, integration into the workforce and creating jobs for people with different abilities, to help create employment opportunities for differently-abled people and ultimately allow for their integration into the labour market.
(1) We are currently compiling data on waste generation at the main head offices of the various Group companies in order to provide said data in future reports. (2) Water use refers to the Banca March head offices in Palma (Alejandro Rosselló - 428 employees) and Madrid (Núñez de Balboa – 213 employees), as these are the largest, most representative buildings in terms of consumption levels. (3) Electricity and paper use refers to the head offices mentioned in footnote (2) as well as R.S.’s head offices in Madrid (Calle Lagasca – 81 employees). (4) There is no information available on fuel use. However, it is estimated that electricity use is the most significant form of energy consumption. (5) Emissions were calculated using CeroCO2 https://www.ceroco2.org/. (6) Scope 3 emissions are not currently calculated. The possibility of calculating these emissions for future reports is to be explored.
64 65 O3 MAIN BUSINESS LINES
Wealth Management 68 Joint Investment activity 70 Retail and Private banking 73 Branch and ATM network 73 Payment methods 74 Product development and sales 74 Customer events 76 Multi-channel banking 77 - Website 77 - Digital customer acquisition 77 - Remote banking 78 - Contact centre 78 - Mobile payments 79 - Social media 79 Corporate banking and markets 81 M&A 82 Capital markets and syndicated financing 83 - Loan origination and distribution 83 - Capital markets - fixed income 84 - Capital markets - equities 86 Treasury and markets (T&M) 86 - Treasury 87 - Treasury distribution (TD) 87 - Methodology and quantitative analysis (MQA) 88 - Asset financing solutions 88 The Insurance area 91 Bancassurance and retirement planning 92 Subsidiaries: 97 March A.M. 97 March R.S. 100 March Vida 101 Banco Inversis 102
66 67 Wealth Management
WEALTH MANAGEMENT Our customers’ portfolios beat the main benchmark indices in 2018, and our institutional SICAVs outperformed these indices by a broad margin. The Wealth Management area provides specialist services for family business owners and high-net In 2018, the Banca March Group remained positioned as the third-largest SICAV manager by worth professionals and families requiring tailored monitoring of both savings and investments volume, according to the ranking by Inverco, with assets under management of 2.81 billion euros over the medium and long term. Our overarching goal is to help our customers preserve and grow (118 SICAVs). their wealth, and pass it down to future generations.
Our overarching goal is to help our customers preserve and grow their wealth, and pass it down to future generations
We offer a broad range of specialist products and services, including discretional portfolio management, portfolio advisory services, investment funds, structured products, financing, traditional banking products and Joint Investment products.
Banca March Group receives an abundance of investment proposals of all different kinds. We carefully analyse these proposals, identify compelling investment opportunities and invite our customers to invest alongside us, offering them the benefit of our experience and expertise as a reflection of our clear, firm commitment.
We believe in open architecture, which allows us to offer independent, flexible advice, and we therefore sell other international financial institutions’ products. We seek the best product offered by the market for each asset class. Against the current market backdrop, we recommend that our customers hold a certain percentage of alternative and illiquid assets in their investment portfolios.
Depending on the customer’s risk profile, we suggest these assets account for between 10% and 30% of the portfolio. Alternative assets are particularly important in the current market scenario, with record low interest rates and international stock markets expected to underperform versus previous years. Also, in recent years, which have been characterised by significant market volatility, correlation between the traditional asset classes – debt and equities – has risen.
As part of our value proposition, we strive to offer our customers a comprehensive advisory service, providing our expertise not only on financial matters, but also on issues related to estate planning, tax and business. In 2018, the Banca March Group We offer our customers a 360-degree range of services delivered by our teams of top professionals in the areas of Treasury, M&A, Insurance, Equity Capital Markets and Asset Financing Solutions. remained positioned as the third- What’s more, with a view to designing effective financial and tax strategies for our customers’ largest SICAV manager by volume, assets, we also provide multijurisdictional solutions through our office in Luxembourg. with AUM of 2.81 billion euros
68 69 Joint Investment Activity
JOINT INVESTMENT ACTIVITY In terms of divestments and pay-outs, various joint investment projects generated liquidity in 2018:
Deyá Capital. In 2018, the first private equity vehicle launched by Grupo March’s asset 2018 saw intensive efforts to identify new real economy investment opportunities, which served manager Artá Capital paid out the proceeds of its divestment of Panasa, as well as dividends to lay the groundwork both for projects undertaken over the course of last year and for others obtained from InStore Media and Mecalux and the definitive amortisation of the Ocibar which will be launched in 2019. equity loan. Out of the 166 projects studied in total, at least a third had a real estate component, a fifth were Oquendo II. In 2018, the mezzanine finance vehicle divested Monbus and Multiasistencia. lending or private financing transactions and another fifth were in the private equity area. Half of These divestments, in addition to the dividend pay-outs, took the distributed capital to 60% the projects were focused in Spain, and the remainder had an international component. of total capital commitments. Out of all the projects studied by the Joint Investment team in 2018, just 3% were approved, as Junior credit-linked notes for LNG carriers. Thanks to the operating performance of per the governance framework for the origination of joint investment projects. the ships, the repayment of the financing is taking place at a faster rate than was initially We are beginning to step up our investment in private equity - the most heavily weighted asset stipulated. At year end, the rate of extraordinary amortisation meant that an additional in our joint investment products - investing in the international arena through Carlyle’s fifth 30% had been recovered on top of the ordinary repayment amount. The fact that these are European private equity fund: Carlyle Europe Partners V. This investment is the launch of our joint floating rate notes also allowed them to harness the increases in the US rate curve, taking investment initiative in the share capital of unlisted companies outside Spain and Portugal, which the average rate since issuance to 5.9%, 10% higher than the initial rate. will be rolled out over the coming years with additional funds and regions to be added.
We are beginning to step up our investment in private equity, the most heavily weighted asset in our Joint Investment products
We continue to invest in niche strategies in financing or (unlisted) corporate debt, and have committed to investing in the new investment vehicle managed by Oquendo, which will provide temporary financing for real estate repositioning projects as a complement to the bank financing secured by these projects.
In the real estate sector, we are making strong inroads in the field of logistics real estate, working with Pavasal on projects for the development of a dozen logistics warehouses of substantial size to respond to existing logistics operators’ latest needs. These logistics projects, located in Madrid, Barcelona and Valencia, also afford additional improvements to the access roads and the logistics assets’ surroundings, and will create over 500 permanent jobs.
70 71 Retail and Private Banking
RETAIL AND PRIVATE BANKING
BRANCH AND ATM NETWORK
In 2018, we continued to roll out our ambitious transformation plan, which is motivated by the needs of our increasingly well-informed, demanding customers, the digitalisation process underway in the sector and the philosophy of our own business model, which is based on tailored, long-term advisory services.
We are still highly aware that excellent customer service means covering the digital and physical environments in a responsible, sustainable manner, which represents a constant challenge. Our customers now have a choice in terms of how they interact with Banca March:
Through our updated online banking service and our brand new app, both of which boast improved, more attractive interfaces, enhanced features and zero limitations in terms of time or location..
Through our highly-trained sales managers, who are equipped with a mobile office in the form of a tablet, allowing them to serve our customers wherever is most convenient. They can complete transactions, carry out simulations and sign contracts digitally.
Through our branches, which are now larger in size and therefore house a greater number of specialist professionals, covering all of the business areas in which Banca March operates.
In practice, this new banking landscape has meant that certain work centres have been absorbed by larger facilities, with larger teams of highly qualified professionals, where efficiency and strong ties with customers are top priorities. We have also continued to open inner-city branches in areas with strong potential which are considered strategic to the bank’s activity.
Another channel which offers our customers greater operational autonomy is our network of ATMs. At year-end 2018, we had a total of 456 ATMs, of which 290 were standalone machines located throughout Spain in areas where the bank operates and in strategic locations for both the Spanish and international public.
Excellent customer service means covering the digital and physical environments in a responsible, sustainable manner
In 2018, we continued to deploy new ATMS equipped with the Windows operating system, which means customers can enjoy a range of new functions including cash withdrawals using contactless and mobile technology (NFC).
72 73 Retail and Private Banking
PAYMENT METHODS We are also highly skilled in seeking sustained returns over the long term, minimising the impact of market fluctuations and prioritising capital preservation. To that end, we offer a broad range of In 2018 we launched the Alturis Business Banca March card, a metallic card available exclusively investment services with a clear focus on high added-value solutions: to Large Companies and Wealth Management customers offering preferential, high added-value Discretional portfolio management: the customer delegates the management of their services. fund portfolio to the Banca March experts who, in line with their management mandate, The Alturis Business Banca March features the latest technology in materials and systems select the domestic or global funds that are best suited to the customer’s risk profile and to guarantee safety and prevent fraud – high coercivity, Mastercard M/Chip Advance and NFC investment goals. technology for contactless payment – coupled with the elegance and strength of the metal card Ongoing advisory services: the manager provides buy and sell recommendations for itself. products that are aligned with the customer’s portfolio profile; the customer has the final say. In 2018 we launched the Alturis Ad-hoc advisory services: the manager recommends investment products based on the customer’s profile; the customer decides which products to buy.
Business Banca March card, a Banca March’s managers boast an extensive, renowned track record in fund management, and metallic card offering preferential, helps our customers to build the portfolio that best suits their profile. They also ensure that the customer receives regular monitoring reports outlining the funds comprising the portfolio, any high added-value services changes undertaken and the returns generated.
Cardholders have access to the Concierge service, which affords them a single telephone number Among the factors that set us apart they can use to meet any needs they may have or resolve any issues, including securing tickets for shows, hotel and restaurant bookings, personal orders, help with event management and are our joint investment vehicles, solutions for any incidents, such as cash advances and 24-hour card replacements.
It also offers free cash withdrawals at domestic and international cash points, high-end travel which are the utmost expression of accident insurance (2 million euros) and another travel insurance policy with extensive cover for our commitment to our customers overseas medical treatment, as well as access to VIP rooms at over 850 airports worldwide.
Finally, the Mastercard Priceless Cities platform offers holders access to tailored experiences and The products managed by our asset management business, March A.M., are also a strong example the most exclusive events. of our commitment to our customers, and include the following key products: On acquiring an Alturis Business Banca March card, customers are provided with a welcome pack March Vini Catena, the first and only global equity fund investing in companies linked to of unparalleled elegance and originality. the wine industry value chain..
The Family Businesses Fund, a global equity fund which invests in a selection of the best listed family-owned companies, where more than 25% is owned by a single family and the PRODUCT DEVELOPMENT AND SALES intention is to pass the business down to the next generation.
Banca March continues to develop its own unique business model which is highly specialised Fonmarch, F.I., Spain’s longest-standing investment fund. in private banking, wealth management and corporate advisory services, always offering an unparalleled value proposition. Discretional portfolio management service, always tailored to the risk profile and investment goals of the customer, who delegates the management of their fund portfolio Our commitment to this long-term management model is underpinned by healthy financial and to March A.M.’s highly experienced team of professionals. capital ratios, as well as specialist expertise, high value-added products and a comprehensive service that strives to ensure outstanding quality. We would also highlight our active marketing and sales of structured bonds, tradable financial assets with a certain maturity and a yield which is linked to the performance of a share of market Among the factors that set us apart from the rest are our Joint Investment vehicles, which are index, an interest rate or an exchange rate, with a specific coupon structure for each particular the utmost expression of our commitment to our customers. Our institutional SICAVs are an bond. These products have a range of formats and can be tailored to the customer’s needs. excellent example of these products: for over 20 years, Torrenova, Bellver and Lluc have united the investment interests of the bank’s shareholders and our customers.
74 75 Retail and Private Banking
As for our retirement products, we offer an excellent investment option through our pension Investment forums. funds, which span a range of profiles and investment styles to ensure they meet the needs of all At these events, Banca March invites three international asset managers to take part in a customers who opt for this investment format ahead of their retirement. debate, moderated by a Banca March executive, on the current market scenario and investment opportunities. These debates are a clear demonstration of Banca March’s open architecture Through March Vida, our unit-linked life insurance plans are available in two investment formats to approach. ensure they meet all our customers’ needs: structured deposits, which allow investors to combine compelling returns with redemption windows, and March Vida’s Multifondos, which are linked to Tax meetings. a portfolio of funds that is determined by their risk profile. Banca March holds regular meetings with its customers to inform them of all tax-related Last year, our more traditional, highly-specialised products also continued to sell well, responding developments that could impact the management of their assets. The bank has a specific tax to our customers’ needs and meeting the requirements of new regulations such as MiFID 2. These department comprising a team of top-level professionals. include discounted mortgage rates, flat-fee current accounts, credit cards and pre-approved Events in partnership with the Juan March Foundation. financing products, among others. Every year, the Juan March Foundation offers Banca March’s customers access to previews and We have also developed a range of commercial offers and events for the professional groups with private viewings of the main exhibitions inaugurated at the Foundation’s headquarters in Madrid. which we have a cooperation agreement in place. Meetings with business leaders. Finally, it is important to highlight the range of products and services designed exclusively for the These meetings are held to discuss specific issues of interest to business leaders, and family EU resident sector, which accounts for a significant proportion of Banca March customers (21.7%) business leaders in particular, and to monitor the performance of certain investment products, thanks to the bank’s geographical footprint and its focus on this specialist market niche. As well as among other topics. covering their banking needs, we also offer these customers advisory services and comprehensive management in their own language, to ensure that they receive the same levels of service as they Branch openings. would in their home countries. When the renovation works undertaken to renew our corporate image come to completion, we organise inauguration events for the new facilities. We invite our customers to these events to showcase these new spaces, which allow us to provide them with enhanced services and an excellent customer experience. CUSTOMER EVENTS Sports and leisure events. In 2018, 165 events were organised with Wealth Management, Private Banking and Corporate Banca March has organised several golf tournaments at various locations, in which our customers Banking clients, which were attended by approximately 7,000 people. were invited to take part.
165 events were organised with MULTI-CHANNEL BANKING
clients, which were attended by Website approximately 7,000 people The Banca March corporate website attracted 3.3 million users in 2018, including customers and non-customers, representing an increase of 1% year on year. All of the corresponding indicators saw an improvement. In 2018, the website was used by 733,000 unique visitors, an increase of The different types of events held can be broken down into: 11.7% versus 2017. The average session length was up by 7.3% and the bounce rate was down by 42% versus 2018. Market Strategy Presentations. At these meetings, held early on in the year, we give clients an overview of Banca March’s strategic 2018 also saw strong progress in the number of subscribers to our newsletters by potential outlook for the economic and market landscape. customers, soaring by 269% from 442 subscribers in 2017 to 1,632 at the end of 2018. Subscribers receive our daily and monthly reports, which offer an overview of the market performance and Institutional SICAV monitoring meetings. outlook. The managers of Banca March’s institutional SICAVs give a first-hand account of results and performance to the clients who co-invest with Banca March through these vehicles. Digital customer acquisition Our digital strategy pursues a two-fold objective: to generate brand awareness and to attract new customers. Digital communications platforms were developed and updated to support our customer acquisition efforts, including the website www.bancamarch.es/crecerjuntos, which helped us to achieve these objectives.
76 77 Retail and Private Banking
Remote Banking Mobile payments In July 2018, we rolled out a brand new remote banking service with a more attractive, more In 2018, Banca March implemented payment via mobile devices. intuitive, easier-to-use design. The platform will continue to add in new functions, with a range of innovative features already implemented: In July 2018, the new Apple Pay service was made available to all Banca March customers. This service allows customers to pay using their Apple devices in any establishment that uses Creation of an alias to access remote banking. Customers can access remote banking either contactless POS terminals. The service went down extremely well with Banca March customers, using this new alias or using the traditional number from their code card. with an activation rate of 40%.
The new service offers overall improvements and is simple and intuitive, featuring graphic In November, we launched the Google Pay service to allow customers with Android devices to views broken down into six sections: Accounts, Investment, Cards, Financing, Insurance and make payments using their mobile phones Business.
The Necesito (“I need”) menu. The lengthy dropdown menus of old are no more. Depending on what page the customer is browsing, this new menu offers context-based related options In 2018, the Apple Pay and or operations, and can be hidden or revealed at any time. Google Pay services were made Transfers: the process to undertake transfers has been completely redesigned and simplified, with a new step-by-step guide. available to all Banca March The percentage of digital customers, understood as customers who have logged on at least once customers in the last 90 days, now stands at 45.5% of our total active customers, versus 44.7% in 2017.
Contact centre
Our efficient, optimised management of customer channels allows us, as well as providing support Social media for all customers via Remote Banking, to add value to other bank areas too, positioning the Contact Centre as a strong source of business generation. In particular, the following commercial services We continue to work on consolidating our presence on social media, generating specialist content deserve a special mention: that helps position our brand as a source of expert advice.
Our reverse-factoring service, launched in 2015, is performing well. This service allows On LinkedIn, we use a one-to-one strategy that allows our managers to position themselves us to manage our customers’ suppliers proactively, providing advance payments of invoices as experts and reach highly segmented target clients. Our profile now has 13,761 contacts, remitted to our customers in 2018 worth a total of 83 million euros. up 35.7%.
Our Euro Accounts, which are intended to help EU residents buy homes and to generate On YouTube, we post weekly videos on our market outlook and investment strategies. Our new business, attracted 354 new customers. . videos got 182,300 views through this channel up to year-end 2017, up 15.3% versus 2017.
Management of initial calls to potential clients stemming from leads generated by online Our Twitter account chalked up 1,350 followers to December 2018, a year-on-year increase customer attraction actions. of 8.8%.
78 79 Corporate Banking and Markets
CORPORATE BANKING AND MARKETS
In 2018, Banca March continued to cement its position as a leading provider of advisory services for family businesses, further our developing value proposition in Corporate Banking solutions beyond financing and transaction solutions.
In an increasingly competitive, complex business area, we continue to offer swift decision-making, flexibility and services which are tailored to each customer’s circumstances. To achieve this, Banca March boasts highly-specialised sales teams – our Large Companies units – as well as a portfolio of products and services which, alongside our financing, transaction and cash management services, also includes comprehensive specialist corporate advisory services provided through the Capital Markets unit, the M&A unit and the insurance broker March R.S.
We offer swift decision-making, flexibility and services which are tailored to each customer’s circumstances
Banca March’s Corporate Banking area enjoyed a successful year; income from services accounted for 65.3% (53.2% Large Companies) of the total ordinary income reflected on the income statement. These results clearly evidence the effectiveness of Banca March’s strategy in the Large Companies business area, offering advisory services to companies – predominantly family businesses – as well as financial services. Banca March’s Large Companies business model is closely aligned with the bank’s philosophy and is clearly focused on enterprises and entrepreneurs, the key pillars underpinning Banca March’s general strategy.
All of the specialist business units comprising the Corporate Banking area contributed to this milestone achievement, as did the sales team at the five Large Companies units (Balearic Islands, Madrid, Catalonia and the Levante region, as well as the Expansion branch). The ability to provide family businesses with advisory services in the fields of capital markets financing to offer alternatives to bank funding, as well as in M&A and in global industrial risk coverage (through our insurance brokerage, March JLT) is an advantage that very few financial institutions can offer their middle-income level clients.
Income from services accounted for 65.3% of the total ordinary income on the income statement
80 81 Corporate Banking and Markets
The sales teams at the Large Companies offices cover an increasingly large geographical area Our customers are always seeking investment opportunities to allow for diversification, and and are highly specialised, both of which are key factors in terms of providing responsible, quality the unit has responded by participating in unique transactions on rental assets (mainly office advisory services. This, in addition to their close ties in place with the bank’s other business areas buildings, logistics warehouses and hotels). This segment now accounts for a substantial part of and subsidiaries and their training in generating added value, is what truly sets our value proposition the unit’s portfolio of transactions underway. Thanks to this ever-increasing activity, Banca March apart from the rest. has expanded its team to include a professional who specialises in advising on transactions on real estate rental assets. Banca March has achieved outstanding results by ramping up the distribution of treasury management products and capital market activity. This has allowed for the creation and distribution of a portfolio of products which is constantly adapted to fluctuations in the forex market, interest rates and commodity prices. We have also made substantial headway in the distribution to We focus our efforts on providing professional and institutional clients of various structured vehicles to provide regulated market financing for our client companies. solutions to the fundamental The number of qualified clients in Corporate Banking grew by 10% in 2018, and we remain strategic concerns of businesses committed to securing even greater growth and further developing our specialist banking model, harnessing synergies with the bank’s other areas and subsidiaries. This allows us to offer our target and business owners customers – enterprises and entrepreneurs – a complete, unparalleled range of products and services for their business activity which fully reflect Banca March’s values and principles and are highly competitive in terms of price, quality, flexibility and efficiency. In 2018, the unit offered advisory services to clients operating in a broad range of sectors, including the food, transport and logistics, pharmaceutical, distribution, security and hotel industries, among In 2019, the Corporate Banking area will make continued progress in providing end-to-end advisory others. services to the business owners, enterprising families and family businesses – large or mid-sized – which, as customers of any of our segments, place their trust in us to protect and manage both their private and business assets. We provide these clients with a broad range of tailored corporate banking services which is expanding every year, regardless of where they are and what they do. CAPITAL MARKETS AND SYNDICATED FINANCING
The overarching goal of Banca march’s Capital Markets and Syndicated Financing unit is to identify solutions for the financing and capital requirements of the bank’s customers, via either traditional M&A lending or institutional investors.
Banca March’s M&A unit is one of the bank’s specialist areas which all help to complete the To that end, the Capital Markets and Syndicated Financing team operates in the following areas circle of long-term advisory services afforded to family businesses and entrepreneurial families. of activity: The team focuses its efforts on providing solutions to the fundamental strategic concerns of businesses and business owners. These efforts are channelled into providing advice on the design Loan origination and distribution and execution of corporate transactions, the format and characteristics of which are tailored to This unit undertakes the bank’s activity in syndicated and traditional club loans, i.e., transactions both the strategic position of the business group in terms of timing and to the strategic needs of in which two or more financial institutions participate in a coordinated manner. It also carries out the shareholder family itself: the origination and distribution of loans which are intended to be disintermediated to institutional Integration of an investment partner to help finance the business plan and further investors; in other words, where Banca March acts as a simple mediator between the company and professionalise the company’s management. the investor client and the loan in question does not appear on the bank’s balance sheet.
Acquisition-based growth through the acquisition of productive units, businesses or Banca March participated in more than 25 club or syndicated loan transactions over the course companies, to step up the company’s expansion alongside its organic growth. of 2018, totalling over 5.9 billion euros in financing. Banca March’s share of the financing stood at over €260 million. Full or partial sales of companies as a solution in the event of the need to replace shareholders, of highly-fragmented shareholdings or when succession is not an option. The aforementioned transactions were undertaken in a broad range of economic sectors, including the agrifood, pharmaceutical, real estate, hotel, industrial and transport industries, among others. Sales of non-strategic divisions, businesses or assets.
Management buyouts (MBOs).
Transactions related to listed companies, working closely with the Capital Markets unit.
82 83 Corporate Banking and Markets
Alongside this activity, the loan origination and distribution unit also originates customer loans --MARF commercial paper programme for Fluidra worth 50 million euros: registered advisor and which are distributed to institutional investors. The format of these loans tends to be bilateral, bookrunner. with Banca March structuring the loan in line with the premises stipulated by the institutional --MARF commercial paper programme for Sacyr worth 250 million euros: registered advisor and investor set to acquire it. Banca March is firmly committed to this strategy, which bridges the gap bookrunner. between origination and distribution – the former involving liaising with companies and the latter with investors – in order to spearhead a dynamic, demanding market in which the quality of the --MARF commercial paper programme for Ulma worth 50 million euros: registered advisor and bank’s services, management and reputation are essential for success. bookrunner. --MARF commercial paper programme for Grupo Siro worth 50 million euros: registered advisor and bookrunner. We seek solutions for the --MARF commercial paper programme for Grupo Jorge worth 75 million euros: registered advisor financing and capital requirements and bookrunner. --MARF commercial paper programme for TSK worth 150 million euros: registered advisor and of Banca March’s customers bookrunner. --AIAF commercial paper programme for Abertis worth 500 million euros: bookrunner. Throughout 2018, Banca March continued to undertake transactions under the agreement signed --European Commercial Paper (ECP) programme in Ireland for Euskaltel worth 200 million euros: in 2016 with a leading European insurance provider. This agreement involved an investment dealer. commitment by the insurer of up to 400 million euros, which was later raised to 850 million euros --European Commercial Paper (ECP) programme in Ireland for Viesgo worth 300 million euros: in late 2017. arranger and dealer. This strategic agreement between Banca March and the institutional investor has allowed Banca --European Commercial Paper (ECP) programme in Ireland for Acciona worth 750 million euros: March to roll out a new initiative called Spanish Loan Private Placements. This initiative affords the dealer. main companies in the Spanish middle market the opportunity to diversify their sources of funding --European Commercial Paper (ECP) programme in Ireland for Ferrovial worth 1 billion euros: by accessing the institutional market for private placements, albeit in loan format. arranger. Capital markets - fixed income --European Commercial Paper (ECP) programme in Ireland for Cie Automotive worth 200 million euros: arranger and dealer. This segment covers all financing transactions executed as fixed income transactions in the form of commercial paper and bonds in public markets – both domestic and international – both by --European Commercial Paper (ECP) programme in Ireland for Cellnex worth 500 million euros: qualified institutions which have public ratings, and companies which do not. dealer. In 2018, Banca March was the most active financial institution in the market in short-term issuances for Spanish companies, including both unrated companies and those with investment grade or high Banca March has a market share in MARF issuances, both in relation to limits on commercial paper yield ratings. At the close of 2018, Banca March was heading up the following MARF and AIAF programmes and to issuance volumes, of between 50% and 60%, positioning it as the Spanish commercial paper programmes and ECP programmes in Ireland: market leader among qualified investors for this product type. --MARF commercial paper programme for Elecnor worth 300 million euros: registered advisor In 2018, Banca March exceeded 3.4 billion euros in short-term financing volumes issued in the and bookrunner. capital markets, outperforming its 2017 issuance volume by over 56%. --MARF commercial paper programme for Tubacex worth 150 million euros: registered advisor and bookrunner. --MARF commercial paper programme for Europac worth 200 million euros: registered advisor In 2018, Banca March was the most and bookrunner. active financial institution in the --MARF commercial paper programme for Barceló worth 200 million euros: registered advisor and bookrunner. market in short-term issuances --MARF commercial paper programme for Maxam worth 100 million euros: registered advisor and bookrunner. At the same time, Banca March continued to renew innovative products such as the financing line --MARF commercial paper programme for Gestamp worth 150 million euros: registered advisor based on the securitisation of invoices implemented for IM Fortia I for a total of 400 million euros, and bookrunner. which has secured a BBB+ rating from S&P thanks to the structure used. Banca March also acted as arranger on Sacyr’s euro medium-term note issuance (Euromedium Term Note Programme), worth 500 million euros. This is the first time that Sacyr has implemented a programme of this kind.
84 85 Corporate Banking and Markets
This financing model – via fixed income markets – is aimed at allowing issuers of commercial paper Treasury and medium-term bonds to optimise financing costs and diversify sources of financing. The members of the Treasury team must be highly qualified and have flexible skill sets to allow There was also substantial demand for the commercial paper issued among professional investors, them to respond to all the requirements of their two-fold roles, working with both the balance as it represents an alternative to other investment products, given the declining yields on short- sheet and customer needs. term products such as term deposits and government bonds. The risk involved is also very Treasury manages the bank’s liquidity and is responsible for managing and hedging the interest controlled, thanks to the issuers’ credit ratings and the short maturities. rate risk and exchange rate risk on the balance sheet:
Capital markets - equities Liquidity. The goal is to outperform a benchmark to ensure that Banca March has an In 2018, Banca March decided to take another step forward in the development of its Corporate adequate cost of funding. The current landscape of negative interest rates and the Banking and Markets area by creating the Capital Markets - Equities unit. The unit aims to provide expansionary monetary policy adopted by the European Central Bank (ECB) has made solutions to help our customers raise capital, as well as offering them the opportunity to adjust this an extremely arduous task, at the same time as helping to systematise extraordinary their shareholder structure via the transfer of blocks of shares. financing transactions, which in turn have helped optimise costs. Interest rate risk. The current low interest rates favour fixed rate operations, which obliges us to transform our financing on the same terms, to manage the gaps emerging as a result We provide solutions of current operations. to help our customers Foreign exchange risk. Banca March has extensive experience in the foreign exchange markets and our solvency and ratios make us a very strong market counterparty; we raise capital therefore work with the top international banks. In 2018, Treasury issued three Banca March, S.A. structured bonds, which act as a guarantee for products sold through March Vida S.A.. A new bond was also issued and another, issued by March The unit’s activity also ties in closely with our services to investor clients, who are constantly International Issuances, was restructured, with aggregated amounts of 100 million euros. At the seeking investment opportunities in equities, specifically acquisitions of large numbers of shares end of the year, renewals of the issuance programmes corresponding to the Commercial Paper that are already in circulation and need to be traded as a block. Prospectus 2018 Banca March and the Bond Prospectus 2018 MiLUX were registered with the The unit began operating in 2018, successfully completing its first transactions and identifying CNMV and the Irish Stock Exchange. business opportunities set to emerge over the course of 2019. Treasury distribution (TD)
TD provides products and services for our customers, seeking to respond effectively to their TREASURY AND MARKETS (T&M) needs and ensure excellent levels of quality. The results generated this year were positive, against a highly complex backdrop, with exceptionally low interest rates, increasingly narrow spreads T&M performs two key functions within the bank: it offers products and services that meet our over the year, negative markets and geopolitical challenges which are unpredictable and tough to customers’ needs, and it cooperates on the management of the bank’s balance sheet, in line with resolve (Brexit and the trade war, among others). the guidelines stipulated by Banca March’s decision-making bodies. The team’s efforts in distributing commercial paper deserve a special mention. These assets are in T&M comprises three clearly differentiated divisions: Treasury, Treasury Distribution and high demand thanks to the characteristics they offer: short maturities and positive yields. The agile Methodology and Quantitative Analysis. The three divisions work together closely and enjoy placement of commercial paper by the DT team, as well as Banca March’s efficient settlement and significant synergies, but maintain their status as individual areas and, in the case of Treasury and custody services and the rigorous selection of issuers undertaken by the bank itself, are a strong Treasury Distribution, ensure that information flows are compliant with regulations. guarantee for investors, who enjoy the peace of mind of knowing that they have a committed partner taking on the same credit risk. Coupled with the creation of new programmes, this has T&M outperformed expectations once again in 2018, reaping strong results and increasing the allowed us to double our trading volume in these assets versus last year, to a total of 3.4 billion number of qualified clients. euros
86 87 Corporate Banking and Markets
Methodology and quantitative analysis (MQA) Our in-house advisory, origination, structuring and distribution capabilities in asset financing are deployed across a broad range of underlying assets – aircrafts, ships, railway rolling stock, The MQA team has continued to grow, whilst holding firm to its ethos of continuous improvement. idiosyncratic assets, technology, energy efficiency and the circular economy – and financial Regulatory demands, process automation and the necessary process improvements all mean that solutions designed to optimise efficiency for our customers and generate investment opportunities this is a highly active division. All of these developments are undertaken as part of the Banca for a conservative investment profile. March Digital Transformation Plan. In an ever-changing environment, MQA strives to allow for both the development of new tailored solutions for our customers and for high-quality, transparent Our outstanding advisory services and unique financial structures are a clear reflection of the services, often going one step further than the regulations require. The excellent work undertaken attributes that set Banca March apart. by the division is evidenced by the fact that in 2018, 12 new regulatory compliance and business development projects were launched.
Asset financing solutions Asset Financing Solutions, a specialist Banca March unit that falls under Corporate Banking, seeks to identify and develop advisory and financing structures that allow for the optimisation of investments in new assets.
The asset financing structures offered by Banca March are grouped as follows:
Optimisation structures based on the regulatory framework, such as Tax Lease/Tax Equity, monetisation and subsidies, among others.
Asset Financing Structures (AFS) focused on assets which due to their nature – liquidity, value preservation, collateral transfer pricing – are financeable on their own merit, affording optimised financial efficiency for the operator of the asset and an improved credit profile, and thereby creating an opportunity to access a newly-created asset category to build diversification.
Banca March is the leading financial institution in structuring and distribution for finance arrangements based on tax incentives stemming from prudent regulatory analysis. This was a key attribute in allowing us to expand the team and, in 2018, to seize a number of significant opportunities, as well as implementing improvements in terms of the design and monitoring of these structures.
Banca March is a leader in the structuring and distribution of finance arrangements for asset financing
Banca March’s asset financing activity is underpinned by a comprehensive model comprising specific scenarios that allow for financial structures which are compatible with disintermediation via the selective distribution of securities to investors.
Our asset financing structures are based on collateral which, due to its nature – liquidity and essentiality to the operator – constitutes ideal backing for investors and allows the asset operators to benefit from diversifying their financing programmes
88 89 The Insurance Area
THE INSURANCE AREA
In May 2018, the new Insurance Area was created, which encompasses the Bancassurance and Retirement Planning Unit and the insurance subsidiary March Vida. The Area’s key objective is to implement a strategic plan to support the sale of insurance solutions across all Banca March business areas, securing a stronger contribution by insurance products to the bank’s ordinary income and helping to consolidate our business model of specialisation and added value for customers.
The overarching goal is to step up the marketing and sale of medium- and long-term savings and retirement insurance products.
In May 2018, the new Insurance Area was created, which encompasses the Bancassurance and Retirement Planning Unit and the insurance subsidiary March Vida
The unstoppable shift towards digital solutions and the demand for simplicity, transparency and tailored services – all of which are hallmarks of Banca March’s strategy – will also form part of the value proposition of the insurance solutions we offer our clients.
The main lines of action within the bank’s strategy in the insurance sector are:
Consolidation of the current business, rolling out tools to improve sales of these types of products.
A company-wide approach, to encompass all of the bank’s business segments, from HNWI customers to the corporate banking business, offering specific solutions tailored to the needs of each customer type.
A customer-focused approach; the customer must lie at the core of the strategy, which is built on understanding customer needs and developing ad hoc solutions.
Digitalisation, which is now an indispensable factor in the design of any new solution.
Growth in products, distribution channels, and services linked to the insurance sphere.
90 91 The Insurance Area
BANCASSURANCE AND RETIREMENT PLANNING The Bancassurance and Retirement Planning In 2018, the Bancassurance and Retirement Planning business performed well, with revenues of 25.2 million euros, up 4.2% year on year. business performed well, with revenues of Thousands of euros 25.2 million euros, up 4.2% year on year Total Bancassurance and Retirement Planning Area
2018 2017 % Diff. Broken down by regional division, the revenues from the Retail and Private Banking business were as follows: 15.7 million euros from the Balearic Islands, 3.4 million from the Canary Islands and 4.8 Risk insurance 8,179,831 7,741,384 5.66% million from the Spanish mainland. Savings insurance 9,870,530 9,629,876 2.50% Thousands of euros Retirement 7,127,082 6,788,405 4.99% Balearic Islands Canary Islands Mainland Spain Total 25,177,442 24,159,664 4.21% 2018 2017 % Diff. 2018 2017 % Diff. 2018 2017 % Diff.
Risk insurance 5,232,752 4,850,485 7.88% 1,491,884 1,474,647 1.17% 1,229,310 1,215,266 1.16% These revenues stemmed from the various different areas of the bank, primarily from Retail and Savings Private Banking: 6,840,243 6,462,989 5.84% 1,173,459 1,193,739 -1.70% 1,458,256 1,390,421 4.88% insurance Thousands of euros Total Retail and Private Banking Area Retirement 3,607,868 3,330,751 8.32% 752,425 724,491 3.86% 2,080,085 1,997,963 4.11%
2018 2017 % Diff. Total 15,680,864 14,644,225 7.08% 3,417,767 3,392,876 0.73% 4,767,652 4,603,649 3.56%
Risk insurance 7,965,408 7,551,272 5.48%
Savings insurance 9,481,459 9,069,381 4.54% Income by Regional Division
Retirement 6,570,886 6,230,774 5.46%
Total 24,017,753 22,851,427 5.10% 4,767.652
Income by Area 15,680,864 3,417,767
987,664 172,025
Balearic Islands 24,017,753 Canary Islands
Mainland Spain
Retail and Private Banking
Wealth Management
Other areas
92 93 The Insurance Area
The distribution by segments within the Retail and Private Banking area were as follows: Retail Banking generated 16.5 million euros, Private Banking generated 6.7 million and Corporate Banking 0.7 million euros.
Thousands of euros RETAIL BANKING PRIVATE BANKING CORPORATE BANKING
2018 2017 % Diff. 2018 2017 % Diff. 2018 2017 % Diff.
Risk insurance 6,709,072 6,417,690 4.54% 554,694 485,757 14.19% 701,642 647,825 8.31%
Savings 5,643,717 5,471,466 3.15% 3,835,655 3,596,444 6.65% 2,087 1,270 64.24% insurance
Retirement 4,199,663 3,928,167 6.91% 2,365,603 2,297,199 2.98% 5,621 5,408 3.95%
Total 16,552,452 15,817,324 4.65% 6,755,951 6,379,601 5.90% 709,350 654,503 8.38%
Income by segment
709,350
6,755,951
16,552,452
Retail
Private
Corporate
March Vida is the Banca March Group’s insurance company. March Vida offers savings, unit-linked, retirement, life annuities and life-risk products, with a focus on personal and asset protection. At the end of December 2018, March Vida managed over 82,000 life insurance policies with a total balance of 1.27 billion euros. March Vida undertakes its activity via the Banca March network of branches and offices, as a linked bancassurance operator.
Further information is available on March Vida in the corresponding paragraph of the Subsidiaries section (page 103).
94 95 Subsidiaries
SUBSIDIARIES
MARCH A.M.
At the end of 2018, March A.M. had total assets under management of 6.27 billion euros. After an extremely strong 2017, during which the asset manager chalked up impressive growth figures, the AuM figure was hampered last year by the weak performance of the financial markets across the board, which saw virtually all assets close the year with losses. Since the beginning of the 20th century, very rarely have we seen both equities and bonds suffer heavy losses at the same time. This is an exceptional circumstance, as the two asset classes tend not to be correlated and as such, when one performs poorly the other does well. Even in 2008, which will go down in history as one of the worst years ever for equities, fixed income funds managed to close the year with gains.
The poor performance of the markets, which brought about a resurgence of market volatility, was driven by a number of factors, including the trade war between the US and China, the economic slowdown in China, the incipient normalisation of central bank monetary policy – with the Fed in the process of raising rates and the ECB tapering its bond buying programme –, the negotiations and uncertainty around Brexit and the political turbulence in Italy, where populist parties have taken power.
Revenues were up by 13% and net profit grew by10%
In 2018, March A.M. saw a 13% increase in revenues and a 10% rise in net profit. Total fees and commissions from asset management held steady versus last year. Assets under management fell by 17.8% to a total of 6.27 billion euros. This decline was generated primarily in the fourth quarter of the year, which was when the bulk of the aforementioned market downturns took place. Fixed income, which accounts for a significant percentage of the total assets under management by March A.M., registered one of the sharpest declines in history.
With regards to management per se, we would highlight the resurgence of volatility after the record low levels in 2017, which had a substantial impact on the markets. The first half of 2018 was extremely complex, with meagre yields, and the second half saw even heavier losses, finally impacting the only markets that had managed to escape the downturns for most the year.
The fixed income team has been recognised as one of best in Europe by Citywire, which has assigned the team its maximum AAA rating
96 97 Subsidiaries
By asset class, the returns offered by money market funds and short term fixed income funds were As for the individual pension plans, the Plan Pensión Creciente generated returns of -2.7% and the hampered largely by the significant widening in spreads between corporate bonds and the deposit March Acciones plan returned -16.4%, although the performance over the latter over a three year rate of -0.40% held in place by the ECB. In spite of everything, the funds managed by March period stands at a positive return of 17.89%. A.M. maintained their positions in the first and second quartiles in their respective categories, outperforming the market average. March A.M.’s fixed income team has been recognised as one of Despite the challenging market conditions in 2018, March A.M. received the award for the Best the best in Europe by the leading international publication Citywire, which has assigned the team Equity Fund Manager 2018 at the 30th Investment Fund Awards, organised by Expansión and its maximum AAA rating. This achievement is even more impressive given the complex current Allfunds Bank. backdrop for fixed income fund management. Medium and long term fixed income funds were also affected by the market performance. YTD 2019* 2018 2017 2016
Equity funds were impacted by the weak performance of stock markets. March Europa FI returned SICAVs -20%. March Valores Iberian Equity FI “A” closed the year down 14.6%, lower than the 14.9% loss suffered by the Ibex 35 last year; 27 of the blue chip index’s 35 stocks ended the year in the red, Torrenova de Inversiones, SICAV 3.54% -4.90% 0.98% 2.06% making 2018 the index’s worst year since 2010. Over a three-year period, however, the two funds gained 7.17% (March Europa) and 17.5% (March Valores Iberian Equity). The returns generated by Cartera Bellver, SICAV 6.39% -10.10% 3.44% 5.75% the themed funds, March International The Family Businesses Fund and March International Vini Lluc, SICAV 9.36% -13.90% 8.66% 10.35% Catena, were also diminished by the drop in the markets, but it is important to bear in mind that over the last three years they have generated gains of 19.89% and 17.66% respectively. Fixed Income Funds
As for the institutional SICAVs, Torrenova was hampered by the market conditions outlined above, March Premier Renta Fija Corto Plazo 0.56% -2.10% 0.65% 0.65% which were detrimental to fixed income and equities alike, causing the fund to close the year with Fonmarch 1.17% -2.14% 1.82% 3.86% a loss of 4.9%. In the last 20 years, Torrenova has only posted negative returns in two – 2008 and 2018 – which is a clear reflection of the exceptional conditions observed last year. Bellver Equity Funds SICAV and Lluc SICAV, which each have increasingly more aggressive profiles than Torrenova and therefore greater exposure to equities, posted negative returns of -10.1% and -13.9% respectively, March Europa, F.I. 12.00% -20.00% 12.72% -0.07% cushioning the impact of the widespread market losses. Lluc Valores, the asset manager’s most March Intl. Valores Iberian Equity 8.45% -14.82% 12.54% 7.54% equity-focused SICAV and one of the largest in Spain by AuM, has returned 16.40% over the last three years. March Intl. The Family Businesses Fund 10.05% -15.20% 15.14% 8.50%
March Intl. March Vini Catena 8.43% -12.89% 15.56% 5.70% March A.M. received the award for the March Global, F.I. 13.50% -17.50% 8.60% 13.10% Best Equity Fund Manager 2018 at the Pension Plans 30th Investment Fund Awards, organised March Acciones, P.P. 13.98% -16.47% 9.02% 12.46% by Expansión and Allfunds Bank Profiled Funds March Patrimonio Defensivo 1.99% -4.56% 0.86% 0.91%
March A.M.’s profiled funds also closed down; the most conservative portfolio, March Patrimonio March Cartera Conservadora 3.86% -6.63% 3.28% 1.42% Defensivo, lost 4.5%, and the most aggressively-profiled fund, March Cartera Decidida, FI, lost March Cartera Moderada 5.87% -8.77% 5.02% 1.88% 12.7%. The latter of the two funds, which invests primarily in equities, has generated returns of 10.94% over the last three years March Cartera Decidida 8.31% -12.79% 10.66% 2.51%
*Data as at 29/03/2019 .
98 99 Subsidiaries
MARCH R.S. MARCH VIDA
The volume of insurance premiums brokered in 2018 stood at 207 million euros, reflecting a 24% At the end of 2018, March Vida’s portfolio stood at over 82,000 policies, with balances under increase in the company’s gross income and a more than 70% increase in EBIT versus 2017. These management of 1.27 billion euros. outstanding results were thanks to policies focused on specialisation and on a customer-centric approach which the insurance brokerage has been implementing for many years. Likewise, the stability and robustness of the Spanish economy in 2018 contributed to the positive performance of the insurance brokerage business last year. March Vida’s portfolio stood at over 82,000 policies, with balances under The volume of insurance premiums brokered management of 1.27 billion euros stood at 207 million euros, reflecting a Premium income in 2018 totalled 436.5 million euros. The top performers were unit-linked products, 24% increase in the company’s gross income which generated 224.5 million euros, and traditional life-saving products, with premiums of 121.5 million euros. Retirement saving products – insured pension plans (PPA), individual systematic and a more than 70% increase in EBIT savings plans (PIAS) and long-term individual savings insurance plan (SIALP) – stood at 49.7 million euros, and life annuities totalled 35.6 million euros. Life-risk products also posted growth versus previous years. Successfully attracting talent is one of the cornerstones of the Group’s strategy. We systematically focus on reinforcing the Group’s various teams to ensure we offer our customers the best possible In 2018, March Vida consolidated its position as the provider at Banca March of long-term savings service, and this is clearly evidenced in our customers’ responses to the external quality surveys products, especially for customers with a conservative investment profile. undertaken over the course of the year.
The results posted by the brokerage were satisfactory across practically all of the various specialist areas and business units. The Construction Unit continued to be one of the key growth drivers Premium income in 2018 totalled last year, and is an area in which we have consolidated our relationships with customers and branched out into new markets. In other units, we have made improvements to the sales process 436.5 million euros and development of products with different insurance markets, which has allowed us to identify opportunities and customer needs more efficiently. In early 2018, a new unit-linked product was launched, aimed at private banking customers. This The digital transformation continues to be an essential part of the insurance brokerage’s strategy. product invests in Banca March structured bonds, offering attractive returns and capital protection We are currently undergoing a process of technological change, implementing a new ERP that will of 90%. The new Accidents product line was also launched, which offers personal and family allow us to enhance our connectivity with customers, insurance markets and partners. The key protection for Banca March customers. guiding principles underpinning March R.S.’s culture include a results-driven approach, team work and proactivity. In addition, March Vida was incorporated into the newly-launched Insurance Area. As its first challenge, this new area will seek to design an ambitious strategic insurance plan for Banca March. In 2018, the subsidiary JLT March Re Correduría de Seguros y Reaseguros, which operates primarily in the reinsurance market, was sold to JLT. The agreement was signed on 31 October 2018. In the March Vida successfully met the targets outlined for 2018, cementing its contribution to Banca first quarter of 2019, Banca March bought back the 25% of March JLT that was owned by JLT March’s results. The total contribution to Banca March, defined as the fees paid to Banca March Group, thereby raising its stake in the insurance broker - which will now be called March Risk by March Vida plus the pre-tax profit posted by March Vida, stood at 15.9 million euros. Solutions (March R.S.) - to 100%. March Vida has adapted fully to the new regulatory requirements, and continues to have an Given these developments, 2019 is set to be a positive, ambitious year, during which we will adequate solvency position. implement far-reaching changes to the brokerage whilst also remaining true to our core values and The goal for the year currently underway is to uphold the robust rate of activity registered in recent vocation of serving our customers wherever they need us. We strive to combine an international years in the sale of March Vida products, furnishing Banca March’s customers with innovative presence with the proximity of a local service to ensure our clients get the very best of both solutions, particularly in the fields of wealth management and private banking. worlds.
100 101 Subsidiaries
BANCO INVERSIS
Banco Inversis provides high added-value solutions aimed at financial institutions and insurance companies for their investment businesses and financial assets through an outsourcing business model.
The comprehensive range of products and services offered by Inversis includes:
Trading and execution of orders.
Settlement of transactions and custody of financial assets.
An integrated platform for the distribution of investment funds.
More specific services, such as acting as administrator and depositary for collective investment schemes and pension plans.
This extensive range of services is underpinned by a powerful, unique technology platform, which is modular, customisable and tailored to meet the needs of the institutional business, thereby supporting the digital transformation of its end customers.
Inversis’ technology allows it to provide account-level services for the end customers of its institutional clients, allowing them to outsource activities and processes to Inversis that do not form part of their business models and thereby enhance their own efficiency.
Inversis offers specialist services, such as those performed by its research and investment fund selection team and the distribution desk, as well as other value-added services.
In 2018, Inversis cemented its position and enjoyed organic growth, having acquired in 2016, and integrated in 2017, the business undertaken by the Spanish subsidiaries of RBC Investor & Treasury Services, which previously formed part of the Royal Bank of Canada (RBC). Specifically, in 2018, despite the weak performance of the stock markets, assets under custody were up by 5% and net inflows grew by 12.2%.
As regards the Inversis balance sheet, this robust growth coupled with enhanced efficiency meant that consolidated profit before tax was up by 47.1% versus 2017.
Inversis’ consolidated profit before tax was up by 47.1%
102 103 04 HOLDINGS OF CORPORACIÓN FINANCIERA ALBA
Investment portfolio 107 Affiliated companies 109 Listed companies 109 - Naturgy 109 - Acerinox 109 - Ebro Foods 110 - Cie Automotive 110 - Viscofan 111 - Bolsas y Mercados Españoles 111 - Parques Reunidos 112 - Indra 112 - Euskatel 113 Non-listed companies 113 - In-store Media 113 - Terberg Ros Roca 113 - Alvinesa 114 - Satlink 114 - Monbake 114 Real estate activity 115
104 105 Investment portfolio
INVESTMENT PORTFOLIO
Structure of the main holdings in the Corporación Financiera Alba investment portfolio (31 December 2018).
18.96% ACERINOX
10.52% INDRA
14.00% EBRO
MECALUX 24.38% 8.8%
100% DEYÁ CAPITAL TERBERG 7.50% ROSROCA BOLSAS Y 12.06% MERCADOS ESPAÑOLES IN-STORE MEDIA 18.89%
13.00% VISCOFAN
MONBAKE 3.70%
11.00% EUSKALTEL
ALVINESA 16.83% PARQUES 21.46% REUNIDOS SATLINK 28.07%
10.10% CIE AUTOMOTIVE
5.27% NATURGY
5.0% DOMINION
https://www.corporacionalba.es/cartera-de-inversiones/
106 107 Affiliated companies
AFFILIATED COMPANIES
LISTED COMPANIES
NATURGY Description of the company Naturgy, formerly known as Gas Natural, is an integrated energy multinational which operates in the gas and electricity sector. It is headquartered in Spain and operates in more than 30 countries, with a strong footprint in Spain and Latin America. It is Spain’s third- largest electricity company and the largest Liquefied Natural Gas (LNG) operator in the Atlantic basin. www.naturgy.es Shareholding owned by Alba Although its stake is mainly held indirectly, Alba is one of the largest shareholders in the company, owning a total of 5.27% of the share capital at 31 December 2018. Most of this shareholding – 5.16% – was acquired through Alba’s 25.73% stake in Rioja Bidco Shareholdings, owned by CVC and Alba, which bought the 20.072% stake held by Repsol in Naturgy for almost 3.8 billion euros in May. Alba also acquired an additional 0.11% directly over the course of the year.
ACERINOX Description of the company Acerinox is one of the world’s leading stainless steel manufacturers, with an annual steel output capacity of 3.5 million tonnes. The company has four flat product factories (Spain, the US, South Africa and Malaysia), three long product factories (two in Spain and one in the US) and an extensive commercial network, with its own warehouses and service centres in 48 countries. Acerinox sells its www.acerinox.es products in over 80 countries worldwide.
Shareholding owned by Alba At 31 December 2018, Alba was positioned as the largest shareholder in the company, holding 18.96% of its share capital. There were no changes to the holding over the course of the year.
108 109 Affiliated companies
EBRO FOODS VISCOFAN Description of the company Description of the company The multinational food company Ebro Foods is the global rice Viscofan is the world leader in artificial casings for meat products, sector leader and the world’s second largest pasta manufacturer. and is the only manufacturer that works with all of the various types It has a retail and industrial presence through its extensive network of casing: cellulose, collagen, fibrous and plastic. The company’s of subsidiaries and brands in over 80 countries in Europe, North revenues are broadly diversified, with around 2,000 clients located in America, Asia and Africa. Ebro Foods boasts a broad range of over 100 countries all over the world. Viscofan has a broad network leading brands. Its main markets are the US and France, whilst Spain www.ebrofoods.es of casing production centres throughout Europe (Spain, Germany, www.viscofan.es accounts for a relatively small part of its business (6.7% of sales in Belgium, the Czech Republic and Serbia), North America (the US), 2018). Latin America (Brazil, Mexico and Uruguay) and Asia (China). It also has 15 sales offices located in a range of countries. Shareholding owned by Alba In 2018, Alba increased its stake in Ebro Foods from 12.00% to Shareholding owned by Alba 14.00%, with an investment of 53.0 million euros, and is one of the In 2018, Alba acquired an additional 1.68% stake in the company for company’s main shareholders. 41 million euros, raising its total position in Viscofan’s share capital to 13.00% at year-end. Alba is currently Viscofan’s largest shareholder.
CIE AUTOMOTIVE Description of the company Created in 2002 via the merger between Grupo Egaña and Aceros BOLSAS Y MERCADOS ESPAÑOLES y Forjas de Azcoitia (Aforasa), CIE Automotive is a global supplier of components and subassemblies for the automotive industry. As Description of the company a Tier 2 supplier, CIE Automotive designs, produces and distributes Bolsas y Mercados Españoles (BME) is the operator of all Spain’s components for the global automotive industry, with over 6,000 official stock markets and financial systems and the leading platform SKUs and a footprint in Europe, NAFTA, Asia and Brazil. In July www.cieautomotive.com for transactions involving shares of listed Spanish companies. The 2018, CIE Automotive distributed the entirety of its 50.1% stake company operates the stock exchanges of Madrid, Barcelona, in Global Dominion to shareholders via an extraordinary dividend. Bilbao and Valencia. The company undertakes a range of diversified Global Dominion is a global supplier of multitechnical services and activities and is structured into six business units: Equities, Fixed www.bolsasymercados.es specialist engineering solutions which helps its customers improve Income, Derivatives, Clearing, Settlement and Registration and the efficiency of their production processes, either through complete Market Data & VAS (Value Added Services). outsourcing (“Services”) or through the application of solutions Shareholding owned by Alba based on specialist technologies and platforms (“Solutions”). Alba’s holding in the share capital of BME remained unchanged in Shareholding owned by Alba 2018. With a stake of 12.06% at year-end 2018, Alba is the company’s Alba is the second largest shareholder with a 10.10% holding at 31 largest shareholder. December 2018, having invested 3 million euros in the acquisition of 0.10% of the capital over the course of the year.
110 111 Affiliated companies
PARQUES REUNIDOS EUSKALTEL Description of the company Description of the company Parques Reunidos is one of the leading leisure park operators in the Euskaltel is a regional telecoms operator which provides high- world, with a strong presence in Spain, across Europe and in the speed broadband, digital pay TV and landline and mobile telephone USA. With over 20 million visitors each year, Parques Reunidos is services to households and businesses in the Basque Country, Galicia the second-largest leisure park operator in Europe and the eighth (through R Cable) and Asturias (through Telecable). It is one of the globally, and is also the world’s leading water park operator. As of 30 leading operators in these regions, with market shares of over 30% in September 2018, the closing date of its last financial year, Parques www.parquesreunidos.com many of the segments in which it operates. In 2018, Euskaltel began www.euskaltel.com Reunidos had over 60 parks in 14 countries, including several projects marketing convergent bundles of products in Navarre and Cantabria, under development. Its portfolio of parks is highly diversified, both and has recently announced similar projects in León and La Rioja, geographically and by type, and includes amusement parks, animal as well as an agreement with the RACC in Catalonia. At December parks and water parks, among others. 2018, Euskaltel had a total of 658,172 residential customers and 111,829 business customers. Shareholding owned by Alba Alba is one of the largest shareholders in Parques Reunidos. In 2018, Shareholding owned by Alba Alba invested 12 million euros in the acquisition of an additional Alba left its 11.00% stake in Euskaltel’s capital unchanged in 2018 1.42% of the company’s share capital, increasing its stake to 21.43% and was the third-largest shareholder in the company at the end of at year-end. In the first quarter of 2019, Alba bought an additional the year. 1.58% for 13 million euros, further increasing its holding to a total of 23.03%.
INDRA NON-LISTED COMPANIES Description of the company IN-STORE MEDIA Indra is Spain’s leading provider of information technology and security and defence systems, and a key player in its sector in Europe In-Store Media was created in 1998 and is now a global leader and Latin America. It offers high value-added solutions and services in the operation of in-store advertising platforms, providing for the transport and defence markets (including both the defence services to advertisers and reaching exclusive agreements with and security and transport and traffic sectors), and through Minsait retailers. (IT), which comprises the energy and industry, financial services, www.indracompany.com On 31 December 2018, Alba had an 18.89% stake in In-Store public administrations and healthcare, and telecoms and media www.in-store media.com Media, held through Deyá Capital. sectors. Indra operates in over 140 countries and had a workforce of almost 43,707 at the end of 2018. Indra’s international business represented 48.9% of total revenues, with America accounting for 19.6% of the total. TERBERG ROS ROCA Shareholding owned by Alba In the first quarter of 2016, Ros Roca Environment and the Alba’s shareholding in Indra remained stable in 2018 at the current Dutch company Terberg Environmental successfully merged, 10.52%, following a reduction from the previous figure of 11.32% creating the UK-based company TRRG Holding Limited. Ros in April 2017 as a result of the capital increase undertaken by the Roca Environment is a Spanish company dedicated to the company for the acquisition and integration of Tecnocom. manufacture of urban waste collection vehicles and Terberg Environmental is the environmental subsidiary of the Dutch www.rosrocaenvironment.com family conglomerate Terberg.
On 31 December 2018, Alba had a 7.50% stake in TRRG, held through Deyá Capital.
112 113 Affiliated companies Real estate activity
REAL ESTATE ACTIVITY ALVINESA Alvinesa is a global leader in the production of natural At the end of 2018, Alba owned approximately 83,700 square metres of lettable area and 1,400 ingredients from grapes, mainly alcohols for beverages and garage spaces, in office buildings located in Madrid (65,900 square metres) and Barcelona (17,800 other uses, tartaric acid, grape seed oil, antioxidants and 100% square metres). natural colourants for the oenological, nutraceutical and food industries, among others. The book value of the properties is updated annually based on a valuation undertaken by an www.alvinesa.com independent expert. At 31 December 2018, the assets were valued at 327.3 million euros, up by At 31 December 2018, Alba had a 16.83% stake in Alvinesa, 2.4 million euros on a like-for-like basis versus last year. This valuation amount exceeds the net held through Deyá Capital IV. investment value by 113.5 million euros.
The occupancy rate at the end of 2018 was 86.0%, 0.4 percentage points lower than at the end of 2017. SATLINK Rental income stood at 16.1 million euros for the year, direct expenses amounted to 5.0 million Satlink is an engineering company which primarily develops euros and gross yield, calculated based on the investment undertaken, stood at 5.3% at year-end technology solutions for sustainable fishing and enhanced 2018. fishery management. Satlink also offers a wide range of satellite products and solutions for the maritime industry including In 2018, the sale of the office building at Lagasca, 88, in Madrid, was completed. The building sold telecommunications, tracking systems, electronic reporting for a total of 15.5 million euros, generating capital gains of 3.9 million euros. and video surveillance from land to improve the traceability of www.satlink.com fishing and sea transport.
At 31 December 2018, Alba had a 28.07% stake in Satlink, held through Deyá Capital IV and accounted for using the consolidation method.
MONBAKE MonBake Group was created in 2018 via the simultaneous acquisition of Berlys and Bellsola, two of Spain’s largest manufacturers of fresh and frozen bread, pastries and cakes, giving rise to a sector leader and cementing its leadership position in Spain. www.berlys.es On 31 December 2018, Alba had a 3.70% stake in MonBake, held through Deyá Capital.
www.bellsola.com
114 115 Av. Alexandre Rosselló, 8 07002 Palma de Mallorca Tel.: 901 111 000 (+34) 971 779 111 www.bancamarch.es
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