CUBIERTAS DEF INGLES 4/5/07 11:34 Página 1
3,981 ideas 3,981 2006
365 days thinking about quality
3,981originators of ideas
Business Report Business 2006 Business Report
Bankinter SA Paseo de la Castellana, 29 28046 Madrid T. +34 913 397 500 F. +34 913 398 323 Telex. 42760 BANKI E Swift: BKBK ES MM www.bankinter.com ANUAL 1-15-ING.qxd 4/5/07 08:14 Página 1
Business Report 2006 ANUAL 1-15-ING.qxd 4/5/07 08:14 Página 2
Profit before tax Net pre Millions of euros Millions of
+19.2% Growth with profitability
265 316 2005 2006 ANUAL 1-15-ING.qxd 4/5/07 08:14 Página 3
Net present value* Millions of euros
2006 2,627 Growth in value
2005 2004 +19.8% 2,192 1,931
*Procedure for calculating the present value of a given number of future cash flows. ANUAL 1-15-ING.qxd 4/5/07 08:14 Página 4
Employees Bankint
More Sh talent
Now 3,981
A year ago 3,712
+7.3% ANUAL 1-15-ING.qxd 4/5/07 08:14 Página 5
Bankinter Shares
Share price appreciation +27.2% Share return up by 29.9%
2006 59.6 2005 46.9 ANUAL 1-15-ING.qxd 4/5/07 08:14 Página 6
Bankinter 2006 Business Report Bankinter 200 Group financial highlights 6 Group financia
Group financial highlights
2005 2006 06/05 (%)
Balance Sheet (thousands of euros) Share da Total assets 40,786,010 46,075,769 12.97 EPS, Ear Loans and receivables 26,139,388 31,653,807 21.10 DPS, Div Loans and receivables PER, Pric ex-mortgage securitisation 29,408,537 34,416,012 17.03 Price/car Customer funds 27,476,959 32,683,580 18.95 EPS, Ear Off-balance sheet-managed funds 11,066,305 11,499,765 3.92 of which: mutual and pension funds 9,573,018 9,988,850 4.34 Branche Controlled customer funds 38,543,264 44,183,345 14.63 Number Number Earnings (thousands of euros) Corpo Profit before tax 265,445 316,336 19.17 SMEs Net profit 187,702 208,490 11.08 Privat Profit after tax plus allowances 341,369 404,049 18.36 Corporat Net profit plus allowances 237,052 265,503 12.00 Number Telephon Ratios (%) Non-performing loans/total risk exposure Workfor ex-securitisation 0.23 0.25 10.51 Number Recorded allowance non-performing loans 607.45 569.91 -6.18 Cost to income ratio 49.60 49.08 -1.05 ROE 14.93 14.94 0.10 ROA 0.51 0.48 -5.48 Capital ratio 10.25 10.03 -2.15 Tier 1 capital 7.32 6.86 -6.28 ANUAL 1-15-ING.qxd 4/5/07 08:14 Página 7
Bankinter 2006 Business Report Group financial highlights 7
/05 (%) 2005 2006 05/06 (%)
Share data 12.97 EPS, Earnings per share (euros) 2.44 2.68 9.84 21.10 DPS, Dividend per share (euros) 1.20 1.30 8.33 PER, Price/Book value (times) 19.23 22.46 16.80 17.03 Price/carrying amounts (times) 2.65 3.05 15.14 18.95 EPS, Earning per share (euros)+ allowances 3.09 3.41 10.36 3.92 4.34 Branches and centres 14.63 Number of branches 318 332 4.40 Number of commercial management centres Corporate 45 50 11.11 19.17 SMEs 105 124 18.10 11.08 Private banking 37 41 10.81 18.36 Corporate Partnerships 498 527 5.82 12.00 Number of agents 1,007 1,003 -0.40 Telephone and internet branches 3 3 0
Workforce 10.51 Number of full-time equivalent employees 3,712 3,981 7.25 -6.18 -1.05 0.10 -5.48 -2.15 -6.28 ANUAL 1-15-ING.qxd 4/5/07 08:14 Página 8
Bankinter 200 Chairman's Le 2006 An excellent year, an a top quality in the secto growing: 3,981 employ 100 most innovative co world. ANUAL 1-15-ING.qxd 4/5/07 08:14 Página 9
Bankinter 2006 Business Report Chairman's Letter to the Shareholders 9
r, an accessible bank, e sector, our talent is employees, one of the ative companies in the
Dear Shareholder:
2006 was an excellent year in ways that cannot be fully reflected by our figures, even though these are very positive indeed.
On the corporate side, we continued with our efforts to improve our good corporate governance practices. In particular I would like to highlight the fact that we have set up a Corporate Governance Committee that completes the set of Board Committees and whose sole mission is to ensure that Bankinter's corporate governance is of the highest standard, not only in comparison with the recommendations in force in Spain but also with the most rigorous standards internationally.
It gives me great satisfaction, as I commented last year, to observe that Bankinter complies with virtually all of the recommendations contained in the new Unified Code of Corporate Governance published by the Commission sponsored by the CNMV in 2006, and as a result of this we have received awards in a number of forums.
The transparency of the Bank's information was also recognised once again by the market: consultants PricewaterhouseCoopers included Bankinter in the group of companies from all over the world who provide their shareholders and investors with the best information. Their report, entitled 'Trends in Corporate Reporting 2006', includes only 5 Spanish companies, and Bankinter is the only one that has appeared in all 7 previous editions of the survey. ANUAL 1-15-ING.qxd 4/5/07 08:14 Página 10
Bankinter 2006 Business Report Bankinter 200 Chairman's Letter to the Shareholders 10 Chairman's Le
'a bank for everyone' With regard to Corporate Social Action, we continued to make progress with the 3.981 Ba initiatives launched to facilitate access to financial services for handicapped people, the purpose of which is to build 'a bank for everyone'. We were awarded the Spanish 'Business and Society Prize 2006' in the category of 'Best Social Action based on Products and Services'.
As a result of our efforts, as in the previous year, Bankinter featured once more in the exclusive FOOTSIE4Good index, setting the standard for others in the field of Social Responsibility.
Net profit From the financial standpoint, the Bankinter Group's annual earnings maintained the +11.1% growth shown quarter by quarter throughout 2006, with a net profit of EUR 208.5 million, which was 11.1% more than in 2005. Excluding the extraordinary impact of the reform of income tax, the profit would have been EUR 222.6 million, an increase of 18.6% on 2005.
The tax reform, which consists of a reduction of income tax to 32.5% in 2007 and 30% in 2008, required a downward accounting adjustment in December. This purely accounting effect, of an industry-wide nature, will be offset by lower taxation in future years and, therefore, by higher profits after tax in the coming years.
I think we can be satisfied with this profit figure because it was achieved after continuing to invest heavily in the development of the SME business in which Bankinter wishes to be one of the leading banks, and this involved a considerable increase in operating costs as a result of having to recruit new personnel to staff the new business centres that we have launched.
Apart from that, once again we devoted a very substantial sum - more than EUR 80 million - to recording general allowances, which clearly reflects the huge effort for Bankinter that the current regulations involve. As long as the non-performing loans for which they were recorded do not arise, these provisions are in fact retained earnings that reinforce the Bank's solvency and stability.
All of these figures should prove very useful when comparing our performance with that of the sector and making an appropriate assessment of the Bank.
During the year we made a big effort in opening new commercial distribution centres: we opened 19 centres specialising in SMEs, 14 non-specialised branches, 4 Private Banking management centres, 5 centres specialising in Corporate Banking, 29 Virtual Branches, and we ended the year with 1,003 Agents. ANUAL 1-15-ING.qxd 4/5/07 08:14 Página 11
Bankinter 2006 Business Report Chairman's Letter to the Shareholders 11
e 3.981 Bankinter staff The growth of all these centres required a very significant increase in the number of ople, the people working at the Bank, who now total 3,981, with an increase in the year of 269 h individuals, entailing a huge effort to select, recruit and train these people to n Products integrate them into our corporate culture. Bankinter's aggregate rate of job creation in the past five years is more than 34%, one of the highest in the sector.
e in the The result of this commercial effort was a gain of 172,000 customers, which was 23% ocial more than in 2005; more than 1,110 million transactions were performed, 53.7% of them over the Internet, which is one of the highest figures not only in Spain; and we grew our balance sheet and its main captions at a significant rate despite having been ned the more prudent in granting mortgage loans. 8.5 act of the Línea Directa continued to grow in the car and motorcycle insurance market, and our se of partnership with Capital One to develop the credit card business also obtained very favourable results giving us well-founded hopes for the future.
nd 30% in Even despite the increase in activity as reflected in the number of transactions, the ccounting launch of new centres and the recruitment of new staff, Bankinter continued to ars and, maintain its leadership as regards the quality of service perceived by banking customers, who placed it considerably ahead of the rest of the sector.
Once again we ended the year with the soundest balance sheet of our competitors, Bankinter with a non-performing loans ratio that was just over a third of the average rate of the e in banking system, and a coverage ratio of 570%, one of the highest in the world, which business gives us the confidence to face a future in which the economy is not as buoyant - and you can be sure that time will come - when the soundness of balance sheets, which is currently considered to be of lesser importance, will once again be something R 80 substantial. for loans for I should like to stress once again that of the total credit loss allowances we have at the rnings moment, only a small proportion (6%) is classified as a specific allowance, i.e. provisions recorded to cover a specific risk, while the remaining allowances are of a general and, therefore, purely precautionary nature. The application of the new with that international models of risk control will in all probability make it possible to cut down on the use of capital and release general provisions without it affecting the growth of lending and the increase of market share. centres: vate Virtual ANUAL 1-15-ING.qxd 4/5/07 08:14 Página 12
Bankinter 2006 Business Report Bankinter 200 Chairman's Letter to the Shareholders 12 Chairman's Le
One of the 100 most Of the numerous acknowledgements that we received during the year, I would like to The valu innovative companies mention the inclusion of Bankinter in the select group of the 100 most innovative climbed in the world companies in the world, according to a league table drawn up for the second year running by the Boston Consulting Group, at the request of the prestigious Business Week publication. The opinions of more than 1,000 executives throughout the world were taken into account in preparing this league table, which includes only two other Spanish companies, both of which operate outside Spain.
Once again we were selected as one of the best companies to work for in Spain, which is of course a matter of great pride to us, because the individuals who make up Bankinter are one of our principal assets, and this is why, year after year, the Bank pays special attention to their training and to their personal and professional development. This is a firm strategy to which we are especially committed.
Also during the year there was significant reorganisation involving the Central Services and some of the Organisations, with the sole purpose of rejuvenating the Bank, moving the bench and promoting up-and-coming individuals.
We continued to work on a number of different projects, some of which are now well established, such as the Fundación de la Innovación Bankinter, whose dynamism is earning it an important place in society; and other projects are making a firm start, such as our change in brand image, which is in its early stages and which in the not too distant future will provide us with a representation of our values that is much more in line with what we are at this moment in time.
Our value proposal, based on service quality, innovation and multi-channel banking, which is endorsed on a daily basis by the thousands of customers who choose to bank with us, continues to be relevant. Rather than observing any signs of weakness in it, our perception is that, if anything, it should be reinforced.
That is why - because our value proposal continues to be valid in attracting and retaining customers and providing them with quality service - we at Bankinter continue to think that our future should be based on organic growth and in order to achieve this we must continue to strengthen our proposal, endeavouring to differentiate it clearly from that presented by the other banks.
This recipe for success, which has led us to where we are today, remains, in our opinion, a perfectly valid strategy with which to face the future and we are sure it will continue to give us excellent results. ANUAL 1-15-ING.qxd 4/5/07 08:14 Página 13
Bankinter 2006 Business Report Chairman's Letter to the Shareholders 13
d like to The value of our stock Share performance was excellent in 2006. The value of our stock climbed 27.2%; and ative climbed 27.2% if we include the dividend per share, the figure would be 29.9%, which means the year shareholder return was once again significant. siness e world 2007 comes, as always, with new and exciting challenges for us. wo other We will continue to focus on achieving growth in all the business segments but will concentrate our efforts, above all, on the SME segment, which has such great potential in, which for Bankinter due to our hitherto limited presence in this area; and that means we will up continue to make a substantial effort to invest in the opening of new centres and the e Bank recruitment of new staff, which I am sure will lead to magnificent results for the future of our Group.
I would like to say again that Bankinter is a highly focused bank with a distinctive al strategic model, which is precisely what has brought us this far, and this is what g the enables me to say to you that if we maintain our commitment to talent, innovation and technology, as we have done until now, then we can continue to be a benchmark not only for the financial community in Spain but also worldwide, and continue to ow well produce excellent results. mism is m start, We continue to enjoy the benefits of a team of people who give Bankinter its main the not competitive edge, and to whom I would like to express my appreciation here for their much commitment in continuing to help to build this magnificent enterprise. Once again, I would like to thank all our shareholders for the trust they place in us year after year and I am confident we will continue to merit this trust by giving the anking, best of our abilities and making our best efforts. e to bank ss in it, As in previous years, I wish to end my letter by conveying to you the determination of the Board of Directors and of the entire management team to fulfil the objectives set, and our commitment to independence, defined as the quest for our own business nd model, one that takes us away from mediocrity and closer to excellence. er rder to Thank you
ur ure it will Juan Arena Chairman Madrid, 14 March 2007 ANUAL 1-15-ING.qxd 4/5/07 08:14 Página 14
Contents
16 26 32 48 60 Quality Technology Channels and Intellectual People Networks Capital knowle manag
18. Bankinter Quality 28. Technology 34. Multi-channel 53. Human Capital 62. Peopl 20. Quality in serving 30. IT security Banking 56. Structural Capital policie individual customers 39. Distribution networks 58. Relational Capital 62. Great 21. Quality in SMEs 46. CRM 63. Talen 22. Quality in employees 64. Work/ 23. Proposals for 65. Traini improvement and 66. Recog quality awards 24. Customer Service Office ANUAL 1-15-ING.qxd 4/5/07 08:14 Página 15
60 68 120 132 People and Business Earnings Shareholders’ knowledge equity and management Bankinter shares
al 62. People management 70. Economic 122. Earnings 134. Shareholders’ equity pital policies environment and 131. Bankinter’s 136. Bankinter shares apital 62. Great Place to Work international contribution to GDP 63. Talent markets 64. Work/Life Balance 72. Market share 144 65. Training 73. Customer funds 66. Recognition 2006 and loans and Brand receivables 80. Customer segments 88. Capital Markets 154 and Treasury Exhibits 90. Risk management 156. Information for shareholders & customers 158. Management structure ANUAL 16-47 ING.qxd 4/5/07 08:20 Página 1 ANUAL 16-47 ING.qxd 4/5/07 08:20 Página 16
Bankinter 2006 Business Report 16 01 Quality
Customer satisfaction above market average; the result of an intelligent effort.
Quality is Bankinter's most important competitive advantage. In December 2006, net satisfaction with the Bank continued to be 6.4 points above the market average; a truly privileged position in the world of banking for private individuals.
In this section
> Bankinter Quality > Quality in serving individual customers > Quality in SMEs > Quality in employees > Proposals for improvement and quality awards > Customer Service Office ANUAL 16-47 ING.qxd 4/5/07 08:20 Página 17 ANUAL 16-47 ING.qxd 4/5/07 08:20 Página 18
Bankinter 2006 Business Report Bankinter 200 01. Quality 18 01. Quality All of our staff show each of our customers that they are our main priority.
Bankinter Quality
At Bankinter we are especially proud that our customers rate the service they receive from the Bank with a high level of satisfaction, as ascertained by the monthly surveys performed by independent firms, the results of which provide thorough knowledge not only of the branch or centre used by customers but also of the segment, distribution network or service platform through which they interact with the Bank.
Overall satisfaction by segment 2006 (ISN score out of 100)
Branch net 76.9 77.6 77.2 78.7 83.2 Telephone Internet ne Virtual bra Agents net Private individuals Private banking SMEs Corporate banking Foreign nationals
ISN is measured on a scale of 0 through 100 2005 2006 and is interpreted as follows: Private individuals 78.11 76.90 Private banking 77.27 77.55 > 85 Very satisfied/excellent. SMEs 77.53 77.19 Telephone 75-85 High level of satisfaction. Corporate banking 79.06 78.67 Bankinter P 60-75 Needs improvement. Foreign Nationals 83.21 Broker Ban
< 60 Needs action. (*) Due to the characteristics of its customers, the Bankinter B Personal Finance segment is not surveyed monthly. Cell phones Instead an annual survey is conducted and the ISN score for 2006 was 82.4 points, which was 1.5 points more than in 2005. ANUAL 16-47 ING.qxd 4/5/07 08:20 Página 19
Bankinter 2006 Business Report 01. Quality 19 ers
The measurement of this perception obtained from customers' opinions is checked against the different product indicators, the market research and the internal e they satisfaction survey, and this enables us to carry out actions for continuing y the improvement focused on customer relations and so to develop product solutions provide and enhanced procedures. s but also they Once again we reiterate our thanks to all our customers for the care, time and effort they take to respond to our surveys. Their opinions enable us to develop the aspects and adjust the services that give them most satisfaction.
2005 2006 Overall satisfaction by network 2006 (ISN score out of 100) Branch network 77.83 77.55 83 .2 Telephone network 75.26 73.49 81 Internet network 77.85 77.42 Virtual branches 81.26 79.27 79 Agents network 79.8 78.80 ationals 77
75
73 2004 2005 2006
Branch network Telephone network Internet network Virtual branch network Agents network
2006 76.90
77.55 2005 2006 Overall satisfaction by service platform 2006 (ISN score out of 100) 77.19 Telephone Banking 79.20 79.39 87 78.67 Bankinter Private individuals 80.55 80.33 85 83.21 Broker Bankinter 79.09 79.23 83 the Bankinter Businesses 79.97 79.88 nthly. Cell phones 86.50 86.69 81 e ISN score more than 79
77
75 2004 2005 2006
Telephone banking Bankinter Private Broker Bankinter Businesses Cell phones Individuals ANUAL 16-47 ING.qxd 4/5/07 08:20 Página 20
Bankinter 2006 Business Report Bankinter 200 01. Quality 20 01. Quality A very reliable indicator of the service received by customers and of their greater perceived satisfaction is the position that Bankinter occupies in relation to its competitors.
Quality in serving individual customers
Using independent consultants we conduct market research on a quarterly basis that enables us to ascertain how satisfied financial service users (private individuals) are with the service they receive from their banks or savings banks.
+6.4 ISN points higher than the market average
Bankinter vs Market. Private individuals
80
78
76
74 6.35 72
70
68
2004 2005 2006
Bankinter Market
2005 2006 Bankinter 77.76 76.81
Market 71.31 70.46 14 aspects of service surveyed; the most Gap 6.45 6.35 highly rated would be: Treatment and attention Training and professionalism Geographic scope: Nationwide, for towns of over Knowledge of customers' requirements 50,000 inhabitants. Information on conditions and costs Group: General public over 18 years of age, holding Advice demand deposits or savings accounts at a financial Employee’s attitude to incidents institution. Transaction speed Sample: 1,400 interviews per quarter. Clarity of statements Survey methodology: Computer-assisted telephone inter- Availability of human and technical view. resources Sampling error: ±2.7%. ANUAL 16-47 ING.qxd 4/5/07 08:20 Página 21
Bankinter 2006 Business Report 01. Quality 21
ter at
Quality in SMEs erly basis We also commission independent consultants to conduct half-yearly market te research so that we can ascertain the level of satisfaction of SMEs with the gs banks. financial services they receive from their bank or savings bank.
+2.9 ISN points higher than the market average
Bankinter vs Market. SMEs
79
77
2.88 6.35 75
73
March 05 October 05 March 06 September 06
Bankinter Market
Mar. 05 Oct. 05 Mar. 06 Sep. 06 Bankinter 78.09 77.08 77.66 77.70
eyed; the most Market 74.30 73.99 74.87 74.82 Gap 3.79 3.09 2.79 2.88
m quirements Geographic scope: The whole of Spain (except Ceuta and 16 aspects of service surveyed; the most and costs Melilla) highly rated would be: Group: Spanish businesses with an approximate turnover Treatment and attention dents of EUR 0.5-5 million. Advice Sample: 1,116 interviews every six months. Training and professionalism Survey methodology: Computer-assisted telephone inter- Clarity of information technical view. Service offered at branch Sampling error: ±3% Simplicity of formalities Employees' attitude to incidents ANUAL 16-47 ING.qxd 4/5/07 08:20 Página 22
Bankinter 2006 Business Report Bankinter 200 01. Quality 22 01. Quality
Quality in employees Proposa
Every six months Bankinter’s Central Services are evaluated by the Branch Network and they also perform a self-evaluation. This evaluation, together with the performance in customer satisfaction, constitutes the quality 'Q factor', in 14 which all of the Bank's staff are involved. projec The perception in 2006 remained at good levels in comparison with the impro previous year. There was a 0.8 point increase in the survey of the Central Services by the Branch network, with a score of 70 points. Likewise, the Central Services' initiat self-evaluation achieved a score of 66.3 points, an increase of 2.1; and in the survey of the Organisations' Central Services by the Branch network, the score was practically the same as in 2005, with a slight fall of 0.2 points.
With the ai quality of s employees improveme year. In 200 improveme started with of 300 peop Bank’s work
Overall satisfaction. Branches and Central Services survey In recog
2005 2006 made by Branches 69.16 69.96 71 that imp Central Services 64.25 66.32 69 most in Organisations' Central Services 70.78 70.58 the follo 67
65
63
61
59 2004 2005 2006
Branches Central Services Organisations’ Central Services ANUAL 16-47 ING.qxd 4/5/07 08:20 Página 23
Bankinter 2006 Business Report 01. Quality 23
Proposals for improvement and quality awards nch her with or', in 141 97 44 projects for members of employees ith the improvement were staff with the received awards al Services Services' initiated in 2006 best perceived for 4 projects and n the customer 7 improvement e score satisfaction initiatives
With the aim of raising the In 2006, 97 members of staff With the idea of encouraging and quality of service, Bankinter’s from the 22 centres with the acknowledging the individual employees propose best perceived customer and collective efforts of staff who improvements throughout the satisfaction received have made an outstanding year. In 2006, 141 recognition. contribution to improving service improvement projects were Likewise, three members of quality in their daily work during started with the participation staff received ‘Awards for the year, 44 employees received of 300 people, i.e. 8% of the Service Excellence’ in 2006. awards for 4 projects and 7 Bank’s work force. improvement initiatives.
In recognition of the joint effort Organisations with the best performance in terms of customer satisfaction compared with made by the areas of the Bank the market in their geographical area that improved their scores the Eastern Spain Castilla-La Mancha and Extremadura most in the 2006 ISN surveys, Andalusia the following awards were made: Business Areas with the best performance in terms of internal and external customer satisfaction Mortgage Procedure Bankinter Businesses
Central Services with the best performance in terms of internal customer satisfaction Asset Management and Management Agreements Back Office Domestic & International Equities Information Systems ApplicationsDevelopment People and Knowledge Management ANUAL 16-47 ING.qxd 4/5/07 08:20 Página 24
Bankinter 2006 Business Report Bankinter 200 01. Quality 24 01. Quality The Bankinter Customer Service Office prevents and corrects the main errors made in the marketing of products or the provision of services.
Customer Service Office
At Bankinter all complaints about service and claims of a financial nature go to the Customer Service Office (SAC in Spanish), which coordinates the different departments concerned and immediately relays all the information on incidents in order to resolve them as quickly as possible, and thereby ensure that customers perceive that the Bank takes their interests very much into account. The Office ensures that there is a consistent approach, in an appropriate and timely manner, that enables us to solve customers' problems; and more importantly, that prevents and corrects the main errors made in any area of the Bank.
Time taken to resolve financial incidents Incidents i
Time taken No. of % Incidents attributable Incidents not attributable Claims to Bankinter (%) to Bankinter (%) 0 days 57,842 67.75 99.45 0.55 86 1-2 days 12,004 14.06 95.74 4.26 3-10 days 9,449 11.07 76.24 23.76 per mil > 10 days 6,076 7.12 52.85 47.15 transac
SAC. Total complaints and financial claims
2005 2006 06/05 (%) Total no. of complaints (non-financial) 7,589 10,821 42.59 Total no. of claims (financial) 79,354 85,371 7.58 Total 86,943 96,192 10.64
SAC. Total number of financial claims
2005 2006 06/05 (%) No. of claims in customer's favour 69,440 74,903 7.87 % of claims in customer's favour 87.51 87.82 0.31 No. of claims in Bank's favour 9,914 10,468 4.74 % of claims in Bank's favour 12.49 12.18 -0.31 Total 79,354 85,371 7.48 ANUAL 16-47 ING.qxd 4/5/07 08:20 Página 25
Bankinter 2006 Business Report 01. Quality 25 made vision
In 2006 the ratio of complaints about service and financial claims per million transactions fell to 86.7 per million (compared with 93 in 2005). Noteworthy also ure go to was the fact that 81.8% of the incidents were answered in less than 48 hours. fferent incidents t customers e Office ly manner, at prevents
Incidents in 2006 Incidents per million transactions
tributable kinter (%) 98 0.55 complaints 86.7 96 4.26 23.76 per million 94 transactions 47.15 92
90
88
86 2004 2005 2006
External Customer Ombudsman
06/05 (%) 2005 2006 06/05 (%) 42.59 Claims processed 582 509 -12.54 7.58 Claims resolved in customer's favour 181 158 -12.71 10.64 Claims resolved in Bank's favour 401 350 -12.72 Claims excluded 0 1
Bank of Spain
06/05 (%) 2005 2006 06/05 (%) 7.87 Claims resolved 120 120 0.00 0.31 Claims resolved in customer's favour 50 32 -36.00 4.74 Complaints accepted 4 4 0.00 -0.31 In Bank's favour 51 42 -17.65 7.48 Pending resolution 15 42 ANUAL 16-47 ING.qxd 4/5/07 08:20 Página 26
Bankinter 2006 Business Report 26 ANUAL 16-47 ING.qxd 4/5/07 08:20 Página 27
02 Technology
Our customers have always been pioneers in trying out technological services to manage their finances. They still are.
Bankinter maintains its commitment to technology as a strategic component of its business development, used both to raise the standard of quality that customers perceive when they use the Bank's services and to increase the efficiency of staff in the performance of their work.
In this section
> Technology > IT security ANUAL 16-47 ING.qxd 4/5/07 08:20 Página 28
Bankinter 2006 Business Report Bankinter 200 02. Technology 28 02. Technology Bankinter maintains its commitment to technology as a strategic differentiator.
Technology
This strategic differentiator assists us in developing the business, both by raising the standard of quality perceived by our customers and increasing staff efficiency.
In 2006 work was done to renew the Branch network's communication networks and increase their capacity. This enables the Bank to benefit from innovative services for communication between staff and customers: multimedia, videoconferences, etc.
Variation in the investment in development (millions of euros)
31
30
29 2005 2006
Sharing technology In support of Bankinter's line of Social Action, the Bank connected up to the 'World Community Grid', a global project that utilises the unused capacity of private and business computers to create a global network that makes it possible to tackle research into disease, natural disasters and environmental problems with enormous computing power.
Life-work balance The Bank also continued to promote the use of technological advances that facilitate working away from one's desk, in line with the different work-life balance schemes set up by Bankinter for its employees. ANUAL 16-47 ING.qxd 4/5/07 08:20 Página 29
Bankinter 2006 Business Report 02. Technology 29 o
Response time performance (in seconds)
by raising f efficiency. Internet Teleprocessing
ation from ultimedia, 2.2 0.3
2006 2006 2 0.4 2005 2005 2.2 0.3 2004 2004
Awards o the Computerworld magazine, which specialises in the world of computers and new ty of technologies, chose Bankinter's CEO, Jaime Echegoyen, as 'CEO of the Year'. t possible This distinction seeks to reward company chief executives who are aware of how oblems important the effective and efficient use of information technologies is for their organisations. In the judges' opinion, management at Bankinter 'has succeeded in perfectly combining technological advances and the needs of the business to achieve an effective and efficient organisation capable of addressing new business that opportunities that may arise in the market and positioning Bankinter as a life benchmark both in Spain and internationally'. ANUAL 16-47 ING.qxd 4/5/07 08:20 Página 30
Bankinter 2006 Business Report Bankinter 200 02. Technology 30 02. Technology Bankinter is the first financial institution in Spain to be certified as ISO 27001 compliant.
IT security Security sy
ISO 27001 Certification Conscious of the important commitment to service and quality, and of the 9.5 continuous technological evolution applied to the Bank's relations with its customers, and in particular through its remote banking services, in 2006 the IT out of 1 Security Department successfully completed the procedure for certification - based on the international ISO 27001 standard - of its Security Management System. Thanks to this milestone, Bankinter became the first financial institution so certified in Spain, evidencing the Bank's compliance with the highest standards of quality and professional rigour in managing the security of its computer platforms and systems.
The process, lasting nearly a year and involving the active participation of a multidisciplinary team of 43 people, was supervised and guaranteed by the Information Security Management System Management Committee (in Spanish SGSI Committee), whose main objective is to clearly show the commitment of the Bankinter Management to the Security Management System.
Customer security The concept of 'customer security' is defined under the three basic pillars of protection: information, protection and advice, and the understanding that customers must play an active role in their own self-protection.
In 2006, thanks to the experience and analysis of the behaviour and the reception by customers, specific actions were taken aimed at reorganising the content on offer, so as to make it more accessible and intuitive, and to continue with the efforts to publicise and raise awareness by the continuous publication of news items on security that may be of interest.
In addition, and being aware of the constant and worrying evolution of traditional threats, such as viruses and trojans, which affect our customers as 'professional' tools for committing fraud, Bankinter has been working on the incorporation of innovative protection, control and alert measures which enable our customers to enjoy the security and reliability of our remote banking network. ANUAL 16-47 ING.qxd 4/5/07 08:20 Página 31
Bankinter 2006 Business Report 02. Technology 31 on in pliant.
Security systems score The security and protection systems implemented by Bankinter are periodically audited by independent auditors, and the score obtained during the last review process was 9.5 out of 10, one of the highest achieved in an audit at the Bank. he 9.5 its Contributing shareholder value 06 the IT out of 10 Bitácora, a security service that came into being in 2001 in response to a specific ion - based need of the security area, has become a commercial product that is firmly System. established in the market under its own name, with a proven reputation, and is on so purchased by Spain's principal financial institutions. andards of r platforms Marketing of Bitácora began in 2004 in association with S21SEC, the company acting as Bankinter's partner for the sale and integration of the product. Since then Bankinter has obtained income that has been included in the Bank's ipation of a income statement, although it was 2006 that saw the sale of all the exploitation, the support and development rights for at least the next two years, which will mean Spanish this contribution will treble in the coming years. ent of the Contributing to brand reputation For the third year running, SIC magazine made its now customary Awards for Information Security.
rs of On this occasion, among the outstanding professionals and organisations that who received awards for their contribution to ICT security was the Bankinter IT Security team. The novelty was that for the first time the prize was awarded to an entire team and not to an individual or an organisation. and the ng the continue lication of
tion of mers as n the h enable ng network. ANUAL 16-47 ING.qxd 4/5/07 08:20 Página 32
Bankinter 2006 Business Report 32
Channels and 03 Networks
We are conspicuous by our presence: there are a thousand ways to communicate with us.
Bankinter is a multi-channel bank. Its form of distribution using a variety of channels and networks, which was a revolution in the way of conducting the banking business, enables Bankinter to offer its customers a wide range of options for dealing with the Bank and for the marketing of its products and services.
In this section
> Multi-channel Banking > Distribution networks > CRM ANUAL 16-47 ING.qxd 4/5/07 08:20 Página 33 ANUAL 16-47 ING.qxd 4/5/07 08:20 Página 34
Bankinter 2006 Business Report Bankinter 200 03. Channels and Networks 34 03. Channels a
Multi-channel Banking Telephone During the Bankinter has made its multi-channel strategy a means of setting itself apart calls from c from its competitors. automatic s
This strategy has made it possible for customers to deal with the Bank at The T Transactions any time and anywhere through whichever channel is the most convenient for channels fo them. The combined use of the different channels (Branch network, Telephone answered w Platform, Bankinter websites, ATMs, SMS Platform and Cell phone banking) sector; whic means that the service provided reaches levels of perceived quality that make us aggregate q 1,110 market leaders. Customer S million transactions Significant steps were taken in 2006 to integrate our commercial activity From through the different channels. This is another area in which Bankinter has a of calls has competitive edge: depending on the time, the product and customers preferences, made it pos one or another channel for dealings is used, preserving a unique commercial allocate cal 68.7% coherence. This has enabled us to optimise commercial efficiency and multiply topics. the number of contacts while containing costs. of them performed Speci using remote channels There were 1,110 million transactions in 2006, which was 20.1% more than strengths; n in 2005. 68.7% of these transactions were carried out using remote channels, the accepta which gives us an idea of how the multi-channel environment has transformed stock marke the Bank. other loan p provided ov
On th 20,600 hou which 295 m Variation in transactions by channel (%) Lastl 100 Platform ha answered in 80
60 53.7%
40
20 39.5% 31% 0 2000 2001 2002 2003 2004 2005 2006
Cell phone Cards Internet Telephone Banking Electronic Banking Branch network ANUAL 16-47 ING.qxd 4/5/07 08:20 Página 35
Bankinter 2006 Business Report 03. Channels and Networks 35
Telephone Platform Remote commercial teams During the year, the Telephone Platform received 7.9 million In 2006, the teams engaged in the proactive marketing of f apart calls from customers. 54% of them were answered by the products and services to customers became part of a new automatic system and 46% by a personal handler. independent area of the Telephone Platform, with the aim of strengthening the value they add to the business. Bank at The Telephone Platform is one of the most important ient for channels for customer relations. 88.7% of the calls were The year was characterised by the consolidation of the lephone answered within 20 seconds (TSF), one of the best ratios in the model of 'Remote Commercial Guidance’, to the extent that there king) sector; which was rewarded by customers with a score on our are now 30,000 customers who have one of these advisers who t make us aggregate quality index for December of 79.5 ISN points (Net provide them with commercial guidance in a personalised and Customer Satisfaction Index). proactive manner by telephone and e-mail. This service is now available in the Private Banking, Private Individuals and SME activity From a technological point of view, the intelligent routing segments. r has a of calls has signified a rationalisation of the service which has references, made it possible, based on the customer characteristics, to The commercial teams consist of a total of 120 members ercial allocate calls to handlers who are more specialised in certain of staff who in 2006 had 325,000 commercial contacts with multiply topics. customers, an increase of 40% on the figure for the previous year. Specialisation continues to be one of the Platform's more than strengths; noteworthy here is the professional competence and nnels, the acceptance by customers of the groups of specialists in the sformed stock market, mutual funds, insurance, mortgage loans and other loan products, which constitute the pillars of the advice provided over the telephone.
On the personnel side, mention should be made of the 20,600 hours of Telephone Platform training given in 2006, in which 295 members of staff took part.
Lastly, and in addition to the telephone calls taken, this Platform handled 80,083 customer e-mails in 2006, which were answered in less than 24 hours.
53.7%
TSF quality ratio
31% 88.7% 2006 of the calls were answered in less than Branch network 20 seconds ANUAL 16-47 ING.qxd 4/5/07 08:20 Página 36
Bankinter 2006 Business Report Bankinter 200 03. Channels and Networks 36 03. Channels a The Internet continues to be the channel most used by the Bank's customers. More than 660,000 users performed 53.7% of the total transactions.
Internet Platform
www.bankinter.com empresas.b Internet The range of products and services available to customers on the Bank's website 2006 was an continued to expand throughout 2006. Of the loan products available, mention and service should be made of the mortgages for new customers at Euribor +0.4. Noteworthy The large m % among the deposits on offer were the 'Deposit at 7%', the 'x2 Deposit' and the from custom 53.7 'Deposit at 8%'. Also worth mentioning are the Bric funds and the options products su of the Bank's total available for fund and securities transfers. of cheques, transactions were services suc performed over the Internet There was a marked increase in the number of log-ons to 3.4 million per the market month, which confirms the excellent perception that customers of the Private to install ad individuals segment have of the web as a channel for dealing with the Bank. Onsite', ena This perception is borne out by the rise in satisfaction indicator levels to an ISN customer's d 79.8 score of 79.8. Broker in fo Assistant, R ISN points for quality Bankinter also continued in 2006 to improve the accessibility of the website and thus make it comprehensible for the support software used by the physically The B handicapped in their habitual browsing of the Internet. The main task in the year registered u was to ensure that all the new website content and maintenance are programmed There would accessibly thanks to the preparation of a new style guide in accordance with the service qual requirements for accessibility and usability.
As a result of all these efforts, the Bankinter website was awarded the Expansión Directo Favourite Websites prize for the 'Best Bank / Insurer' over the Internet. This prize is awarded on the basis of the votes cast by Internet users themselves plus the decision of a prestigious panel of judges. This was the second year running that Bankinter won this award recognising the Bank as the best Internet service transaction provider in the banking and insurance sector.
At any g 35 users connect
75 transac ANUAL 16-47 ING.qxd 4/5/07 08:20 Página 37
Bankinter 2006 Business Report 03. Channels and Networks 37 el re f the
empresas.bankinter.com broker.bankinter.com s website 2006 was an excellent year in the development of new products In recent years the services and transactions available from mention and services available over the Bankinter for businesses website. Bankinter's broker service have progressively been expanded and oteworthy The large majority have been introduced in response to requests enhanced. In 2006, the emphasis was on the offering of nd the from customers. We would highlight the introduction of new derivatives, credit sales, and enhancing the existing services. ns products such as payrolls, payments in foreign currency, issuance of cheques, commercial paper and direct debit payments; and Broker Bankinter is firmly established as the main channel services such as 'Web Remittances', the most comprehensive on for equities transactions and was used to perform 80.7% of the lion per the market in online remittance management (without the need Bank's total equities transactions. rivate to install additional programs), or the innovative 'Bankinter Bank. Onsite', enabling a bank to be included for the first time on a The attribute of this platform most highly valued by o an ISN customer's desktop. And not forgetting other types of services: customers was the service availability, which received an ISN Broker in foreign currency, Insurance, POS terminals, Virtual score of 83.4, while the overall satisfaction with this channel was Assistant, Repos on Bankinter commercial paper, etc. 80.5 ISN points. he website physically The Bankinter for businesses website now has 95,422 in the year registered users who perform 173.5 million transactions per year. ogrammed There would be no sense to any of the foregoing without excellent with the service quality, which at year-end had a score of 80.2 ISN points.
d the over the t users the second he best or.
At any given minute of the day... Transactions
35 17 % users different 80.7 connected businesses of all the Bank's equities transactions were performed using this channel
75 24 hrs. 3 transactions remittances on average ANUAL 16-47 ING.qxd 4/5/07 08:20 Página 38
Bankinter 2006 Business Report Bankinter 200 03. Channels and Networks 38 03. Channels a
SMS Platform The SMS platform offers substantial added value to customers, who perceive the availability, the immediacy of information and the ease of use afforded by this technology as excellent attributes. Presence
New services and operating options were added to the Platform in 2006. As a result, the satisfaction indicators reached levels of excellence, with an ISN score of 85. 33 Non-sp branch ANUAL 16-47 ING.qxd 4/5/07 08:20 Página 39
Bankinter 2006 Business Report 03. Channels and Networks 39
Distribution networks
Branch network Presence At 2006 year-end, Bankinter had a network of 332 non-specialised branches, 14 more than in 2005. This expansion of the Branch network was located in towns with fast-growing populations, both local and European non-resident, and in areas where income levels, real estate development and greater economic activity mean 332 that the investment will be recovered in the shortest possible time. Non-specialised branches The branches are staffed by a team of 1,792 professionals (managers, assistant managers, account managers, executives, authorized officers and clerical staff) whose brief is to promote commercial activity in all the business segments under their responsibility.
In order to support this sales team, to make their work easier and to improve the quality of customer service, the Bank continued to focus in 2006 on optimising CRM as the basis for commercial activity at all the branches and centres. Mention should be made in this respect of both the management of potential customers and the synergies between segments to facilitate the addition of new customers.
In line with Bankinter's Social Action strategy of making 'a bank for everyone' and improving the quality of life of groups of disadvantaged individuals, fundamentally the handicapped, the Branch network continued to participate actively in the branch office accessibility project, the aim of which is for all the Bank's premises, particularly those that are open to the public, to be equipped with all types of physical accessibility requirements for physically handicapped persons by the year 2008. ANUAL 16-47 ING.qxd 4/5/07 08:20 Página 40
Bankinter 2006 Business Report Bankinter 200 03. Channels and Networks 40 03. Channels a
Apart from these 332 traditional branches, Bankinter also has a large team of specialists in various customer segments working at a number of clearly differentiated centres:
SME Centres. To increase our presence in the strategic SME segment continued to be one of our priorities. Accordingly, a further 19 new centres were opened, mainly located in industrial complexes where there is a high density of small and medium-sized enterprises. At 2006 year-end, Bankinter had a network of 124 SME Centres, distributed among the 13 territorial organisations that comprise the Networks w Bank, with a total headcount of 346 employees. Management & Financial Advisory Centres. The number of these Centres, 79 exclusively dedicated to taking comprehensive, personalized care of the customers in the Private Banking and Personal Finance segments, was 41 at year-end, four Virtual more than in 2005, with a staff consisting of 148 highly-qualified professionals.
Business Management Centres. The Bank currently has 50 Business Management Centres, 5 more than in the previous year, staffed by a total of 215 78 professionals. These are centres where larger companies and big corporations receive commercial services tailored to their needs. Agents
Branch Network highlights
2005 2006 06/05 (%) Non-specialised branches 318 332 4.40 SME Centres 105 124 18.09 Millions of euros Average funds 18,079.89 20,377.27 12.71 Average loans and receivables 24,792.14 29,374.67 18.48 Profit before taxes 253.95 320.07 26.03 ISN score 77.83 77.55 -0.28 ANUAL 16-47 ING.qxd 4/5/07 08:20 Página 41
Bankinter 2006 Business Report 03. Channels and Networks 41 The Networks with Partners have the highest quality ratings of the Bank's networks.
eam of Networks with Partners y 'Networks with Partners', the new business area under which the Agents network and the Virtual Branches network will be developed from now on. Despite continuing commercially separate, the two networks share certain meeting points ontinued to whose joint strengthening and development will generate the necessary synergies ned, to speed up the growth of both businesses. small and of 124 Both the Agents network and the Virtual Branches network coincide, for mprise the Networks with partners ISN score example, in their obsession with service quality, which is considered to be a crucial differentiating value. It is not for nothing that they both have the highest quality ratings of the Bank's networks and, consequently, of the market: Virtual res, 79.3 banking with an ISN score of 79.3; and Agents network with a score of 78.8. e customers end, four Virtual branches Both businesses also coincide in the arrangement that the profit obtained is ssionals. shared between the Bank and the partner, whether the latter be an Agent or a Virtual Branch. tal of 215 78.8 Apart from that, Networks with Partners has a growing relative importance rations within Bankinter, thanks to the strength of the business of the Agents and of the Agents network Virtual branches. At 2006 year-end, this area had 12% of the Bank's customers; and accounted for 10.3% of the profit before tax, 16.4% of customer funds and 10% of lending of the networks overall.
06/05 (%) 4.40 18.09
12.71 18.48 26.03 -0.28 ANUAL 16-47 ING.qxd 4/5/07 08:20 Página 42
Bankinter 2006 Business Report Bankinter 200 03. Channels and Networks 42 03. Channels a
Agents network Bankinter's Agents network ended another year as market leader in this model of distribution.
This network, which was set up in 1992 as part of Bankinter’s strategic commitment to growth and profitability, is based on partnership between the Bank and professionals in the financial and advisory services field. Bankinter and the agent share the margins earned on financial transactions without incurring the structural costs of traditional branches.
Conscious of their growing importance, Bankinter is committed to the training and professional development of the agents. Noteworthy in this respect was the significant number of them who in the course of the year were certified by the EFPA (European Financial Planning Association) as experts in consultancy and personal financial advisory services.
In addition, work continued with the process of segmentation of the agents according to their activity, business volume and involvement with Bankinter, in order to introduce initiatives aimed at improving both earnings and the professional development of the agents themselves.
The Agents network has a history of success and a promising future. It accounts for an increasing weight of the Bank's business and faces the challenges of the coming years with the certainty that it will maintain its firmly established leadership, uphold its standard of quality and accelerate its growth.
Agents network highlights
2005 2006 06/05 (%) Agents 1,007 1,003 -0.40 Millions of euros Average funds 1,738.53 2,017.47 16.04 Average loans and receivables 1,405.71 1,654.79 17.72 Profit before tax 13.64 16.48 20.82 ISN score 79.80 78.80 -1.10 ANUAL 16-47 ING.qxd 4/5/07 08:20 Página 43
Bankinter 2006 Business Report 03. Channels and Networks 43
Virtual branches s model of Bankinter's Virtual Branches continue to represent a unique model of collaboration between a bank and another company, public agency or professional society or association. Through a Virtual Branch financial products and services ategic are offered to the partner’s employees, members, customers and suppliers. en the nkinter Bankinter and its partner (company, professional society, association...) out co-manage the Branch. The Bank provides the capital, technology and financial products, while the partner provides access to the businesses and individuals with which it usually deals, with both of them sharing in the earnings generated as a o the result. s respect certified The customers of the Virtual branches continued to be the most satisfied of onsultancy all the Bank's networks in 2006, with an ISN score of 79.3 points. One of the factors contributing to the high degree of satisfaction of Virtual Branch customers is the advice and personal attention they receive thanks to the Bank's remote the agents service structures and the knowledge and management possibilities offered by kinter, in Bankinter’s CRM. e
ure. e its firmly growth.
Virtual branches highlights
06/05 (%) 2005 2006 06/05 (%) -0.40 Virtual branches 498 527 5.82 Millions of euros 16.04 Average funds 2,000.64 2,111.01 5.52 17.72 Average loans and receivables 1,555.63 1,810.50 16.38 20.82 Profit before tax 16.06 20.92 30.26 -1.10 ISN score 81.26 79.27 -1.99 ANUAL 16-47 ING.qxd 4/5/07 08:20 Página 44
Bankinter 2006 Business Report Bankinter 200 03. Channels and Networks 44 03. Channels a
Telephone Network Telephone Network Profit The Telephone Network, which comprises customers who sign up with the Bank Internet N through the telephone banking channel, ended 2006 with a pre-tax profit of EUR Increase of 3.4 million, which was 41.6% more than at 2005 year-end. Increas
The average loans and receivables arranged with these customers rose by 41.6% 5.1% to EUR 234.1 million. As usual, mortgage loans comprised the largest 51 portion of this item. on 2005 on 200 Average funds stood at EUR 271.1 million, which was 15.8% more than in 2005, thereby consolidating the upward trend reinstated during the previous year. The offerings of fixed rate deposits that have repeatedly been made available via the remote networks have undoubtedly contributed to the achievement of this volume.
Equity securities deposits amounted to EUR 102.2 million, which was 13% more than at 2005 year-end. Noteworthy was the 9% year-on-year fall in operating costs.
Telephone Network highlights
2005 2006 06/05 (%) Customers 45,496 46,542 2.30 Millions of euros Average funds 234.03 271.06 15.82 Average loans and receivables 222.72 234.10 5.11 Profit before tax 2.43 3.44 41.56 ISN score 75.06 73.57 -1.9 ANUAL 16-47 ING.qxd 4/5/07 08:20 Página 45
Bankinter 2006 Business Report 03. Channels and Networks 45
Internet Network the Bank Internet Network Profit The Internet Network ended 2006 with a pre-tax profit of EUR 8.5 million, an ofit of EUR increase of 51.8% on the previous year. Increase of The average funds amounted to EUR 411.1 million, which was 39.8% more rs rose by than in 2005. Equity securities deposits were up by 11% at EUR 244 million; and gest 51.8% mutual funds rose to EUR 97 million, a year-on-year increase of 20%. Loans and receivables - mainly home mortgage loans - stood at EUR 946.8 million, an on 2005 increase of 6.9%. e than in evious year. As regards management, efforts continued to encourage customers to use ailable via the logical channel for their profile, i.e. the Internet, in their dealings with the t of this Bank, and the use of all the financial services by cell phone was also promoted. The number of active customers using this channel increased by 14.2%.
was 13% It should also be highlighted that despite some investment in advertising to in promote this Network, the control of expenses was maintained, and this was one of the factors that made it possible to achieve the aforementioned profit.
Internet network highlights
06/05 (%) 2005 2006 06/05 (%) 2.30 Customers 69,068 78,868 14.19 Millions of euros 15.82 Average funds 294.02 411.10 39.82 5.11 Average loans and receivables 885.40 946.80 6.93 41.56 Profit before tax 5.62 8.53 51.78 -1.9 ISN score 77.98 77.17 -1.04 ANUAL 16-47 ING.qxd 4/5/07 08:20 Página 46
Bankinter 2006 Business Report Bankinter 200 03. Channels and Networks 46 03. Channels a
CRM
Supporting Multi-channel Banking 2006 can be considered the year of the full integration of Customer Relationship Management practices in the Bank's daily activities. CRM concentrates the intelligence of customer management, personalising all the contacts with the customers of all the Bank's business areas, all the products and services and all 2/3 the channels. CRM has provided us with a single overall vision of each of our of our customers use customers. more than one channel This knowledge, based on advanced models of analysis and distributed among the more than 4,000 customer profiles, has enabled us to raise perceived customer satisfaction and the profitability arising out of cross-selling above the rest of Spanish banks. CRM accompanies customers at all stages in the 1/3 relationship: advising them from the start, achieving a return on and offering them value-added products, giving them sufficient notice of certain situations of our customers use and, in short, taking care of the treatment and the quality customers receive in 3 channels each of our dealings with them.
CRM has made a decisive contribution to innovation at Bankinter, promoting channels such as cell phones, the Internet and SMS, contributing to the commercial offering of the Bank's different business areas and providing expertise to the Group's subsidiaries such as Bankinter Seguros de Vida, Línea Directa Aseguradora or Capital One. ANUAL 16-47 ING.qxd 4/5/07 08:20 Página 47
Bankinter 2006 Business Report 03. Channels and Networks 47
CRM has also been a key element in our customer relations culture: two thirds of our customers use more than one channel and a third of them habitually use 3 ationship channels, which clearly evidences our leadership in customer-oriented technology. the th the In recognition of the efforts made and the results achieved, Bankinter has and all been the subject of study in international forums, and this has enabled us to of our maintain standards of international prestige in the CRM area.
The objectives we have set ourselves for the future will be along the lines of ibuted offering innovative products in the Bank's commercial actions and continuing to perceived consolidate the knowledge of customer relations with more complex and bove the sophisticated models.
ffering uations eceive in
, uting to the g expertise recta ANUAL 48-119 ING.qxd 4/5/07 09:46 Página 1 ANUAL 48-119 ING.qxd 4/5/07 09:46 Página 48
Bankinter 2006 Business Report 48
Intellectual 04 Capital
At Bankinter thinking is also a question of scale: we think big.
Bankinter's model of intellectual capital seeks to provide useful information to evaluate the Bank's most important asset, its employees. It is also an efficient management tool for optimising their contribution to the Bank's business strategy.
In this section
> Human Capital > Structural Capital > Relational Capital ANUAL 48-119 ING.qxd 4/5/07 09:46 Página 49 ANUAL 48-119 ING.qxd 4/5/07 09:46 Página 50
Bankinter 2006 Business Report Bankinter 200 04. Intellectual Capital 50 04. Intellectua
Intellectual Capital 3,981 employees
Diversity Graduates 53.1% 71.9% men
46.9% women
Men Women Graduates 53.1 46.9 71.9 2006 2006
55.0 45.0 70.7 2005 2005
55.2 44.8 67.1 2004 2004
24 employee nationalities
Spain, Germany, Belgium, Bulgaria, Denmark, Finland, France, Holland, Ireland, Italy, United Kingdom, Romania, Sweden, Switzerland, Argentina, Colombia, Cuba, China, Ecuador, United States, Philippines, Peru, Uruguay, Venezuela ANUAL 48-119 ING.qxd 4/5/07 09:46 Página 51
Bankinter 2006 Business Report 04. Intellectual Capital 51
Employees who received training in 2006 97.6% 8 courses per employee 1,121 courses taught in 2006
36.5 10.3 average age average years of service
30% increase in the workforce compared with 2004 ANUAL 48-119 ING.qxd 4/5/07 09:46 Página 52
Bankinter 2006 Business Report Bankinter 200 04. Intellectual Capital 52 04. Intellectua Bankinter's model of intellectual capital enables us to evaluate the Bank's most important intangible asset: its employees.
Intellectual Capital
Models of intellectual capital provide information on the intangible assets of organisations, such as the knowledge there is in them, the creativity and commitment of their employees, their talent and ability to innovate, the corporate culture or the value of their relations with customers, shareholders and suppliers, among other stakeholders. These assets are what lie behind a large part of the very marked difference there is in many cases between the market value of companies and the value reflected in their traditional financial statements. Workforce Bankinter makes significant efforts to invest in and manage its intellectual capital and, despite the difficulty posed by valuing assets of an intangible nature, it pays special attention to their measurement. Bankinter's model of intellectual 30 capital seeks to provide useful and relevant information to evidence its ability to create value. It is also an efficient management tool for optimising the bigger contribution of these assets to the Bank's business strategy. in 2004
The model is arranged in three blocks of information (human, structural and relational capital), depending on the different nature of the intangible assets under consideration in each case. ANUAL 48-119 ING.qxd 4/5/07 09:46 Página 53
Bankinter 2006 Business Report 04. Intellectual Capital 53 l ees.
Human Capital This refers to the attitudes, skills and knowledge of employees and teams that ets of provide value to the Organisation, and to the latter's ability to regenerate its nd human capital through training and learning. e corporate suppliers, Bankinter's human resources policy addresses the principal objective of rt of the achieving a trained, motivated workforce that is fully committed to the objectives ue of of the Organisation and its business model. ents. Workforce In recent years the workforce has increased in size by more than 30%, with ntellectual 1,741 persons having joined the staff between 2004 and 2006. As a result of this ble nature, renewal and of the effort made during this period in training and development, at ellectual 30 % the end of 2006 the average age of the staff at Bankinter was 36.5 years. It is also ability to a qualified workforce, with the highest percentages of graduates and advanced- bigger than level foreign language speakers of the sector. Likewise it is a diverse workforce as in 2004 regards the academic qualifications, experience, sex and nationality of its members. ructural ible assets The data relating to hours of training and investment in training per employee trained are lower than those for the previous year as a result of the increase in workforce size, the greater coverage of the training - involving on average 97.6% of the workforce (100% in the case of the commercial network) - and, in the case of expenses, increased efficiency, due to the reduction in indirect expenses, such as logistic costs, and to the greater emphasis on training undergone locally. Nevertheless, investment in training continued to represent 3% of the total payroll, and the average number of courses per employee once again was 8. 74 courses were available online, including some that are compulsory and others of interest to the workforce, for example the classes offered by the University of Barcelona.
With regard to workforce commitment and motivation, the number of staff receiving variable remuneration rose to 68.7%; and those who have received some type of recognition to 25.5%. ANUAL 48-119 ING.qxd 4/5/07 09:46 Página 54
Bankinter 2006 Business Report Bankinter 200 04. Intellectual Capital 54 04. Intellectua
Human Capital Human C
Indicator 2004 2005 2006 Indicator Descriptive indicators Commitme Number of employees 3,267 3,712 3,981 Employees Average age (years) 36.99 36.59 36.50 Satisfactio Motivation Experience Participati Average length of service (years) 11.09 10.45 10.27 External ro Average length of service (years) as % of 40 years (professional lifetime) 27.73 26.13 25.63 Employees Employees Diversity Employees Breakdown by sex Employees Men (%) 55.19 54.98 53.10 Recognitio Women (%) 44.87 45.02 46.90 Variable co Graduates (%) 67.10 70.69 71.94 New hires Employees with advanced English language skills (%) 40.80 40.38 39.56 % of emplo Number of nationalities represented 91624 Personnel Number of different qualifications 95 92 95 Number of % of workforce holding the 3 most common qualifications at Bankinter 47.63 43.91 42.68 Number of % of emplo Ability and development % of emplo Employees who have received training (%) 100.00 94.75 97.56 Average number of training hours per employee as % of 350 (average post-grad. course load) 19 18 16 Prevention Average number of training hours per employee 68.08 63.19 55.07 Seriousnes Average number of training hours per employee trained 66.48 66.69 56.45 Frequency Investment in training as % of total payroll 333 Number of Investment in training per employee (euros) 1,015 1,168 994 Investment in training per employee trained (euros) 990 1,232 1,019 Value crea Employees with access to Virtual Classroom from their workstation (%) 100 100 100 PBT/ Numb Training actions in Virtual Classroom as % of total different training initiatives 7.42 19.02 18.50 Contributio Number of different training initiatives 512 389 400 Average number of courses per employee 488 Productivi Total number of courses taught 1,368 1,182 1,121 Customer f Index of application of training in the job performed (%) 100 100 100 Loans and
* These dat ANUAL 48-119 ING.qxd 4/5/07 09:46 Página 55
Bankinter 2006 Business Report 04. Intellectual Capital 55
Human Capital (cont.)
2006 Indicator 2004 2005 2006 Commitment and motivation 3,981 Employees participating in stock and convertible debenture ownership programmes (%) 79.28 68.24 62.72 36.50 Satisfaction Index *85* Motivation index (%) *83* Participation in opinion poll (%) * 71.40 * 10.27 External rotation index (%) 8.14 7.03 9.74 25.63 Employees participating in Quality Projects and Initiatives as % of total headcount 29.05 22.36 7.54 Employees participating in Debating Forums as % of total headcount 58.80 48.71 43.25 Employees with variable compensation (%) 65.26 65.98 68.70 Employees who have received awards (%) 72.48 73.55 78.80 53.10 Recognition index (%) 32.35 19.64 21.60 46.90 Variable compensation as % of total payroll 17.07 14.55 14.45 71.94 New hires in the past year as % of total workforce 12.46 18.59 16.18 39.56 % of employees who meet or exceed their targets 89.91 89.84 24 Personnel expenses (thousands of euros) 168,643 192,398 227,336 95 Number of contributions to knowledge communities 3,323 2,740 2,456 42.68 Number of suggestions for improvements 1,402 932 734 % of employees receiving individual mentoring 14 10 10 % of employees acting as mentors 333 97.56 16 Prevention of Occupational Hazards 55.07 Seriousness Index = (days not worked due to accidents/hours worked) * 1,000 0.15 0.10 0.09 56.45 Frequency Index = (Number of accidents / Number of hours worked) * 1,000,000 1.49 2.18 3.36 3 Number of total hours of absence (hours not worked due to common illness & non-industrial accident) 175,928 211,000 276,680 994 1,019 Value creation (thousands of euros) 100 PBT/ Number of employees 81.60 71.51 79.46 18.50 Contribution to GDP per employee 149.14 149.57 166.36 400 8 Productivity (thousands of euros) 1,121 Customer funds per employee 5,977 7,402 8,210 100 Loans and receivables per employee 5,738 7,042 7,951
* These data are from the biennial atmosphere survey and therefore are not available for 2004 and 2006 ANUAL 48-119 ING.qxd 4/5/07 09:46 Página 56
Bankinter 2006 Business Report Bankinter 200 04. Intellectual Capital 56 04. Intellectua
Structural Capital Structura Structural capital is defined as the value of the internal systems and of the corporate structure and culture. It is the knowledge that the Organisation succeeds in specifying, systematising and internalising in its individuals and Indicator teams. Sound structural capital facilitates a better flow of knowledge and leads Product te to the increased efficiency of the Organisation. % of hierar % of emplo The ample availability of information that is useful for management, the % of mana flexibility of the workforce, the dissemination of new information technologies and the communication and the effort devoted to processes of innovation are all Delayering elements that are fully integrated into Bankinter's signs of identity. Number of Average nu The constant drive for renewal and the organisational transformations that Average nu Internal job rotation the Bank has undergone in recent years are made evident in the high rate of (applicatio internal job rotation of 34.5% in 2006. Internal rotation is a key element of the professional development policy at Bankinter: in addition to facilitating Flexibility % knowledge of the Organisation and a comprehensive vision of the business, Internal jo 34.5 it encourages the mobility and promotion of the staff, and makes greater % of emplo in 2006 organisational flexibility possible. Number of Time logge Employees Employee
Technolog % of emplo Employees % of emplo MIPs at ce Daily e-ma Number of Number of % of branc ANUAL 48-119 ING.qxd 4/5/07 09:46 Página 57
Bankinter 2006 Business Report 04. Intellectual Capital 57
Structural Capital the on s and Indicator 2004 2005 2006 nd leads Product technology % of hierarchical levels involved in preparing the Group’s strategic plans 56 45.79 44.44 % of employees who know the Bank’s objectives 100 100 100 ent, the % of management information available to all employees 96 96 96 nologies on are all Delayering and transparency Number of people participating in 360° evaluation 3,177 3,432 3,874 Average number of evaluators per employee evaluated (applications sent / total headcount evaluated) 11.26 10 11 ations that Average number of persons evaluating each Management Committee member rate of (applications sent / Management Committee members) 54.13 73.12 75.80 nt of the Flexibility ness, Internal job rotation (%) 28.80 29.01 34.46 er % of employees who have logged on remotely 52.46 54.20 38.46 Number of remote log-ons 139,063 159,006 104,546 Time logged on remotely per user (min.) 9,758 20,710 10,757 Employees accessing the Internet daily from the Bank’s platform (%) 73.12 70.35 61.97 Employee suggestions implemented (per thousand) 2.69 34.63 24.91
Technology and process quality % of employees with access to Intranet 100 100 100 Employees contributing to development and maintenance of Intranet content (%) 41 84 104 % of employees with access to e-mail 100 100 100 MIPs at central host / employees 0.73 0.73 0.88 Daily e-mail traffic (daily average in a 7-day week) 233,688 239,466 336,690 Number of quality projects and initiatives carried out 347 389 141 Number of prize-winning quality projects and initiatives 10 10 10 % of branches with Internet stations & telephones connected to the Telephone Banking platform 100 100 100 ANUAL 48-119 ING.qxd 4/5/07 09:46 Página 58
Bankinter 2006 Business Report Bankinter 200 04. Intellectual Capital 58 04. Intellectua
Relational Capital Relational capital refers to the value for an enterprise of its interactions with the Relationa outside world: customers, suppliers, social partners, etc. One of the highlights for Bankinter in 2006 was the expansion of the Bank's commercial presence, with the increase in the number of both branches and management centres, and the high Indicator rate of multi-channel penetration: the transactions performed using channels Agency Ne other than the branch network accounted for 68.7% of the total transactions at % growth the Bank, while the new customers attracted through channels other than the Virtual Ba branch network accounted for 43.7% of the total number of new customers. % of tot % growth Relational Capital Agency Ne % of tot
Indicator 2004 2005 2006 Internet Customer Relations Internet cu Number of Non-specialised and foreign branches 308 318 332 Transactio Number of Virtual branches 467 498 527 Internet lo Number of Bankinter Agents 1,004 1,007 1,003 Equity sec Number of SME Management Centres 46 105 124 New custo Number of Business Management Centres 39 45 50 Number of Private Banking Management and Financial Advisory Centres 35 37 41 Sharehold Employees per Branch or Management Centre 7.64 7.35 7.27 Channels a Staff directly involved in the business (%) 72.87 74.46 74.13 Number of New active customers (%) 10.51 13.55 14.46 Annual growth in Average Total Assets (%) - 31.64 17.51 Support fo New active customers per employee 17.05 21.65 24.47 Alliances a Number of Quality and customer satisfaction Number of % of financial incidents resolved in 48 hours 85.26 83.95 81.81 Number of complaints to Ombudsman per active customer for every 10,000 customers 9.76 9.81 7.55 Environm Number of complaints processed by Bank of Spain per active customer for every 10,000 customers 2.70 2.02 1.78 Number of Training & Multi-channel banking development and ach Transactions through channels other than Branch Network as % of total Bank transactions 64.99 67.46 68.67 New customers attracted through channels other than Branch Network as % of total new customers 30.78 41.80 43.71 Brand awa Awards or Telephone Platform Positive an Calls answered by Telephone Platform / staff 2,422 2,114 1,894 Enquiries and incidents reported to Telephone Banking handled by e-mail/ Telephone Banking staff 368 263 274 Social acti Active Telephone Banking users as % of total active customers 69.39 65.05 67.10 Number of Transactions through Telephone Banking as % of total Bank transactions 8.21 7.46 6.90 Number of Calls handled by automatic service (%) 52.75 56.63 55.95 ANUAL 48-119 ING.qxd 4/5/07 09:46 Página 59
Bankinter 2006 Business Report 04. Intellectual Capital 59
s with the Relational Capital (cont.) hlights for e, with the d the high Indicator 2004 2005 2006 annels Agency Network and Virtual Banking tions at % growth in number of Virtual Banking customers 4.40 5.45 6.10 an the Virtual Banking transactions through channels other than Branch Network as mers. % of total Virtual Banking customer transactions 99.74 98.70 98.87 % growth in number of Agency Network customers 9.40 Agency Network transactions through channels other than Branch Network as % of total Agency Network customer transactions - 97.78 97.15
2006 Internet Internet customers as % of total customers 26.42 26.97 27.28 332 Transactions through Bankinter Internet as % of Bank total 48.84 51.94 53.71 527 Internet log-ons per active user 90.61 96.29 104.60 1,003 Equity securities activity through Broker Bankinter (%) 79 75 78.46 124 New customers signed up by Internet as % of total new customers signed up by the Bank 8 17 16.29 50 41 Shareholder and Investor Relations 7.27 Channels available to shareholders & investors 999 74.13 Number of publications aimed at shareholders & investors 33 33 24 14.46 17.51 Support for Education, Culture & Innovation 24.47 Alliances and collaboration projects with academic and research institutions 75 63 66 Number of lectures organised by Fundación de la Innovación Bankinter 8 14 11 Number of experts participating in the forums organised by the Fundación de la Innovación Bankinter 95 133 148 81.81 7.55 Environment 1.78 Number of environmental projects 61011 Training & communication actions aimed at optimising consumption in the workplace and achieving responsible management of resources 7 11 12 68.67 43.71 Brand awareness Awards or public recognitions received by Bankinter 13 18 21 Positive and neutral assessments made in reports on Bankinter in the media in the target market (%) 88.04 88.92 97.61 1,894 274 Social action 67.10 Number of projects to promote social development and accessibility for the handicapped - 9 10 6.90 Number of agreements reached to include handicapped persons on the staff 5 5 5 55.95 ANUAL 48-119 ING.qxd 4/5/07 09:46 Página 60
Bankinter 2006 Business Report 60 ANUAL 48-119 ING.qxd 4/5/07 09:46 Página 61
People and 05 knowledge management
3,981 originators of ideas: we’re good at thinking, we’re even better at doing.
In the people management field, Bankinter is an innovative organisation in constant evolution, with a clearly defined set of principles and a management model, whose ultimate aim is to make the Bank's objectives a reality and to uphold its corporate culture.
In this section
> People management policies > Great Place to Work > Talent > Work/Life Balance > Training > Recognition 2006 ANUAL 48-119 ING.qxd 4/5/07 09:46 Página 62
Bankinter 2006 Business Report Bankinter 200 05. People and knowledge management 62 05. People and
People management policies
In the people management field, Bankinter is an innovative organisation in constant evolution, with a clearly defined set of principles and a management model, whose ultimate aim is to make the Bank's objectives a reality and to uphold its corporate culture.
The objective of the strategic model of Bankinter's people management area is to make the Bank a high performance organisation by applying people management policies that have an impact on motivation and, accordingly, lead to an increase in earnings and share value. These policies seek to foster an environment that facilitates and motivates staff commitment, one that is Talent Proy characterised by team work, training, professional development, the promotion of talent, the recognition of the contribution each person makes and fair pay.
To implement this model, the people management area is arranged in the 12 following organisational units: Organisation, Training, Internal Communication, particip Knowledge Management, Recruitment, Pay and Planning, Network Coordination trainin and Administration.
The people management activities are facilitated by the use of advanced techniques and tools (including job map, knowledge map, pay model, 360º evaluation, performance evaluation, potential evaluation and atmosphere survey), which provide Bankinter with objective information and data about its people and enable it to make meritocracy a reality and promote it as a value for development within the Bank.
Great Place to Work
For the third year running, Great Place to Work® Institute España recognised Bankinter as being one of the best places to work in 2006. This award ranks Bankinter among the 'top 25 best places to work' in Spain.
According to GPTW's definition of an excellent working environment, Bankinter is a place where ‘you can have confidence in the people you work for, feel proud of what you do, and enjoy the company of those you work with.’ ANUAL 48-119 ING.qxd 4/5/07 09:46 Página 63
Bankinter 2006 Business Report 05. People and knowledge management 63
The award is made after completion of a survey of the Bankinter culture and a questionnaire submitted to a random sample of employees. The results of the on in survey highlight the high rating achieved in aspects relating to two-way gement communication, the competence of the executive team, the training received, the nd to encouragement of creativity, decentralised decision-making, team work and the employees' wish to continue working for the Bank.
ement area le Talent gly, lead to n In the knowledge society, the success and the very survival of businesses depend is Talent Proyect increasingly on their ability to attract and develop talent. That is why the omotion of management of talent is a distinguishing feature of businesses that succeed in pay. members achieving high earnings thanks to their human capital. For Bankinter, the management of talent is an organisational capability of the utmost strategic ged in the 129 of staff importance. In a competitive market, where size, mergers and acquisitions are nication, participate in the what shape the strategy of some banks, Bankinter's competitive edge will depend rdination training programe on the talent of its workforce.
The priority attached to the management of talent starts with the dvanced application of new and selective policies for attracting and recruiting talent and 60º encompasses the whole organisation. 2003 saw the launch of a specific project in ere this matter, with ‘the Talent of People’ as its slogan and its objective, which has about its entailed the development and monitoring of the individuals and the teams that value for make up the Bank. The project seeks to make this intangible asset the Bank's principal driver of change and differentiation in the medium term, and it came into being with the purpose of making new talent visible. The development of employees who are identified as having talent is encouraged with training courses, on-the-job learning and missions, as well as with job rotation and promotion policies to give them the necessary experience for a successful gnised professional career. anks At present there are 129 individuals participating in a specific training programme for members of staff identified under the Talent Project with the aim ment, of assisting their professional development. For this purpose, there was also work for, separate monitoring in 2006 of the groups identified under the project. ith.’
Indicator Persons identified Persons identified Total with Talent with Potential workforce Internal job rotation (%) 46.51 41.86 34.46 Promotions (%) 20.15 14.95 6.83 ANUAL 48-119 ING.qxd 4/5/07 09:46 Página 64
Bankinter 2006 Business Report Bankinter 200 05. People and knowledge management 64 05. People and
In short, the aim is to identify and promote the professional development of the Bank's young talent in the early stages of their careers. The success of this project relies on the responsible involvement of the Bank's people managers, who must facilitate and bring out the talent of the people they line-manage, and who must create a work environment and atmosphere that makes it possible to develop the best of every professional. In the medium and long term, the persons directly involved in this project must lead and drive the change in the Organisation towards this new culture based on talent.
Work/Life Balance
At Bankinter people have always found respect and consideration for their personal circumstances and needs and a sincere interest in providing specific solutions that are in harmony with the needs of the business. Solutions that over time have become established as a set of measures of great added value that all staff must be aware of so that they can take advantage of them whenever they need to. Training h In 2006 these measures were reviewed, discussed and improved in order to increase the management capability of line managers and People Management, enabling us to continue to make progress in facilitating work/life balance. 56 These measures, which are published and notified to all the staff, are of train posted on the People website and seek to respond to the following headings:
- Attention to flexible working hours. - Care and attention of family members. - Attention to maternity/paternity. - Attention to long-term contingencies. - Attention to training and professional development. - Attention to solidarity activities. - Attention to personal rest periods. - Attention to situations of harassment. - Attention to situations of gender violence. ANUAL 48-119 ING.qxd 4/5/07 09:46 Página 65
Bankinter 2006 Business Report 05. People and knowledge management 65
nt of the Training this project who must The development of the Organisation's intellectual capital through training is one who must of Bankinter's most important values. The Business Report on intellectual capital evelop the summarises the situation and the performance of the Bank under this heading. irectly Training at Bankinter is essentially practical, directed at customer satisfaction and tion to keeping the value of the Bank's human capital permanently up to date, enhancing the employability of its professionals.
Training management is based on a model of managing and directing people that is embodied in a 'job and knowledge map' containing the competencies, skills, functional profiles and knowledge required at the different heir points of the Organisation. This management model makes it possible to know pecific what the Bank expects of each of its employees, and also serves as a personalised that over guide for their training and professional development. In this way it is possible to e that all design continuing training actions that are adapted to both the needs of the ver they business and those of each individual.
Training hours The Bank's target is to train 100% of its staff. In 2006, 97.6% of the in order to workforce received training through a total of 1,121 courses and 400 different agement, training actions. The target was fully met in the commercial network, where 100% ce. of the staff received training. The figures in terms of training hours (56.5 hr.) and 56.5 hours investment in training (EUR 1,019) per employee trained place Bankinter among , are of training per employee the leaders in the banking sector as regards the training effort made. dings: In aggregate terms, approximately 10% of the workforce have attended the leading business schools in Spain.
The Training website, included in the People website, is a key tool for planning and implementing the training scheme. The website enables employees to consult their training plan in terms of the knowledge needed for their job, courses to be taken, those already completed, those to be announced or those that have already been announced. They may consult the schedules for all the courses they intend to take and those they have been assigned to by the training department. This is also where all the online courses available to staff are located as well as the links to virtual schools with which Bankinter has courses active. ANUAL 48-119 ING.qxd 4/5/07 09:46 Página 66
Bankinter 2006 Business Report 05. People and knowledge management 66 Xavier Ripoll Subiros, Virginia Ferragut Roig, Virgilio Víctor Manuel García Gonzalo, Vicente Morales Moy Vicente Gómez Segura, Úrsula Reuschenbach, To Palenci, Teresa García Redondo, Susana Becerro, Susana Balaguer López, Sonia María Lima, Silvia Fernández González, She González, Sebastián M. Ojeda Gartner Osma Sánchez Ocaña, Santiago Sánc Vázquez Gabaldón, Patricia A Fernández Fernández, Rubén Cea Novas Agra, Rosa María Ram Martín Finez, Rosa Ana Pelayo, Rocío Fernández Giménez Serran Ricardo Luís Arn Rebeca Corrales Rodríguez Á Go Zahonero Maiz Bu M Recognition 2006 L
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Anto Díaz, A Antonio He Rueda, Antonio B Annette Y. Kurzyn María Cáceres Ji Ángel Llamas Llamas, Á Ramírez Cogollor, Ana Mª Z Mª Calero Artero, Ana Jaque Martín, Ana Isabel Ortiz Vivanc González Arellano, Ana García Orde Pérez Sánchez, Amy Unger Martín, A Caballero, Álvaro Rosano González Arturo Santana Sánchez, Alicia Serr Alberto Carmona Alonso, Alberto Bruña Va Aida Mª Cabrera Jorge, Agustín García Félix, A Arias Urrutia, Adelaida Adánez L ANUAL 48-119 ING.qxd 4/5/07 09:46 Página 67
ier Ripoll Subiros, Virginia Ferragut Roig, Virgilio Escudero Ramírez de A., 67 tor Manuel García Gonzalo, Vicente Morales Moya, Vicente Hernández Picón, Vicente Gómez Segura, Úrsula Reuschenbach, Tomás Enrique Serrano Álvarez- Palenci, Teresa García Redondo, Susana Prieto Cuevas, Susana Fernández Becerro, Susana Balaguer López, Sonia María Morales Castillo, Silvia Floren Pérez Lima, Silvia Fernández González, Sheila María García García, Sergio Bellido González, Sebastián M. Ojeda Gartner, Sara Roldán Ceballos, Santiago Vaca de Osma Sánchez Ocaña, Santiago Sánchez Illanas, Sandra Durán Olivencia, Sabela Vázquez Gabaldón, Patricia Alandi Tartalo, Rubén Martínez Vicente, Rubén Fernández Fernández, Rubén Ceacero González, Rosendo Brenes Barrera, Rosario Novas Agra, Rosa María Ramón Bibiloni, Rosa María Nardiz Arrarte, Rosa María Martín Finez, Rosa Ana Viejo González, Rodrigo Martín Terrón, Rocío Ortega Pelayo, Rocío Fernández de Toro Moreno de Ve, Roberto Soriano Gallego, Roberto Giménez Serrano, Rita María Martínez Rodríguez, Ricardo Mañas Jiménez, Ricardo Luís Arnau Roig, Reyes Loizaga Díaz, Restituto A. Herrero Rodríguez, Rebeca Corrales Martínez, Raúl Martínez Martín, Raúl Castro Rodríguez, Raquel Rodríguez Álvarez, Raquel Muñoz Calderón, Ramón Luís Frigola Costa, Ramón González Marín, Rafel Mingo Fernández, Rafael Zamora Follana, Rafael Zahonero Coba, Rafael Pereiro Castro, Rafael García Vega, Pilar Sanz Pinto, Pilar Maiz Buendía, Pedro Torres Serna, Pedro Rodríguez Viguri Escobar, Pedro Pericas Mir, Pedro Muñoz Romero, Pedro María Martínez Basabe, Patricia Fernández Llorente, Patricia Álvarez Alonso, Paloma Sánchez Flores, Pablo Serrano López, Pablo Nistal Cortina, Pablo Jiménez Jiménez, Pablo Herrero Torres, Pablo García Bellido, Pablo Caballero Badiola, Pablo Alonso Burgos, Oscar Nuño Rico, Nuria Relaño García, Norberto Gandarillas Ugarte, Nieves Luís Sánchez, Nicolás Oriol Hoyos, Neftali González Polledo, Natalia Vázquez Díaz, Natalia Colmenero Ruiz, Natacha Mª Lorensu Melguizo, Motserrat de Domingo de la Cámara, Montserrat Hervas Rosa, Mónica Garrido Vilchez, Miriam Embid Areta, Mirene Zubimendi Arzubialde, Miguel Artola Menéndez, Miguel Ángel Rubio García, Miguel Ángel Pino Barrientos, Miguel Ángel Pérez Sánchez, Miguel Ángel Mogro Remolina, Miguel Ángel García Bartolomé, Miguel Ángel Fernández Gutiérrez, Miguel Ángel Aragón López, Miguel Ángel Alonso Rodríguez, Mercedes Peñas Lorenzo, Mercedes Alcojor Moreno, Mercedes A. Olloqui Martín, Matías Díaz González, ernández García, Mariano M. Alcázar Negrillo, Mª Viñas Mardones Mencia, Mª Uriarte Goizueta, Mª Teresa Prats Coll, Mª Teresa Falcón Brito, Mª Pilar Vizuete eves Mayorga Expósito, Mª Luisa Ibáñez Botella, Mª José Valiente Pérez, Mª José Pérez Sánchez, Mª José Martín Rodríguez, Mª José Fuentes Belmontes, Mª José ª Helena Calaforra Ingunza, Mª Haydee Ruiz Die, Mª Gracia González Nodal, Mª Esther Velasco Arribas, Mª Esther Risquez Susi, Mª Ester Puebla González, Mª Elena García Gómez, Mª Carmen Alcalá Cristino, Mª Begoña Navio Pérez, Mª Begoña Mancebo Salas, Mª Ángeles Beltrán Andrés, Mª Ana Fernández de la Iglesia, Margarita Álvarez, Manuel Ocaña Rubia, Manuel José Gutiérrez-Mellado Satrustegui, Manuel José Ballester Cecilia, Manuel Fernández Fernández, Mª Teresa Miralles Sánchez, Mª ª del Mar Ortiz Viana, Mª del Coro González González, Mª Concepción Castellano Hernández, Mª Rosario Vallano Vergara, Mª Rosario Pérez Escajadillo, Mª Mercedes López ómez-Cadiñanos Hernández, Mª Isabel Encinas Bayán, Mª Begoña Revuelta Lucas, Luís Sánchez Serrano, Luís Sánchez Dura, Luís Miguel Gómez Elvira, Luís Miguel Ambrona ero García, Luís Escuredo Casado, Luís Emilio Hernández Domínguez, Luís E. Reviriego Agudo, Luís Aguinaco Alava, Lucía Alonso Alonso, Lourdes Quintana Requibatiz, Lorena ura Gómez Martín, Laura García Vera, Laura Eugenia Fernández Aguilar, Laura Chillón Martín, Laura Cermeño Simón, Julio Urcola López, Julio San José Sánchez, Julio Fernando n Ramírez, Juan Miguel Osoro Iturbe, Juan Manuel Zanón Pérez, Juan Manuel Tatay Pérez-Ontiv, Juan Luís Poveda Chacón, Juan José Tur Martínez, Juan José Escolar Moreno, Juan o, Juan Carlos Martín Hidalgo, Juan Carlos Jiménez Cortés, Juan Carlos Gutiérrez Nieves, Juan Carlos Guillen Suñer, Juan Carlos García Rivera, Juan Antonio Paños Díaz, Juan Antonio rego, José Ramón Coll, José Mercadal Seguí, José María Scholl Monjas, José María Ordejón Rontome, José Manuel Villa Martines, José Manuel Fernández Poyatos, José Manuel Duran José Luís Bolea Ureta, José Luís Arias Avilés, José Gutiérrez Ariño, José Gabriel Díez Bados, José Fernando Ontaneda Martínez, José Esteban Sanz López, José Clares Expósito, José ez Portilla, José Alberto Ariza Gil, Jorge Rodríguez Basanta, Jorge Martín Poyatos, Jorge Gastón Gasca, Jorge García Gomes, Jorge Bajo Pérez, Jorge Argueso Panera, Jordi Camps uez, Jesús Javier Hernández Bermejo, Jesús Amador Castrillo, Jesús Alejo Serrano, Jesús Alberto González García, Jerónimo Muñoz Corrales, Javier Sáez Martos, Javier Pajares ndez Martín, Javier Erlac Miguel, Javier E. Bello Marcos, Javier Cortes Lucena, Jaime Ortiz Esteller, Jaime Castello Pastor, Jacinto Chamorro Tejado, Isolina Antaño Sobrado, z Villanueva, Inmaculada Mª Rodríguez, Inmaculada Cano Sánchez, Ignacio Muñoz Salgüero, Ignacio Moreno Gracia, Honorato Martín Maroto, Guillermo Segura Rodríguez, ia Ortiz Portero, Gines José Aznar Aznar, Gema Tapia Guerrero, Gema Rebollo Guerrero, Gabriel Nieto Llorente, Gabriel Duesa Capellades, Francisco Javier Martín Calvo, anco Sarab, Francisco M. Guirado Sariñena, Francisco Javier López Marcos, Francisco Javier Galán Serapio, Francisco Javier Carballo López, Francisco Javier Calderón cisco Cejudo Bastante, Fernando Sobradillo Sarasa, Fernando Rey Navarro, Fernando I. Morillo López, Fernando Gómez García, Fernando Gómez Bastida, Fernando ando Vicente Rodríguez Sanso, Francisco Ubaldo Rodríguez Jiménez, Francisco Manuel Mocholi Santos, Francisco Javier Hurtado Huerta, Francisco José Galiana genio Sáez Lozano, Eugenio Díaz Álvarez, Eufemia Cuesta Romero, Estíbaliz González Calzada, Esther María Llorente Rincón, Ernesto Vicente Lahoz, Erika W. hnell, Emilio Sánchez Górriz, Emilio González Rodríguez, Emilia Romero Barragán, Elisabeth de Linos Escofet, Elisa Mª Petidier López, Elisa Mª Domínguez Toledano, Delia García García, David Vivas García, David Salomón Ruiz, David Ortega Sol, David Mendieta Cortes, David Larger Martínez, Daniel Balleste- ros Rocafull, Cristina Suárez Revuelta, Cristina I. Núñez Fuentes, Cristina Cortes Santaella, Cosme Gorostiza Laborda, Conrado Rguez-López Garabote, Concepción Worner Jiménez, Concepción Pedraza Oejo, Claudio Arévalo Garcia, Clara Isabel Garzón Reguillo, Cibrián Carnicero Suárez, César Enrique Leal Puertas, Celia Prellezo Besoy, Celia García Flores, Cayetana Velilla Lacalle, Carolina Sánchez Soriano, Carolina Cabanillas Castro, Carmen Zafra Ceres, Carmen Mª Pendas Martín, Carmen Guitard Marín, Carmen Casado Sola, Carlos Vázquez Vicente-Rgz, Carlos Sánchez Bragado, Carlos Olivas Pastor, Carlos Mocholi Mocholi, Carlos Manuel Calvo Domingo, Carlos Cesar Dagnino Pardo, Carla Martinón Moreno, Bruno Bejerano Gómez, Borja Maldonado Maese, Borja Alonso del Cid Arranz, Belén Rodríguez Fernández, Beatriz Organero Manzanero, Beatriz López González, Beatriz González Arguedas, Beatriz de Mendoza Rodríguez, Balbina Fenollosa Reixach, Arturo Gamarra Blas, Aranzazu Palmero Martín, Antonio Piqueras Martínez, Antonio Moyano Cabezón, Antonio Martos García, Antonio Juan Santana Díaz, Antonio Jesús Castillo Gallardo, Antonio Jesús Benjumea Moreno, Antonio Hernández Amorós, Antonio García Pagés, Antonio Cosme Banda Rueda, Antonio Bosch Morro, Antonio Aznar Folch, Annibal Jesús Peral Ruiz, Annette Y. Kurzynski, Ángela Romo Martínez, Ángela Martí Castelló, Ángela María Cáceres Jimeno, Ángel Rosón Rodríguez, Ángel Pasamontes Díaz, Ángel Llamas Llamas, Ángel Larrinaga Ibarz, Ángel González Miragaya, Ana Ramírez Cogollor, Ana Mª Zalduondo Zavala, Ana Mª de la Tajada Gómez, Ana Mª Calero Artero, Ana Jaque García, Ana Isabel Sanz Pérez, Ana Isabel Sainz Martín, Ana Isabel Ortiz Vivanco Soto, Ana Isabel Hernáez Calzón, Ana Isabel González Arellano, Ana García Orden, Ana Gallo Alonso de Armiño, Ana Belén Pérez Sánchez, Amy Unger Martín, Ambrosio Miñarro Viseras, Amador García Caballero, Álvaro Rosano González, Álvaro Morales Arce Serrano, Álvaro Arturo Santana Sánchez, Alicia Serrano Iruela, Alejandro Tejero Garcés, Alberto Carmona Alonso, Alberto Bruña Valdivieso, Alberto Álvarez Gómez, Aida Mª Cabrera Jorge, Agustín García Félix, Adriana Sargatal Serrat, Adolfo Arias Urrutia, Adelaida Adánez Lerma, A. Belén Valle Vázquez ANUAL 48-119 ING.qxd 4/5/07 09:46 Página 68
Bankinter 2006 Business Report 68 06 Business
The majority of people want a bank that offers something different. So do the minority.
All of the segments of the customer business grew significantly, particularly those which have been the focus of the Bank's efforts in recent years, such as SMEs, Personal Finance and Private Banking.
In this section
> Economic Environment and international markets > Market share > Customer funds and loans and receivables > Customer segments > Capital Markets and Treasury > Risk management ANUAL 48-119 ING.qxd 4/5/07 09:46 Página 69 ANUAL 48-119 ING.qxd 4/5/07 09:46 Página 70
Bankinter 2006 Business Report Bankinter 200 06. Business 70 06. Business
Economic environment and international markets
The world economy continued to grow at a strong pace in 2006. The United States maintained growth of around 3%, which represented a slight slowdown, particularly in the second half of the year. China continued to grow at a very high rate (+10%), and was one of the drivers of the world economy. Germany and Japan also improved substantially, with growth rates of more than 2% in both cases.
In Spain economic growth reached more than 3.5% - despite a slight slowdown in the rate of growth of private spending to around 3.6% - as a result of the strength of investment in fixed capital (up by 9%) and the lower negative contribution of the foreign sector. Even so, the current account balance deficit reached a negative record in 2006. Cumulative inflation for the year stood at 2.7%, which was a substantial improvement on the 3.7% recorded in 2005, due in part to the moderation of energy prices.
Interest rates and foreign exchange In 2006 the U.S. Federal Reserve continued with the process of interest rate increases by raising its intervention rates from 4.3% to 5.3% during the first half of the year. Since then it has made no changes to the official rates pending the effects of slowdown on the American economy. Meanwhile, in Europe, the European Central Bank raised its reference rates from 2.3% to 3.5% in 2006, in a process of normalisation of monetary policy which is likely to continue in 2007. Also in Japan there was the first rise in rates for six years, setting them at 0.3%.
Government bonds had a year marked by a sharp rise in yields in all sections of the curve during the first half of the year and, during the second half, a reduction in volatility and a stabilisation of yield levels that discount rate rises to around 4% in the euro area. The corporate bond market had a very stable year with no shocks, and with low spreads as in 2005. The asset securitisation market was very busy, with a large number of new issues and slightly higher issue prices within a very stable and firm framework.
Official Interest rates (%)
2005 2006 Euro Area 2.25 3.50 United States 4.25 5.25 Japan 0 0.25
(Source Bloomberg, Central banks) ANUAL 48-119 ING.qxd 4/5/07 09:46 Página 71
Bankinter 2006 Business Report 06. Business 71
arkets As for foreign exchange, the euro grew stronger in 2006 against the main currencies, reflecting both the improvement in the European economic nited States environment and the problems of the American foreign trade balance. During the , year the euro rose 11.4% against the dollar and 12.6% against the Japanese yen. a very high y and Euro/ US dollar and euro/yen in 2006 in both 1.6 160 1.5 155 ght 1.5 150 1.4 145 a result of 1.4 140 egative 1.3 135 deficit 1.3 130 ood at 1.2 125 120 05, due in 1.2 1.1 115 1.1 110 Dec. Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec. 05 06 06 06 06 06 06 06 06 06 06 06 06
rate (Source Bloomberg) €/$ €/Yen e first half ding the the International stock markets 2006, in a In 2006 the positive scenario for global stock markets continued, due to the growth in 2007. in corporate earnings of around 15%, the still low interest rates and, especially, a m at 0.3%. record year in corporate mergers and acquisitions of businesses throughout the world. In Europe, the biggest increases occurred in Spain (up by 32%), driven by the n all large number of corporate transactions in the electricity and construction sectors; cond half, followed by Germany (up by 22%), assisted by its economic recovery. By sectors, the rate rises best in Europe were: construction (up by 37%), mining (up by 37%) and electricity table year (up by 36%); whereas those with the lowest increases were: pharmaceuticals (up on market by 3%), technology (up by 4%) and oil (up by 5%). ssue prices
Performance of the main stock markets in 2006 in local currency (%)
2006 (local currency) Spain Ibex 35 +31.8 United States S&P 500 +13.6 United States Nasdaq +9.5 2006 United Kingdom FTSE 100 +10.7 3.50 Germany DAX +22.0 5.25 France CAC +17.5 0.25 Japan Nikkei +6.9
Central banks) (Source Bloomberg) ANUAL 48-119 ING.qxd 4/5/07 09:46 Página 72
Bankinter 2006 Business Report Bankinter 200 06. Business 72 06. Business
Market share
2006 was characterised at Bankinter by the Bank's ongoing commitment to profitable growth, and this was reflected in the performance of the principal lines of business, both in loans and receivables, which continued to grow strongly, particularly in the SME segment, and in mortgage financing and customer funds.
Bankinter is a multi-channel bank in which technology plays a vital role in the management of the business and in the commercial activity, and makes a crucial contribution to the implementation of the profitable growth strategy. In this respect, the consolidation and growing use of relational capabilities and Customer Relationship Management (CRM) tools enable us to deliver our value proposal to our customers increasingly clearly, based on products and services that are innovative and differentiated, and with personalised conditions for each customer. Customer f 19 more th
Market share (%)
2005* 2006* Profit 3.04 2.17 Assets 4.13 4.16 Deposits plus debt securities 4.63 4.90 Mutual funds 3.42 3.55 Loans and receivables 4.89 4.81
(*) Comparing September 2005 data with September 2006. ANUAL 48-119 ING.qxd 4/5/07 09:46 Página 73
Bankinter 2006 Business Report 06. Business 73
Customer funds and loans and receivables nt to 2006 was characterised at Bankinter by strong, profitable and healthy growth ncipal lines from the point of view of loans and receivables, following the strategic guidelines ongly, on asset quality. The rise in housing prices in Spain - although slower in the mer funds. closing months of the year - and the good performance of the economy were what marked the mortgage activity. tal role in akes a From the point of view of customer funds, the Bank's emphasis on providing tegy. advice and quality service led to growth in mutual funds of 2.6%, year on year, in ties and assets managed. The rate of growth was even higher for the remainder of ur value customer funds, which closed the year 19% up on 2005. ervices s for each Customer funds At 31 December 2006, customer funds totalled EUR 32,683 million, an increase of Customer funds EUR 5,207 million (19%) on 2005. Off-balance-sheet funds managed amounted to EUR 11,499 million, which was EUR 433 million (3.9%) more than in 2005.
Product innovation continued to be one of the pillars of Bankinter's 19% business. During the year there was considerable success in marketing a wide more than in 2005 range of hedging products aimed at mitigating our customers' interest rate and exchange rate risk. Our strategy, based on the simplicity of products, the provision of advice, multi-channel banking and substantial efforts in commercial network training, was extremely well received in all the customer segments.
Customer funds
2005 2006 Thousands € %
2006* Customer deposits 15,490,497 18,409,659 2,919,162 18.84 2.17 General government 283,771 394,997 111,226 39.20 4.16 Customer sectors 14,795,924 17,471,296 2,675,372 18.08 4.90 Current accounts 7,265,584 8,339,037 1,073,453 14.77 3.55 Savings accounts 108,440 114,244 5,804 5.35 4.81 Time deposits 2,202,448 3,476,024 1,273,576 57.83 Asset repos 5,219,452 5,541,991 322,539 6.18 Non-residents 343,520 467,057 123,537 35.96 eptember 2006. Valuation adjustments 67,282 76,309 9,027 13.42 Bonds and other marketable debt securities 11,986,462 14,273,921 2,287,459 19.08 Total 27,476,959 32,683,580 5,206,621 18.95 ANUAL 48-119 ING.qxd 4/5/07 09:46 Página 74
Bankinter 2006 Business Report Bankinter 200 06. Business 74 06. Business
Off-balance-sheet funds Off-balance-sheet funds managed Off-balance-sheet funds managed grew by 3.9% in 2006 in comparison with the figure at 31 December 2005, and totalled EUR 11,499 million. % 3.9 Most noteworthy for its volume was the growth in pension plans. more than in 2005 The aggregate growth rate of both on- and off-balance-sheet customer funds was 14.6%.
These figures show that the emphasis on providing advice that began in 2004, and which has become the basis for customer relations, continues to be fundamental. 2006 saw the successful launch of new mutual funds, bonds and structured deposits, as well as combined products.
Off-balance-sheet funds managed (thousands of euros)
2005 2006 Thousands € % Mutual funds 8,692,687 8,920,220 227,533 2.62 Pension funds 880,331 1,068,630 188,299 21.39 Commercial paper 25,403 25,403 0 0.00 Government bonds held to maturity 169,437 84,671 -84,766 -50.03 Treasury bills held to maturity 0 0 0 0.00 Asset management 1,298,447 1,400,841 102,395 7.89 Total 11,066,305 11,499,765 433,460 3.92
Pension pl
Amount of assets under management Mutual funds The assets managed totalled EUR 8,920 million at the end of 2006, which was 2.6% 21 more than in the previous year. In addition to this amount, mention should be more th made of the growing importance of the open architecture of the advisory services 2.6 % that Bankinter offers to its customers. more than in 2005 For more than nine years Bankinter has had distribution agreements with the world's leading international fund managers so as to be able to distribute their funds and thereby contribute value to the Bank's customers' portfolios. The assets managed by fund managers other than the Group's fund manager amounted to EUR 690.8 million. ANUAL 48-119 ING.qxd 4/5/07 09:46 Página 75
Bankinter 2006 Business Report 06. Business 75
There was a slight shift in the distribution of the assets in the mutual funds portfolio with the with respect to 2005: the equities funds and guaranteed funds rose slightly and fixed income funds fell, which was in line with the performance of the financial markets. Money market funds, at 46% of the total portfolio, continued to account for the most significant portion of the overall total, although it is true that year by year their funds significance is diminishing as a result of efficient customer 're-portfolioing'.
Bankinter has one of the most competitive ranges of conservative mutual egan in funds that are clearly segmented according to target customer, with these assets s to be being the shelter from which to diversify towards higher risk products. There was a ds and slight advance in the importance of guaranteed funds to 16.1% of total funds, as a result of the placement of nearly EUR 400 million in this type of fund during 2006.
Distribution by type of fund (%)
€ % Money market funds 46.03 33 2.62 Fixed Income funds 5.92 99 21.39 Mixed funds 6.61 0 0.00 Equities funds 25.31 66 -50.03 Guaranteed funds 16.13 0 0.00 95 7.89 60 3.92 Pension funds The volume of pension plans and EPSVs (voluntary pension entities) at Bankinter Pension plan volume totalled EUR 1,068.6 million at the end of 2006, which was 21.4% more than at the end of 2005. The leading role in this growth of pension plans and EPSVs was played by the Bank's management agreements, which continued to contribute high added value to the portfolio management of these longer-term specific- h was 2.6% 21.4 % purpose savings assets. uld be more than in 2005 services Bankinter has 19 individual pension plans and 9 EPSVs, which enable customers to benefit at all times from the best advice, whatever the geographical area or type of asset that are most favoured by the prevailing economic situation. nts with Over the past year the Bank has launched 3 new pension 'target plan' plans, with bute their the intention of expanding the range and offering customers a product that he assets adapts to the markets and distributes the asset portfolio on the basis of the time nted to EUR remaining until retirement. ANUAL 48-119 ING.qxd 4/5/07 09:46 Página 76
Bankinter 2006 Business Report Bankinter 200 06. Business 76 06. Business
Insurance Loan asset In 2006, the Bank's determined commitment to the insurance business made it possible to continue recording outstanding rates of growth in both pension products and risk insurance policies. 17 The pensions business succeeded for the first time in topping one thousand more th million euros of assets managed: it reached EUR 1,069 million, which was a 21% increase on the figure at the end of 2005, in a year in which the emphasis was on long-term plans.
Policy portfolio The risk insurance business - both as regards general insurance through Bankinter Gestión de Seguros, and life insurance through Bankinter Seguros de Vida - once again achieved very significant growth, driven largely by the 23 % mortgage business. Thus, the portfolio totalled 488,169 policies which was 23% more than in 2005, and there was a noteworthy 29% increase in life and accident more than in 2005 products.
There was further enhancement of the information provided to customers over the www.bankinter.com website, which now includes all the information on credit card insurance, as well as Bankinter's multi-risk and automobile insurance for SMEs and businesses, as a further example of our commitment to transparency in the insurance field.
All of the foregoing, assisted by the excellent performance of claims and supported by a wise selection of risk, enabled Bankinter Seguros de Vida to achieve a pre-tax profit of EUR 26.2 million, which was 34% more than in 2005; and a total profit contributed to the Bankinter Group - through the general insurance brokerage business and fees and commissions - of EUR 34 million, an increase of 29% on 2005.
Loans and receivables In 2006 Bankinter’s lending activity was characterised by a commitment to healthy, profitable growth in terms of asset quality, which is what made Bankinter able to record the lowest non-performing loans ratio in the industry as a whole. ANUAL 48-119 ING.qxd 4/5/07 09:46 Página 77
Bankinter 2006 Business Report 06. Business 77
Loan assets At 31 December 2006, the Bankinter Group’s loans and receivables amounted to made EUR 34,416 million, which was EUR 5,007.5 million (17%) more than at the end nsion of 2005. This growth continued to be led by the thrust of the mortgage business, but also by the development of the financing connected with the promotion of the 17% SME business, which was a key segment in the increase in the Bank's net sales e thousand more than in 2005 in 2006. was a 21% asis was on Mortgage lending continued to be the linchpin of the Bank’s lending activity, although there was no variation in the selective strategy regarding either customers or the quality of the loan assets generated. hrough guros de Secured loans grew by 12.3% to EUR 20,370 million. New lending amounted he to EUR 5,623 million, 95% of which related to customers with a medium or high was 23% profitability profile. d accident This growth was accompanied by the launch of new mortgage products, such as the 'Hipoteca Cuota Ligera' or the 'Hipoteca Cuota Libre', which offer ustomers something completely new to the Spanish market and give customers easier mation on access to mortgage financing, because they allow borrowers either to delay insurance repayment of an amount of their choice until the end of the transaction or to finance 100% of the value of the transaction.
Bankinter's value proposal in the mortgage business is based on the ability ms and to offer the best mortgage product on the market, at the best price, on a to personalised terms for each customer and with an efficient and agile process of in 2005; marketing and arrangement, seeking excellence in the quality perceived by eral customers. llion, an However, the most noteworthy aspect of the growth in Bankinter’s lending activity in 2006 was the focus on the SME segment, in which lending grew by 37% to EUR 6,128 million. This growth was supported by all the lines of financing nt to products, with particularly noteworthy increases in credits/loans (32.7%), leasing e (47.8%), portfolio (31.7%), import/export financing (80.7%), factoring (88.0%), etc. ndustry as ANUAL 48-119 ING.qxd 4/5/07 09:46 Página 78
Bankinter 2006 Business Report Bankinter 200 06. Business 78 06. Business
Lending to SMEs 2006 was also the year of consolidation of the 'Financing Multiline for Businesses' product which significantly simplifies the administrative procedures of SMEs by concentrating all their transactions in a single contract, thereby achieving 37% substantial savings in time and money. more than in 2005 In means of payment, there was substantial growth under all headings of the business in 2006. The number of cards issued rose by 31.1% to 871,570 cards; similarly, the number of transactions performed using Bankinter cards in shops and ATMs rose to 46.4 million, for a total volume of EUR 3,552 million, representing growth of 18.6% and 17.7%, respectively.
This was accompanied by the launch of new and innovative products such as the Mastercard Revolving, Gold and Platinum card, which refunds a percentage of the amount spent by customers, and received a CIT 2006 award as the most innovative bank card.
International business The International area encompasses all the products and services we offer our customers to facilitate the day-to-day management of their cross-border business or their operations in currencies other than the euro. Included in this area is the International Financial Institutions department, which offers global coverage for our customers' international transactions by means of agreements with banks in the different countries.
2006 was characterised by an increase in the activities of the three business areas: services, lending and customer funds, which translated into a contribution of EUR 79.2 million to the Bank's profit, 29.2% more than in 2005, with a International business’s contribution portfolio of 132,207 active customers in the year. In 2006, the International Business division managed customer volumes of more than EUR 30,000 million. In line with the general strategy of the Bank, the International Business area % replicates its product and service offering in the different customer channels, 29.2 particularly the Internet, where it presents a comprehensive offering of all its more than in 2005 operations. An example of this multi-channel banking is the high percentage –70%– of international payments that our customers make using the Internet. ANUAL 48-119 ING.qxd 4/5/07 09:46 Página 79
Bankinter 2006 Business Report 06. Business 79
Businesses' As a result of the ongoing quest for an innovative and distinctive product offering, SMEs by in 2006 this area developed new products for international operations. One of ng these was the introduction of the platform for foreign currency trading over the Internet, aimed initially at the Businesses and SMEs customer segments. The foreign currency Broker enables our customers to engage in online foreign adings of currency dealing (of the most liquid currencies on the market) in both cash deals 570 cards; and forward transactions, with the traditional exchange risk insurance. It also in shops offers the possibility of making foreign currency transfers knowing immediately the rate of exchange that is going to be applied to the transaction. Real time monitoring of exchange rates is also available, enabling customers to complete transactions at a specific rate in a matter of seconds. ucts such percentage Turning to lending, 2006 can be considered the year of the Multicurrency he most Mortgage Loan, with a 168.4% increase in the number of transactions.
The upward trend in euro interest rates, together with greater financial awareness on the part of our customers both as regards the economic outlook and fer our the options for long-term borrowing, have made our multicurrency mortgage an r business extraordinary option for the profile of customers who are looking for added value rea is the and a different product, enabling them to borrow in currencies with lower interest erage for rates than the euro; and all of this with a controlled exchange rate risk, since it is banks in possible to change the currency of the loan at each instalment.
ee business ntribution a onal million. s area nnels, all its ntage nternet. ANUAL 48-119 ING.qxd 4/5/07 09:46 Página 80
Bankinter 2006 Business Report Bankinter 200 06. Business 80 06. Business
Customer segments
There was significant growth in all the segments of customer business, especially those which have been the recurrent focus of the Bank's efforts and investments in recent years, which gives an idea of how sound and well-managed they have been.
Thus, the pre-tax profit of the SME segment was up 50% year on year, and this is a particularly notable achievement if we take into account the investment involved in opening new branches specialising in serving customers of this type: the number of these branches rose from 105 in 2005 to 124 in 2006. The growth in pre-tax profit was also significant in the segments encompassing the customers with higher net worth, such as Personal Finance and Private Banking, with increases in profit of 28.8% and 30%, respectively.
The profit from customer business was EUR 363.2 million in 2006, up 29.2% on 2005. The strong pace in the attraction of new customers also continued in 2006: 172,000 customers added at December 2006, which was 16.6% more than in December of the previous year. At 2006 year-end, the number of the Bank's active customers stood at 674,000, 13.6% more than in 2005.
This increase in earnings was underpinned by the increasing use of tools such as CRM, which helped the Bank to enhance its commercial business. In 2006 Bankinter continued to outperform its competitors in its standards of quality, with an ISN score 6.4 points higher than the average for the banking for private individuals market as a whole.
Highlights of the Customer business (millions of euros)
2005 2006 2005/2006 (%) Average funds 22,351.50 25,194.24 12.72 Average loans and receivables 28,988.54 34,256.19 18.17 Profit before tax 281.04 363.19 29.23 Efficiency (%) 52.37 48.36 -4.01 ISN score 77.99 77.46 -0.06 ANUAL 48-119 ING.qxd 4/5/07 09:46 Página 81
Bankinter 2006 Business Report 06. Business 81
Private individuals At 2006 year-end, the funds managed by the Private individuals segment especially amounted to EUR 7,214 million. 34% of this amount related to mutual and estments pension funds. Noteworthy was the fact that 18% of the funds were managed hey have under 'Management Agreements'. These volumes clearly reflect the quality of our mutual fund offering, which is one of the most competitive in the sector in terms of fees and commissions and quality of management. A good sign of this quality year, and is the number of different awards and public recognitions that both our Fund vestment Manager and our fund portfolio receive from sector analysts year after year. this type: he growth As for the figures for lending in the Private individuals segment, we ended customers 2006 with year-on-year growth of 11% and a total of EUR 19,463 million. As in with previous years, the driver of growth continued to be the mortgage business. In 2006 we arranged 22,026 mortgages for a total of EUR 3,560 million, which accounted for 74% of the Bank's mortgage transactions and 63% of the total 6, up 29.2% volume of such transactions. 63.6% of the mortgages were arranged with new nued in customers, this being one of the main products for attracting customers in the ore than in Private individuals segment. ank's active It is important to highlight the qualified growth of our mortgage portfolio, as a result of the consolidation of our policy of personalising prices based on of tools business variables. This policy resulted in 69.7% of the mortgage transactions in ss. In 2006 2006 being arranged with customers with a high socio-economic profile, an uality, with improvement on the previous year when customers of this type accounted for vate 67.9% of the mortgages arranged. This qualification matches the quality of our mortgage portfolio, which has a non-performing ratio of 0.1%, one of the lowest in the sector. The average cross-sales per active customer stood at 6.6 products per customer, which was an improvement of 0.4 products per customer on the figure for 2005. This growth is based on our strong focus on multi-channel banking and our customer relations capability using CRM techniques that enable us to adapt our product and service offering to the real needs of our customers.
Highlights of the Private individuals business (millions of euros)
/2006 (%) 2005 2006 2005/2006 (%) 12.72 Average funds 6,329.82 7,214.52 13.98% 18.17 Average loans and receivables 17,540.39 19,463.13 10.96% 29.23 Profit before tax 94.25 114.40 21.38% -4.01 Efficiency (%) 63.48 60.35 4.93% -0.06 ISN score 78.11 76.90 -1.55% ANUAL 48-119 ING.qxd 4/5/07 09:46 Página 82
Bankinter 2006 Business Report Bankinter 200 06. Business 82 06. Business 2006 was an extraordinary year for Private Banking - indeed the best in its 6 years of existence.
Private Banking Private Ban A number of milestones were reached in 2006, one of which was the growth in new customers, which was 19.6% up on 2005 at 7,126, taking the total number of active customers to 37,767. 17 There was a 17.5% increase in funds managed which totalled EUR 6,807 mem million. Noteworthy under this caption was the Fixed income caption, which recorded extraordinary growth due to the magnificent response to the bespoke perform structured products: these were up by 73.5%. Similarly, and underpinned by the and per good performance of the domestic and international markets, and by the constant functio enhancement of the offering from our Internet Broker, there was a 25.2% rise in the Equities heading.
There was also a 30.6% increase in the figure of lending to EUR 2,744 million, which was consistent with our value proposal: to offer comprehensive banking to customers rather than a mere asset management service. As a result, the pre-tax profit increased by 30% to EUR 67.8 million, and represented 31% of the PBT of the Private Individuals segment and 18.6% of PBT of the Bank's segments as a whole.
From the point of view of capability and presence, we continued to expand the infrastructure of Private Banking Management and Financial Advisory Centres, reaching a total of 41, distributed throughout Spain, which was 4 more than in 2005. In parallel with this progress, the team of staff continued to grow with the aim of serving our growing customer base with appropriate quality standards. In fact, the Satisfaction Index maintained an ISN of 77.6 through the end of the year. ANUAL 48-119 ING.qxd 4/5/07 09:46 Página 83
Bankinter 2006 Business Report 06. Business 83 vate of
Private Banking and Personal Finance Bankinter currently has a team of 179 members of staff devoted exclusively to owth in management and personal advisory functions for customers of Private Banking and number of Personal Finance, who have joined the business gradually, thereby keeping our 179 efficiency ratio at 33.8% at 2006 year-end. R 6,807 members of staff A specific training programme has been implemented that includes the which qualification of 'European Financial Adviser' awarded by the EFPA (European bespoke perform management Financial Planning Association), of which Bankinter is a corporate member. By the ed by the and personal advisory end of 2006, more than 50% of our Private Banking managers had gained this he constant functions qualification. 2% rise in Finally, Private Banking continued to focus on its efforts to intensify relations with customers using all the Bank's networks and channels. In this respect, Customer 2,744 Relationship Management (CRM) is a key component of our culture and our way of ensive working, helping us to ensure that we can continue to provide personalised, quality s a result, service to all the Bank's customers. d 31% of nk's
to expand ory s 4 more to grow ality ough the
Highlights of the Private Banking business (millions of euros)
2005 2006 2005/2006 (%) Average funds 5,790 6,807 17.56 Average loans and receivables 2,101 2,744 30.60 Profit before tax 52.1 67.8 30.00 Efficiency (%) 36.92 33.8 3.12 ISN score 77.27 77.55 0.36 ANUAL 48-119 ING.qxd 4/5/07 09:46 Página 84
Bankinter 2006 Business Report Bankinter 200 06. Business 84 06. Business
Personal Finance For the Personal Finance Division, 2006 was marked by strong growth in all balance sheet lines. This achievement was due to a combination of different variables: quality indexes bordering on excellence, a record number of new customers attracted and the provision of new services and products aimed at Corporate achieving comprehensive management of customers' assets. Service quality, one of the fundamental factors that underpin our business, was perceived in 2006 by the customers of Personal Finance with a very high rating of 82.4 ISN points, which is a record for this business segment and places us clearly ahead of the 26 sector average. more th
The Personal Finance Division, set up to meet the needs for advice and management of customers with a high level of income or net worth, took an important step in 2006 as regards the creation of new products and services within an overall offering of advisory services and comprehensive management of customers' assets. This is the framework for the newly-created 'Value-Added Services' area which includes activities such as investment in property, in art, corporate, bankinterallstars, family protocol, etc.
The combination of the factors referred to above, together with an unbeatable IT platform and a team of staff that is a sector leader, is what enabled New customers attracted us to achieve assets managed of EUR 12,207.6 million at the end of 2006, an increase of 26.9% on the figure for the previous year; as well as a 28.7% increase in the number of new customers attracted. 28.7 % There was a 9.9% increase year on year in the number of SICAVs (open-end more than in 2005 investment companies) managed, enabling Bankinter to maintain its fourth place in Inverco's league table of institutions with the largest number of collective investment companies.
Highlights of the Personal Finance business (millions of euros)
2005 2006 2005/2006 (%) Average funds 3,195.53 3,637.37 13.83 Average loans and receivables 667.45 897.33 34.44 Profit before tax 27.94 35.99 28.80 Efficiency (%) 21.42 20.24 -1.18 ISN score 80.88 82.39 1.51 ANUAL 48-119 ING.qxd 4/5/07 09:46 Página 85
Bankinter 2006 Business Report 06. Business 85
Corporate Banking in all In 2006 Corporate Banking maintained the trend of sustained growth that began erent some time ago. As was the case in the previous year, 2006 brought significant new increases in all the indicators of a business in which Bankinter, despite its med at Corporate Banking PBT significant market share in the segment of big and medium-size companies, still ality, one has a great deal of scope for progress. Thus the pre-tax profit was up by 26.2% n 2006 by year on year to EUR 81.8 million; and loans and receivables were 18.8% higher at points, EUR 4,673 million, which would be more than EUR 7,000 million if off-balance- of the 26.2 % sheet risks were included. more than in 2005 The value proposal of Corporate Banking continued to focus on a wide ce and range of innovative and distinctive financial products and services supported by ok an the Bank's proven technological capability, its multi-channel distribution model, vices and a firm commitment to quality of service, with an aggregate ISN score at the agement of end of December of 78.7 points, one of the highest of the Bank's different dded segments and channels. The installed capacity continued to grow with the in art, opening of new Business Management Centres (another four in 2006) and, above all, due to the significant and increasing use our customers make of the Internet channel. With regard to the latter, it is worth highlighting that Internet n transactions using the Bankinter Businesses website accounted for 76.5% of the at enabled total at year-end, thereby ratifying this channel as the one most frequently used 06, an by customers for dealing with the Bank in their day-to-day business. There were % increase improvements in the main performance ratios of the Corporate Banking business in 2006, with an ROE of 23.1%, which was more than 2 points higher than in 2005, with an efficiency ratio – measured by operating costs as a percentage of (open-end total costs - of 30.4%, which is also an improvement of more than 3 points on ourth place 2005. And all while maintaining excellent quality in the lending portfolio, with ctive another record low in the non-performing loans ratio, which ended the year at 0.2% of loans and receivables plus off-balance-sheet risks. In short, 2006 for Corporate Banking was another year of strong, profitable, efficient, sound and healthy growth, which means we can continue to face the future with optimism.
Highlights of the Corporate Banking business (millions of euros)
/2006 (%) 2005 2006 2005/2006 (%) 13.83 Average funds 4,440.32 4,168.31 -6.13 34.44 Average loans and receivables 3,621.80 4,304.08 18.84 28.80 Profit before tax 64.66 81.82 26.20 -1.18 Efficiency (%) 33.80 30.35 10.21 1.51 ISN score 79.06 78.67 -0.49 ANUAL 48-119 ING.qxd 4/5/07 09:46 Página 86
Bankinter 2006 Business Report Bankinter 200 06. Business 86 06. Business
SMEs 2006 was another year which brought growth both in the number of active customers and in business volume, leading to significant increases in the balances managed. The number of new customers attracted and the percentages of activation of these customers were both higher than in 2005. Average total assets grew by 41.7%, the most noteworthy item being customer financing, with an increase of 36.3%. This growth continued to be underpinned by the sound assessment of credit risk, which made it possible to reduce the non-performing loans ratio in this segment to 0.49%.
As in previous years, this significant increase in customer transactions was successfully managed mainly through the most efficient channels, as part of the objective of efficient multi-channel banking that constitutes our proposal to customers. Thus it was noteworthy that in 2006 customers habitually carried out their transactions over the Internet, which was used to perform over 97 million transactions in the year, with extremely high standards of service reliability and quality.
Lending During the year numerous improvements and new functionalities were included in the Bankinter Businesses website, most notably services such as Web Remittances, Foreign Exchange Broker, Online Insurance, POS terminals, Virtual Wizard or Commercial paper Repos. With regard to the quality of customer 26 service, it is worth noting that the Net Customer Satisfaction Index of customers more th in the SME segment was consolidated at a commendable score of 77.2. SME segment The specialised knowledge required to serve SME customers, combined with a further significant increase in the number of staff employed in this segment, led once again to enormous efforts in training. In 2006, 29,512 hours were devoted to 29,512 hrs. specific training programmes that were attended by a total of 711 members of of specific training staff. Work continued in 2006 on developing the new SME distribution network in industrial parks: 19 new centres were opened in the year, bringing the total number of SME branches to 124 at the end of December.
Highlights of the SME business (millions of euros)
2005 2006 2005/2006 (%) Average funds 2,299.64 2,922.72 27.09 Average loans and receivables 4,047.06 5,517.56 36.34 Profit before tax 36.01 54.03 50.02 Efficiency (%) 62.75 57.19 -5.56 ISN score 77.53 77.19 -0.34 ANUAL 48-119 ING.qxd 4/5/07 09:46 Página 87
Bankinter 2006 Business Report 06. Business 87
Foreign Nationals tive The main purpose of setting up the Foreign Nationals segment within the Private he balances Individuals area was to serve the needs of European citizens who buy property in of Spain, as either a second or permanent home, chiefly on the coast. Our aim is to otal assets be their bank in Spain. ith an nd 2006 was the year in which this segment became firmly established as a forming specialised business division focused on responding to the demand for financing and services of a group of customers with other requirements, another financial culture, a different language and different expectations. ctions was art of the The initial focus was on financing the purchase of homes by the first al to buyers, and the aim in 2006 was to lay the foundations for growth by expanding arried out the business model and rolling out a range of products capable of providing a million solution for any financial case of interest to the hundreds of thousands of bility and Europeans who already own a home in Spain.
This led to a 26.8% increase in lending, year on year, compared with a Lending market - that of inward investment in property - which, as shown by the housing s were indicators of the Bank of Spain, has been recording negative growth figures for ch as Web the past three years (latest year-on-year rate: -13.1%, at September 2006). s, Virtual mer 26.8 % With a bespoke offering, and focusing on the specialisation of staff and ustomers more than in 2005 processes, on adequate geographical coverage, multi-channel banking and a variety of languages, the Bank has succeeded in achieving significant growth both in the business and in profitability. And all with a high quality of service mbined with perceived by our European customers. Thus, the segment achieved a Net egment, led Satisfaction Index score of more than 82 every month in 2006, and it is a devoted to challenge to maintain those levels in what is a crucial variable, given the mbers of potential for bonding customers such as these whose assets and place of residence network in are divided between two countries. total
Highlights of the Foreign Nationals business (millions of euros)
/2006 (%) 2005 2006 2005/2006 (%) 27.09 Average funds 300.68 302.76 0.69 36.34 Average loans and receivables 511.03 647.70 26.74 50.02 Profit before tax 7.39 9.63 30.25 -5.56 Efficiency (%) 53.44 48.44 -5.00 -0.34 ISN score 78.11 83.21 5.10 ANUAL 48-119 ING.qxd 4/5/07 09:46 Página 88
Bankinter 2006 Business Report Bankinter 200 06. Business 88 06. Business
Capital Markets and Treasury
Bankinter continued to maintain an active presence in the fixed income markets as a government bond and bills market maker and as joint leading issuer of Spanish Treasury issues; in the corporate bond market, with a very active desk in both notes and preferred shares; and also as an issuer of debt and asset-backed bonds.
With regard to public offerings of securities, the Bank took part in two of the main transactions in 2006: BME and Vocento, with an outstanding placement through the Bank's different distribution channels, in which a particularly important role was played by the Internet channel (Bankinter Broker). Bankinter is also very active as an issuer and distributor of warrants.
Once again in 2006, Bankinter’s high balance-sheet growth made it advisable to maintain an active, careful and efficient policy of managing the Bank's liquidity and capital, keeping access open to the European short- and long- term capital markets and the different instruments available. Bankinter's good image and solvency meant that the issues made were very well received.
To obtain liquidity, the Bank used short-term issue programmes both on the domestic market, with the Bankinter and Bankinter Sociedad de Financiación commercial paper programmes, and on the international market, with the Euronotes programme, with average balances in the year of EUR 3,072 million, EUR 140 million and EUR 307 million, respectively. The issues of the latter two programmes began between the second and third quarter of the year. ANUAL 48-119 ING.qxd 4/5/07 09:46 Página 89
Bankinter 2006 Business Report 06. Business 89
Securitisations have played a leading role in the medium- and long-term management of capital and liquidity in recent years, with special emphasis on the e markets assets with the highest growth (mortgages and loans to businesses). As a result, er of three securitisations were launched in 2006 (two of mortgage loans and one of ve desk in loans to SMEs) for a total of EUR 3,570 million. This importance will continue in t-backed 2007 and beyond, due to the prospects for growth. As a result of this, Bankinter continues to be a benchmark in securitisation activity in Europe.
n two of Lastly, and to complete the capital and liquidity requirements, EUR 1,375 placement million of senior and subordinated debt were issued. The liquidity situation in rly 2006, measured in terms of dependence on the interbank market and excluding Bankinter transactions against assets, as of the last day of each month, was as follows:
e it g the Variation in liquidity. Net debt on the interbank market (Month-end data) - and long- r's good -7,500 d. -6,500 -5,500 both on the -4,500 ciación -3,500 the -2,500 million, -1,500 tter two -500 0 Dec. Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec. 05 06 06 06 06 06 06 06 06 06 06 06 06
Dependence on interbank market Total capital market Total ANUAL 48-119 ING.qxd 4/5/07 09:46 Página 90
Bankinter 2006 Business Report Bankinter 200 06. Business 90 06. Business
Risk management
In 2006, all the Bank's risk divisions: Credit Risk, Market Risk, Operational Risk and Comprehensive Risk Management, were brought together under a single Risk Management Department, the manager of which reports directly to the Chief Executive Officer.
Risk management is one of the competitive advantages of the Bankinter Group, which places special emphasis on identifying, measuring, managing, controlling and monitoring the main risks to which the Bank's business is exposed: credit risk, market risk (structural interest rate risk and the risk involved in the Treasury and Capital Markets activity), liquidity risk and operational risk; without forgetting other types of risks present in the business of financial institutions, such as reputational risk, strategic risk, etc.
The Board of Directors, acting through the Audit and Regulatory Compliance Committee, the Audit Division and the Risk Divisions, guides and supervises the accounting policies and internal control systems and procedures in relation to all the risks involved in the Bank’s activity, as well as the prevention of money laundering pursuant to current legislation. For this purpose, the Board of Directors approves and periodically reviews the main credit risks and sets and updates the specific limits for market and liquidity risk.
At executive level there is a segregation of functions between the business units in which risk arises and the units responsible for monitoring and controlling this risk. The Bank continues to make headway in implementing methodologies, systems and policies for the measurement and management of risk and capital requirements in accordance with the principles laid down in the new Basel II Capital Framework.
Basic principles of the risk function The basic principles of risk management at Bankinter are as follows: Independence of the risk function. Comprehensive risk management. The Bank identifies, measures, manages and controls all of its significant risks. Importance of automatic approval systems, new methodologies of risk quantification and use of technology in the risk management systems. Risk diversification among customers, sectors, counterparties and markets. Identification, assessment and control of risk in the launch of new products. Importance of the service quality factor in the risk function. The ultimate objective is to contribute to maximising the return on capital and the sustained creation of value over time. ANUAL 48-119 ING.qxd 4/5/07 09:46 Página 91
Bankinter 2006 Business Report 06. Business 91
Structural and market risk management policies The purpose of Bankinter's policy on the management and control of 'structural nal Risk risks' and 'market risks' is to neutralise the impact of variations in interest rates, single Risk in the main market variables and in the balance sheet structure itself, on the Chief Bank's income statement, by adopting the most appropriate investment or hedging strategies.
nkinter The Board of Directors delegates the constant monitoring of decisions ging, regarding structural balance sheet risks (interest rate risk and liquidity risk), is stock market risk and exchange rate risk of the Bank's corporate positions, as well sk involved as the establishment of the financing policies, to the Assets and Liabilities onal risk; Committee (ALCO). Each year it reviews, approves and delegates to the ALCO the ial limits applicable for managing the aforementioned risks. The Treasury and Capital Markets division implements the decisions taken by the ALCO with regard to the Bank's corporate positions. es and Also on an annual basis the Board of Directors sets the operating limits cedures in applicable to the Treasury and Capital Markets division for dealing on the Bank's evention of own account in the financial markets, in order to take advantage of any business Board opportunities that may arise. d sets and The Market Risks division, which forms part of the Risk Management Department, has the independent function of measuring, monitoring and e business controlling the Bank's structural and market risks. controlling odologies, Structural risks d capital The following paragraphs describe the models for managing, measuring and asel II controlling the structural interest rate and liquidity risks applied in general at the Bank.
Structural interest rate risk Structural interest rate risk is defined as ‘the Bank’s exposure to market interest rate fluctuations resulting from maturity and repricing gaps in the balance-sheet nages and asset and liability items’. k Bankinter performs active management of this risk in order to protect the interest margin and to preserve the economic value of the Bank against interest rkets. rate fluctuations. The methodology used to manage, measure and control interest ucts. rate risk is the so-called ‘repricing gap’ model. This model consists of an interest rate map based on certain assumptions, which shows information on the pital and Bank’s interest rate risk exposure based on the maturities and/or repricing structure of the on- and off-balance-sheet items. ANUAL 48-119 ING.qxd 4/5/07 09:46 Página 92
Bankinter 2006 Business Report Bankinter 200 06. Business 92 06. Business
The operating limits applicable to this measurement are defined as the maximum gap or difference that can be maintained, for each segment in the interest rate risk map, between the total amount of assets and liabilities. The situation of the interest rate map at 2006 year-end was as follows:
Interest rate risks (millions of euros)
Data at 12/31/06 Total assets Total Liabilities and Own Funds Off-balance-sheet transactions Total interest rate gap Up to 1 month 13,089 14,381 5,726 4,434 1-3 months 7,051 15,196 836 -7,310 3-12 months 17,498 8,726 -5,706 3,065 1-2 years 1,433 1,561 1,295 1,166 2-3 years 141 648 215 -292 3-4 years 1,269 565 -409 296 4-5 years 856 21 -652 184 Over 5 years 5,381 5,620 -1,305 -1,544
In addition, dynamic simulation tools are used to ascertain the sensitivity of the interest margin to various scenarios of interest rate variations and changes in the slope of the curve.
The graph below illustrates the effect on the interest margin of a parallel shift of +/- 100 basis points in the euro interest rate curve over a time horizon of 18 months, at the end of 2006.
Sensitivity of the interest margin (basis points)
10.00
5.00
0.00
-5.00
-10.00
Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec. Jan. Feb. Mar. Apr. May Jun. 07 07 07 07 07 07 07 07 07 07 07 07 08 08 08 08 08 08
100 b.p. fall 100 b.p. rise ANUAL 48-119 ING.qxd 4/5/07 09:46 Página 93
Bankinter 2006 Business Report 06. Business 93
maximum The following graph shows the sensitivity of the interest margin to changes in the rest rate slope of the curve over a time horizon of 18 months. This scenario is constructed on of the by keeping the 6-month interest rate constant and varying the short-term rates (up to 3 months) and the 12-month rate by the same amount and in the opposite direction in order to introduce a ±25 basis points variation in the slope of the curve over the period considered.
Sensitivity of the interest margin (basis points) t rate gap 4,434 10.00 -7,310 3,065 5.00 1,166 0.00 -292 296 -5.00 184
-1,544 -10.00
Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec. Jan. Feb. Mar. Apr. May Jun. 07 07 07 07 07 07 07 07 07 07 07 07 08 08 08 08 08 08
25 b.p. rise in slope 25 b.p. fall in slope ensitivity nd changes As an additional measurement to the foregoing, the exposure to interest rate risk of the Bank's economic value is also analysed. At 2006 year-end the sensitivity of the economic value to parallel shifts of 200 basis points (b.p.) was parallel EUR 16.5 million. horizon of Liquidity risk Structural liquidity risk is connected with the Bank's ability to meet its payment obligations and to finance its lending activities. To mitigate this risk, Bankinter performs coordinated management of its balance-sheet assets and liabilities and, specifically, of its interbank assets and liabilities. The measures used to control liquidity risk are the ‘liquidity gap or map’, and information and analysis regarding the specific status of the Bank's interbank assets and liabilities.
Market risk In addition to providing overall interest rate and liquidity risk management services, the Treasury and Capital Markets Division operates in the markets to harness any business opportunities that may arise. To carry out these functions, the Division uses the most appropriate financial instruments at any given time, r. May Jun. as well as the necessary hedges to mitigate market risk. The financial 8 08 08 instruments traded must generally be sufficiently liquid and hedgeable. ANUAL 48-119 ING.qxd 4/5/07 09:46 Página 94
Bankinter 2006 Business Report Bankinter 200 06. Business 94 06. Business
Each year the Bankinter Board of Directors establishes limits and internal measurement procedures for the risk on each of the products and markets in which the Treasury and Capital Markets Division trades. The method for setting limits in this Division is based on a delegation arrangement. The related information is made available to the control committees in the internal databases maintained for this purpose.
The market risk of the Treasury and Capital Markets Division activities and the limits thereon are measured using the Value at Risk (VaR) methodology, considered both overall and separately for each significant risk factor. The limits in VaR terms are supplemented by other measures such as stress testing, sensitivities, equivalent positions and concentration. Specific limits are also set for credit and counterparty risk, and the markets in which trading is authorized are specified. The method used to determine the principal market risk measurements is described below.
Value at Risk (VaR) Value at Risk (VaR) is defined as the maximum expected loss on a given portfolio of financial instruments, under normal market conditions, for a given confidence level and time horizon, as a result of variations in market prices and variables.
VaR is the principal indicator used daily by Bankinter to measure and control, in an integrated and comprehensive manner, the exposure to market risk due to interest rates, equities and exchange rates in Treasury and Capital Markets transactions. VaR is calculated by the parametric model, which is based on the statistical assumption that changes in market prices follow a normal probability distribution. It is performed with a confidence level of 95% and a time horizon of one day.
The table below shows the average and year-end VaR values of the Bank’s positions for 2006:
VaR (millions of euros)
Average Year-end VaR Interest rate 9.11 6.45 VaR Equities 0.84 0.85 VaR Exchange Rate 0.05 0.07 Total 8.99 6.20 Level of confidence 95%, horizon 1 day ANUAL 48-119 ING.qxd 4/5/07 09:46 Página 95
Bankinter 2006 Business Report 06. Business 95
nal Stress Testing ets in Stress Testing, i.e. the analysis of extreme scenarios, is a supplementary test to r setting VaR. Stress test estimates quantify the maximum potential loss in the value d of a portfolio under extreme scenarios of change in the risk factors to which the databases portfolio is exposed. The benchmark stress test scenario used by Bankinter is that approved each year by its Board of Directors; this scenario includes extreme variations in interest ivities and rates, stock market prices and exchange rates, as well as significant changes in ology, volatility. The Bank also prepares estimates using scenarios that replicate The limits historical market crisis situations. The following table shows the 2006 average g, and year-end stress test estimates prepared using the scenarios described below: also set for rized are a) Interest rate scenarios: for terms in the curve below three months, a variation surements of 200 basis points (b.p.) with respect to current rates; for terms from three months to two years, a variation of 125 b.p.; for terms from two to ten years, a variation of 75 b.p.; and for terms of over ten years, a variation of 50 b.p. b) Equities scenarios: a 30% fall in stock markets. n portfolio c) Exchange rate scenarios: 5% variations in the euro against the currencies of onfidence non-emerging countries. ariables. d) Volatility scenarios: 60% rise in volatility.
and market risk tal Markets on the obability horizon of
he Bank’s Stress Testing (millions of euros)
Average Year-end Interest rate stress 134.74 123.26 Equities stress 22.67 26.26 Exchange rate stress 0.99 1.36 Year-end Derivatives stress 0.60 0.52 6.45 Total stress 159.00 151.40 0.85 0.07 6.20 ANUAL 48-119 ING.qxd 4/5/07 09:46 Página 96
Bankinter 2006 Business Report Bankinter 200 06. Business 96 06. Business
Credit risk
Organisation and functions The Board of Directors, as the senior body in matters relating to credit risk, establishes the Bankinter Group risk policy which is set forth in the risk policy framework agreement. The Board is also the body responsible for approving non- delegated transactions, and sets the financial limits on the powers of the Loans Committee, which is the second step in the functional risk hierarchy. The Board is briefed regularly on the evolution of the Group's lending portfolio, its breakdown by business, the exposure to major risks, the evolution of the guarantees and terms, and any other aspect affecting the credit risk quality, as well as all such matters as are regulatorily required.
The Loans Committee, chaired by the Chief Executive Officer, determines the scope of the authority that is delegated to the Credit Risk Committee and to the loans committees of the different Regional Organisations; and it approves the risks that are within its own scope of authority. It is briefed by the Credit Risk division on the evolution of the lending portfolio, the sectors of greatest risk, the exposures in the main groups of risk and the evolution of credit quality, non- performing loans and substandard risk.
The Credit Risk division forms part of the Risk Management department, the manager of which reports directly to the Chief Executive Officer. This therefore guarantees its independence, while promoting its alignment with the strategy of the Bank. The Credit Risk division is arranged in five different areas: the Private Individuals & Developers Risks Area, the Corporate Banking Risks Area, the SME Risks Area, the Control & Recoveries Area, and the Loan Approval Systems Area.
The main function of these areas, which match the Bank's customer segments, is to draw up and convey their own risk policies to the different networks and channels. Each area is responsible for defining how to handle the risk of new products and what the different processes are for approving and processing transactions. ANUAL 48-119 ING.qxd 4/5/07 09:46 Página 97
Bankinter 2006 Business Report 06. Business 97
The function of the Control & Recoveries Area is to direct and manage the processes of control, monitoring and recovery of loans by establishing and promoting automatic systems to make management more efficient, and ensuring risk, that there are sufficient controls to guarantee the quality of the lending portfolio. k policy Its responsibilities include controlling the quality of the data entered in the oving non- automatic approval systems and controlling the arrangement of lending he Loans transactions. he Board is reakdown The task of the Loan Approval Systems Area is to promote and implement es and the appropriate methodologies and systems for processing and managing all such customer risk to carry out the risk strategy defined by the Bank. Its principal function is the maintenance and evolution of the present risk management and approval systems; and the definition and coordination with Information Systems ermines of the new Combined Risk System, which will encompass all of the current risk e and systems. approves Credit Risk Structure of Powers t risk, the The Board of Directors sets the limits of authority delegated to the Loans , non- Committee, which is responsible for setting the limits delegated to the Credit Risk Committee and to the loans committees of the different regional organisations, these latter being limited by type of risk and term. artment, The organisations' loans committees may delegate powers - within limits ment with defined in the 'powers circular' - to the different centres that report to them. Risk fferent decisions are taken collegiately and in a decentralised manner through the anking various Loans Committees. Loan Quality of the lending portfolio Bankinter’s excellent credit quality and its ample credit loss allowances continue mer to give it a competitive edge. The rigour of its risk management, based on both ent the staff and the IT systems, enables the Bank to maintain a very high rate of ndle the growth in lending, particularly in the SME segment, where automatic approval and systems are an essential support of the risk process. The Bank continues to maintain excellent credit quality, as reflected in its non-performing loans ratio, which continues to be significantly better than that of its competitors. ANUAL 48-119 ING.qxd 4/5/07 09:46 Página 98
Bankinter 2006 Business Report Bankinter 200 06. Business 98 06. Business
Customer credit risk Bankinter's customer credit risk exposure amounted to EUR 37,448 million at 31 December 2006 which was 17.2% more than in 2005. 93% of this credit risk related to direct lending to customers and 7% to off-balance-sheet risks. The business % segment in which growth was highest in relative terms was SMEs, which was up by 17.2 34.8%; followed by Corporate Banking, with an increase of 17.2% and Private more than in 2005 Individuals with an increase of 13.5%. Accordingly, the relative weight of lending to businesses (SMEs and Corporate) in the lending portfolio increased by 2 percentage points to 34.7%. Bankinter's non-performing loans ratio rose from 0.25% in December 2005 to 0.27% at the end of 2006. This slight upturn was the result of the high growth in lending in the SMEs and Consumer credit segments over the past two years. At the same time, the Bank continued to maintain very ample credit loss allowances, giving it a coverage ratio of 570% (607% in 2005).
Non-performing loans and allowances (millions of euros)
600,000 +21.5% 531,403 500,000
400,000
300,000
200,000 +29.5% 100,000 93,243
0 Dec. Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec. 05 06 06 06 06 06 06 06 06 06 06 06 06
Allowances NPL
Variations in coverage ratio (%)
700%
607% 600%
570% 500%
400% Dec. Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec. 05 06 06 06 06 06 06 06 06 06 06 06 06 ANUAL 48-119 ING.qxd 4/5/07 09:46 Página 99
Bankinter 2006 Business Report 06. Business 99
Analysis of doubtful credit risk (thousands of euros) n at 31 sk related 2005 2006 variation % ness Risk exposure ex-securitisation 31,953,852 37,448,141 5,494,290 17.19 was up by Doubtful risk 71,998 93,243 21,245 29.51 ate Total allowances 437,346 531,403 94,057 21.51 lending to Mandatory allowances 437,346 531,403 94,057 21.51 ercentage General 412,393 500,141 87,748 21.28 n December Specific 24,953 31,262 6,309 25.28 high Non-performing loans ratio st two ex-securitisation (%) 0.23 0.25 0.02 10.51 it loss Non-performing loans ratio (%) 0.25 0.27 0.02 8.00 Non-performing loans ratio: mortgage portfolio ex-securitisation (%) 0.14 0.12 - 0.01 -9.64 Non-performing loans coverage ratio (%) 607.45 569.91 -37.53 -6.18 Unsecured non-performing loans coverage ratio (%) 483.20 418.35 - 64.85 -13.42
+21.5% 531,403
Breakdown of loans and receivables (%)
Relative ≤ 150 150-600 600-3,000 3,000-6,000 > 6,000 Total ≤ 3 months 1.97 2.05 2.41 0.91 2.42 9.76
+29.5% 3-12 months 4.27 3.69 3.73 1.04 3.55 16.27 93,243 12-36 months 2.10 0.48 0.53 0.15 0.63 3.90 > 36 months 32.77 27.50 6.00 1.31 2.48 70.07
Nov. Dec. Total 41.12 33.72 12.67 3.41 9.07 100.00 06 06
Internal risk scoring models In 2006, Bankinter continued to develop the Bank's internal credit risk scoring models in compliance with the Basel II framework. The efforts made in previous years to establish the necessary infrastructure of systems, processes and databases have enabled the Bank to be included in the process of validation of advanced models initiated by the Bank of Spain. 570% Within the private individuals field, the models for loans and credits, overdrafts and other financing of low amount were constructed. These three models, together with the home mortgages model and the four models for Nov. Dec. corporate entities, already in existence, cover 90% of the total customer credit risk 06 06 exposure. ANUAL 48-119 ING.qxd 4/5/07 09:46 Página 100
Bankinter 2006 Business Report Bankinter 200 06. Business 100 06. Business
Credit Risk exposure by internal category (%)
Other legal entities Home mortgages for private Project finance individuals
Big companies
Medium-sized companies
Small companies Unsecured credits Large transactions and loans
Other transactions Credit cards
The internal rating models provide, for each category, a score or rating of the risk assumed by the Bank vis-à-vis each customer or transaction. Each of these ratings is associated with a certain probability of default (past due by more than 90 days) and, accordingly, the higher the rating, the lower the probability of default. The probabilities of default, or PDs, shown in the graphs were obtained by applying statistical techniques to 16 years of historical data.
This means that the results obtained reflect all the economic cycle data, including the worst situations occurring from 1990 to 2005. Consequently, when calculating the expected loss and the capital requirements a criterion of maximum prudence is applied.
For each risk category, whether relating to private individuals or corporate entities, the range of the probability of default associated with the rating of each of them is different. In order to be able to compare the various credit risk categories, Bankinter has developed an internal master scale that gives a value in the scale (from 0 to 100, where 0 is the worst value and 100 the best) to a segment of the default probability. The ‘home mortgage loans’ category is the one with the lowest probabilities of default and, accordingly, this category is at the higher end of the master scale: ANUAL 48-119 ING.qxd 4/5/07 09:46 Página 101
Bankinter 2006 Business Report 06. Business 101
Distribution of risk per the master scale. Private Individuals (thousands of euros)
7,000 ages 6,000 5,000 4,000 3,000 2,000 1,000 0 90-100 80-89 70-79 60-69 50-59 40-49 30-39 20-29 0-19 Master scale
Mortgage loans Other transactions with private individuals Credits & loans to private individuals
edits Distribution of risk per the master scale. Corporate entities (thousands of euros)
6,000
5,000
4,000
rating 3,000 Each of 2,000
e by 1,000 he 0 graphs 90-100 80-89 70-79 60-69 50-59 40-49 30-39 20-29 0-19 al data. Master scale
Medium-sized companies e data, Big companies Small companies ly, when f maximum
corporate ng of each sk a value in o a is the one s at the ANUAL 48-119 ING.qxd 4/5/07 09:46 Página 102
Bankinter 2006 Business Report Bankinter 200 06. Business 102 06. Business
Bankinter has historical default databases that permit calculation of the severity (the average default recovery rate) and exposure at the time of default for each one of the categories.
The probability of default, the severity and the exposure are the three factors required to calculate the expected or probable loss for each loan. The loss associated with a transaction will be the result of the probability of each transaction being in default within one year (probability of default), multiplied by the transaction's exposure at the time of default (exposure) and by the percentage loss in the event of default (severity).
The expected loss is a key factor in estimating the risk premium that should be passed on in the price as an additional cost of the business activity. As in the probabilities of default, the data used to calculate the exposure and the severity were obtained by applying statistical techniques to historical data going back to 1990. In addition in this case, volatility coefficients were applied that ensure the criterion of maximum prudence in preparing the expected loss data.
The estimates calculated by Bankinter of probability of default, severity and exposure and, therefore, of expected loss, disclose the excellent quality of the Bank's portfolios. For example, in the mortgage portfolio, 80.9% of the exposure had a rating of 5 or higher, and the expected loss on the portfolio as a whole was 0.04% of the risk exposure. ANUAL 48-119 ING.qxd 4/5/07 09:46 Página 103
Bankinter 2006 Business Report 06. Business 103
e severity Distribution of home mortgages by rating (%) for each
30 0.25 25 three 0.20 20 . The loss 0.15 h 15 0.10 ultiplied by 10 percentage 5 0.05
0 0.00 that should Riesgo 123456789Expected Rating Loss As in the severity Risk Expected loss A rating of 9 indicates maximum credit quality and 1 indicates the worst g back to nsure the Distribution of the portfolio of unsecured credits and loans to private individuals by rating (%) everity and 15 5.00 of the 4.00 exposure 10 whole was 3.00 2.00 5 1.00
0 0.00 Riesgo 123456789Expected Loss Rating
Risk Expected loss A rating of 9 indicates maximum credit quality and 1 indicates the worst
Distribution of the portfolio of other transactions with private individuals by rating (%)
25 0.80
20 0.60 15 0.40 10 0.20 5
0 0.00 Riesgo 123456789Expected Loss Rating
Risk Expected loss A rating of 9 indicates maximum credit quality and 1 indicates the worst ANUAL 48-119 ING.qxd 4/5/07 09:46 Página 104
Bankinter 2006 Business Report Bankinter 200 06. Business 104 06. Business
Distribution of the small companies portfolio by rating (%)
25 5.00
20 4.00
15 3.00
10 2.00
5 1.00
0 0.00 Riesgo 123456789Expected Rating Loss
Risk Expected loss A rating of 9 indicates maximum credit quality and 1 indicates the worst
Distribution of the medium-sized companies portfolio by rating (%)
40 0.25
30 0.20
20 0.15
10 0.10
5 0.05
0 0.00 Riesgo 123456789Expected Loss Rating
Risk Expected loss A rating of 9 indicates maximum credit quality and 1 indicates the worst
Distribution of the big companies portfolio by rating (%)
30 10.00 25 8.00 20 6.00 15 4.00 10
5 2.00
0 0.00 Riesgo 123456789Expected Rating Loss
Risk Expected loss A rating of 9 indicates maximum credit quality and 1 indicates the worst ANUAL 48-119 ING.qxd 4/5/07 09:46 Página 105
Bankinter 2006 Business Report 06. Business 105
The fact that the expected losses are so low throughout the cycle is due not only to the quality of the transaction acceptance systems, but also to the excellent 5.00 systems and methods of recovery of transactions that go into default. As the following graphs show, 72.2% of the transactions with private individuals were 4.00 recovered within 365 days of their original default. For the same period, the 3.00 percentage of transactions with corporate entities recovered was 61.2%.
2.00
1.00
0.00 Expected Loss cates the worst
Private Individuals. Non-performing balances recovered (%)
100% 0.25 90% 85.79% 80% 0.20 70% 72.18% 60% 0.15 50% 0.10 40% 30% 0.05 20% 10% 0.00 0% Expected 012345 Loss Years cates the worst Balance recovered
Corporate entities. Non-performing balances recovered (%)
80% 10.00 70% 66.74% 8.00 60% 61.22% 50% 6.00 40% 4.00 30% 20% 2.00 10% 0.00 0% Expected 012345 Loss Years cates the worst Balance recovered ANUAL 48-119 ING.qxd 4/5/07 09:46 Página 106
Bankinter 2006 Business Report Bankinter 200 06. Business 106 06. Business
Developers 2006 saw the consolidation of the use of the internal rating of residential real estate development financing transactions by means of the completion by expert analysts of an assessment questionnaire.
The statistical processing of these assessments classifies transactions in this portfolio into four categories, with 'weak' being the worst and 'strong' the most favourable. The breakdown of classifications shows that 91% of the transactions achieved 'good' or 'strong' as a result.
Breakdown of the real estate development portfolio (%)
80% 70% 60% 50% 40% 30% 20% 10% 0% Weak Acceptable Good Strong Classification
Economic capital The economic capital is a quantitative risk measurement designed to measure all the quantifiable risks of an institution in a consistent and comprehensive manner. It can be defined as the potential unexpected loss of an institution over a time horizon of one year, with a statistical level of confidence (determined on the basis of the rating desired by the bank) taking into account all the main classes of risks. ANUAL 48-119 ING.qxd 4/5/07 09:46 Página 107
Bankinter 2006 Business Report 06. Business 107
Economic capital methodologies provide an institution with uniform risk al real measurements for enhanced decision taking regarding business strategy, by expert management of concentrations and risk diversification (mobilisation and hedging of transactions and portfolios), capital planning and price management and risk- adjusted returns. They are also the cornerstone of management that, in ions in this accordance with Pillar II of the Basel II framework, takes into account the e most dimension of all the significant risks, their evolution and the assessment of nsactions current and foreseeable capital requirements based on the Bank's nature and business plans, and also make it possible to perform stress tests in adverse potential scenarios.
In 2006, Bankinter defined and created the prototype of its economic capital calculation model in order to quantify credit risk, market risk, interest rate risk, operational risk and business risk using this methodology. Under the Master Plan for implementing Basel II at Bankinter, action will be taken in 2007 to apply these measurements to portfolio management, stress testing, capital adequacy assessment, business planning, price policies and the Bank's profitability.
Risk-adjusted return One of the most important applications of the new risk quantification methodologies is that they make it possible to introduce uniform credit risk measurements into management, such as probability of default, severity, exposure, expected loss and economic capital. In turn, these measurements make it possible to consider credit risk premiums in the different systems for calculating the profitability and assessing the economic performance of the business units.
rong Bankinter was the first bank in the Spanish market to develop, in 1981, an analytical accounting system that enabled it to ascertain the profitability of its various products, customer segments and business units. Since then the Bank has continued to enhance these systems and their application to the business, within the framework of a culture of decentralised and flexible prices and management easure all that constitutes one of its main competitive advantages. Apart from that, since ve manner. 1990, the Bank has been developing and using different credit transaction scoring a time and mechanised approval systems, which are now further enhanced with this n the basis additional information on quantitative measurements of credit risk. ses of At the present moment, therefore, both the Bank's systems and its culture are in a privileged position to continue, in a natural manner, to incorporate risk quantification in the setting of prices and the management of the customers and the businesses. ANUAL 48-119 ING.qxd 4/5/07 09:46 Página 108
Bankinter 2006 Business Report Bankinter 200 06. Business 108 06. Business
Private individuals In 2006, Bankinter maintained and strengthened its policy on home mortgage loans by targeting and focusing on customers with a better socio-economic profile. The Bank has an internal statistical model which makes it possible to determine the expected profitability of a customer based on the cross-selling of other products. Personal mortgage loans as a percentage of the Bank’s total credit risk decreased by more than 2 percentage points in the year, falling from 58.9% at 2005 year-end to 56.3% at 2006 year-end. In 2006 the real estate sector showed the first signs of slowdown, and household indebtedness continued to rise as a result of the increase in house prices and the rise in interest rates.
The Bank also continued to pursue a policy of prudence with regard to coverage of the appraised value of the housing, the rating according to the internal mortgage model, and the economic effort borrowers must make to meet the mortgage payments. As a consequence of this policy, the coverage of new mortgage loans remained stable, with an average ratio of the mortgage loan as a percentage of the appraised value of the property of 63.8% (2006). The number of mortgage loans for which the loan to appraised value ratio is higher than 80% has fallen significantly in the last three years, from 27% in August 2003 to a current steady 7%.
On average, new mortgage loans accounted for 35.4% of household income in 2006, compared with 31.6% in 2005, as a result of the rise in interest rates and the increase in housing prices. However, this increased effort, measured as the portion of their income that borrowers allocate to payment of their mortgage loans, is not cause for concern given our target customer profile. The customers' net disposable income after paying the mortgage continues to be high enough to continue to meet payments in the face of any further interest rate rises. It is noteworthy that, whereas in the system as a whole there has been an increase in non-performing mortgage loans, at Bankinter the rate has remained stable. ANUAL 48-119 ING.qxd 4/5/07 09:46 Página 109
Bankinter 2006 Business Report 06. Business 109
Profile of home mortgage portfolio (%) ortgage mic profile. 2005 2006 etermine Average loan (euros) 94,965 100,976 her Primary residence 90.6 89.9 redit risk % of household income (net) 27.4 30.2 8.9% at Loan/Appraised value 59.6 58.5 r showed Non-performing loans ratio 0.12 0.12 ise as a Origin of home loans (%)
2005 2006 ard to Subrogation from developers 6.86 6.72 the Direct sales 93.14 93.28 e to meet of new e loan as a The credit policy applied in the developers' business continues to be one of number of prudence, with the Bank targeting professional customers with ample experience. an 80% has The location of the development and the buyer profile are fundamental variables a current in the approval of transactions.
The amount of the loans to developers represents 2.4% of the total credit old income risk, which is lower than the average for the system by some way, because this t rates and business is considered to involve greater risk and volatility in the event of a d as the change in the economic cycle. tgage ustomers' In 2006, 76.6% of Bankinter's home mortgages were processed using the enough to SINPAR automatic authorisation system for private individuals, which is the . It is computer programme that facilitates implementation of the risk policy in retail ncrease in products, such as mortgage loans, and achieves an excellent level of efficiency able. with transactions being approved online, thereby providing customers with enhanced service quality. Automatic approval rose to 54% from 48% in 2005. Since 2003, this system has applied the rule that the rating assigned to each of the transactions by the internal mortgage model must be included as a variable for determining automatic approval. The statistical model, which combines an approval tree with a regression, determines the likelihood of default on transactions. In January 2006 the internal approval systems risk policy model was updated for new loans. ANUAL 48-119 ING.qxd 4/5/07 09:46 Página 110
Bankinter 2006 Business Report Bankinter 200 06. Business 110 06. Business
Variation in mortgage loan amount/appraised value (%)
100% 90% 80% 70% 60% 50% 40% 30%
20% 27% 10% 0% 7% Aug. Dec. Aug. Dec. Aug. Dec. Aug. Mar. May Jul. Sep. Nov. Dec. 03 03 04 04 05 05 06 06 06 06 06 06 06
Appraised value < 80 Appraised value > 80
Breakdown of the home mortgage portfolio by LTV (Loan to Value)
Total bank Balance drawn (thousands of euros) LTV 00-10% 221,826.86 1.1% LTV 10-20% 757,516.82 3.8% LTV 20-30% 1,388,130.08 7.0% LTV 30-40% 2,119,577.09 10.7% LTV 40-50% 2,853,064.07 14.4% LTV 50-60% 3,447,661.96 17.4% LTV 60-70% 3,817,957.03 19.3% LTV 70-80% 3,625,870.80 18.3% LTV 80-90% 854,310.90 4.3% LTV 90-100% 739,477.26 3.7% Total LTV segments 19,825,392.88 100% ANUAL 48-119 ING.qxd 4/5/07 09:46 Página 111
Bankinter 2006 Business Report 06. Business 111
Corporate Banking Corporate Banking continued to pursue its strategy of growth in 2006, and raised its share of customer risk by 17.2%, compared with 18.7% in 2005. It is worth highlighting that these increases were achieved in a mature segment in which the Bank has a very significant market share.
Despite the notable increase in credit risk, the non-performing loans balance was still contained, and the year ended with a non-performing loans ratio of 0.20%, down from 0.22% in 2005.
7% In 2006 there was increased activity in structured finance, always with Nov. Dec. long-standing customers of the Bank, with transactions authorised and signed for 06 06 EUR 261 million, which was 150% more than in 2005. The diversification was quite high, since the average amount involved was EUR 9 million per transaction, with an average margin of 107 basis points.
Customer rating, which has formed part of day-to-day risk management since 1998, constitutes a fundamental variable in the analysis, approval and 1.1% monitoring of Credit Risk transactions. It is being used to pre-classify customers in 3.8% certain products, which substantially facilitates the commercial activity. 7.0% 10.7% The matrix by terms and amounts shows that almost 75% was financing at 14.4% terms of under 1 year and that the risk at terms of over 3 years - which rose from 17.4% 18% to 21% - was highly diversified by amount, with no more than 6.7% in 19.3% individual risks of more than EUR 6 million. 18.3% 4.3% 3.7% 100%
Breakdown of loans and receivables (%)
Relative ≤ 150 150-600 600-3,000 3,000-6,000 > 6,000 Total ≤ 3 months 2.27 5.46 8.57 3.79 10.92 31.01 3-12 months 3.35 8.23 11.57 4.12 14.82 42.09 12-36 months 1.37 1.15 1.24 0.29 1.88 5.94 > 36 months 1.53 3.54 6.74 2.44 6.72 20.96 Total 8.52 18.37 28.13 10.64 34.34 100.00 ANUAL 48-119 ING.qxd 4/5/07 09:46 Página 112
Bankinter 2006 Business Report Bankinter 200 06. Business 112 06. Business
SMEs SMEs credit risk 2006 was a year of consolidation for the SME segment. The expansion of the business that began in 2004 and 2005 has borne fruit, with a growth rate in the figure for credit risk of 34.8% in 2006.
34.8 % During the year 19 new centres specialising in SMEs were opened, giving a more than in 2005 total of 124 such centres at year-end. There was also a 20% increase in the number of active customers, and consequently the volume of loan applications handled was 16% higher than in 2005.
Mortgage-secured credit risk continued to account for a very substantial portion of the segment's total risk at 45%; and of this percentage, 37% was secured by a home. The collateral-backed portion amounted to 3%.
One of the basic principles of this segment is its diversification by customer, and noteworthy in this respect was the fact that 74% of the customers had risks of less than EUR 150,000, which represented 22% of the risk. Taking the amount up to EUR 600,000, 93% of the customers accounted for 57% of the risk.
Sectoral diversification (%)
Agriculture & fisheries 2% Other 17% Construction 15% Services 41%
Industry 16% Assets 17% ANUAL 48-119 ING.qxd 4/5/07 09:46 Página 113
Bankinter 2006 Business Report 06. Business 113
From the risk management point of view in the SME segment the main lines of of the action were as follows: te in the 1. To maintain credit quality In a business segment as sensitive to risk as that of SMEs, strengthening the d, giving a functions of control and monitoring, from the point of view of both the customers the and the centres, was paramount. cations The objective was to identify possible problems, both at specific centres and as regards the customer portfolio, and this required the strengthening of our control teams at the different organisations. In 2007 we consider it will be necessary to stantial continue to take this line of action forward. was The result in 2006 can be considered highly satisfactory, with the achievement of a non-performing loans ratio of 0.49% compared with 0.45% in 2005.
y customer, 2. To maximise the use of our automatic approval system: SIGRID had risks of SIGRID, the system used to process and approve proposals in this segment, mount up maintained the levels of automatic approvability (62% compared with 63% in 2005) and automatic authorisation (44% compared with 43%), which enabled us, on the one hand, to streamline a process in which speed and efficiency are paramount; and on the other, not to lose the risk quality of our portfolio, with a non-performing loans ratio in automatically-approved transactions of 0.44% compared with 0.49% for the segment as a whole.
3. To use ratings as a variable for determining automatic approval For both automatic and manual approval, ratings are essential to our business, serving directly as a determining variable in automatic approvals and as a & supporting tool in manual approvals and as an aid to our commercial network in selective campaigns to attract customers. We also made progress in introducing indicative maximum risk figures for % potential customers as part of the risk guidance we give our commercial network.
4. The training given Training, once again, was decisive in disseminating the Bank's risk policy in this business segment. Taking into account also the effort made to expand our commercial teams, continuing training is a key component of the success of this business model. The dissemination of knowledge among the most recent commercial teams and involvement in and awareness of the risk tasks were clearly one of our main lines of action in 2006 that materialised in 9,000 hours of training taught. ANUAL 48-119 ING.qxd 4/5/07 09:46 Página 114
Bankinter 2006 Business Report Bankinter 200 06. Business 114 06. Business
Non-performing loans, risk control and monitoring The area of Control and Monitoring of Credit Risk acquired special significance in a year of growth in SMEs. This function is important, especially in monitoring this segment, given the higher level of default that is a feature of it. This function is underpinned by two basic pillars: on the one hand, the team of staff; and, on the other, the early warning tools.
The task of monitoring risk begins at the branch, with the adviser, and is followed and supported by the risk managers of the regional organisations and by the Credit Risk division, with this activity being of fundamental importance for keeping the level of non-performing loans appropriate to the growth obtained.
The use of early warning tools by the branch network and by the risk managers at both the organisations and the Central Services makes it easier to focus on the customers with a greater probability of default, thereby making the whole risk process more efficient.
The 'customer alert system', a fundamental early warning tool, has been in use since 2001. It is a statistical model that provides a score for each customer, making it possible to distinguish clearly those whose likelihood of default is higher, and therefore take swift action to prevent a non-performing loan. This system classifies customers who need special monitoring. In 2006, both the customers subject to alert and the associated risk remained at balanced levels, enabling us to appropriately manage our portfolio.
Variation in customers subject to alert (%)
4 2.5
3 2.0 2
1.5 1
0 1.0 Dec. Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec. 05 06 06 06 06 06 06 06 06 06 06 06 06
% customers subject to alert % risk subject to alert ANUAL 48-119 ING.qxd 4/5/07 09:46 Página 115
Bankinter 2006 Business Report 06. Business 115
The 'substandard customer risk rating system', 'to be watched' and 'to be ficance in terminated', is a tool that forms part of the day-to-day management of the centres itoring this and makes it possible to detect potential problems of creditworthiness. The nction is system provides an automatic rating of customers based on objective variables nd, on the indicating the deterioration of their creditworthiness, taking into account both internal information on their behaviour and external databases. The rating may also be produced manually, as a result of the management of the 'customer alert r, and is system'. The two ratings have different consequences: the 'to be watched' category ons and by involves very close monitoring of the customer and the position and may lead to ance for classification as 'to be terminated', involving the reduction/termination of the tained. position with the customer. The performance of these categories remained stable during 2006. risk easier to The work of the commercial teams, in partnership with the risk managers, aking the plus the use of the tools described above, made it possible to anticipate 79% of the customers who presented some problem.
as been in stomer, ult is n. This the levels,
Variations in 'to be watched' and 'to be terminated' loans’ (%)
2.5 10 0.6 0.5 8 2.0 0.4
6 0.3
1.5 0.2 4 0.1 1.0 2 0 v. Dec. Dec. Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec. 06 05 06 06 06 06 06 06 06 06 06 06 06 06
Loans to be watched/lending Loans to be terminated/lending ANUAL 48-119 ING.qxd 4/5/07 09:46 Página 116
Bankinter 2006 Business Report Bankinter 200 06. Business 116 06. Business
In addition to the early warning systems using customer ratings managed by the Control and Recoveries area, there are other systems whose sole purpose is to ensure the correct use of the mechanised approval systems, the rigour applied in arranging transactions and the proper behaviour of staff members at the centres. This is an essential task given the high percentage of transactions that are approved automatically, and is of particular importance at a time of substantial growth in both customers and SME centres.
The Data Reliability System (FIDA in Spanish) validates the data used by the approval systems. This is done by performing monthly reviews of random samples of transactions approved at the centres.
The control of the arrangement of transactions (Automatic System of Arrangement Control) is performed monthly by the organisation managers by means of mechanised samplings of transactions booked to certify or reduce the risk of arrangement.
The training provided by the Control and Monitoring area, in coordination with people management and the other areas of the Credit Risk division, made it possible to provide courses to 365 people in 2006, thus ensuring that the staff of the new centres, and particularly the SME centres that were opened during the year, have knowledge of the control and monitoring function.
Lack of early warning overall (%)
50
40
30
20
10
0
-10 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 ANUAL 48-119 ING.qxd 4/5/07 09:46 Página 117
Bankinter 2006 Business Report 06. Business 117
ged by the Given the importance of decision-taking regarding risks, in 2006 the Credit Risk se is to division made a training effort both at management level and with classroom applied in teaching by the risk managers themselves which materialised in a series of he centres. seminars taught to a total of 1,267 members of staff from a variety of business are areas who were provided with a total of 8,676 hours of risk training. bstantial Lastly, the use of the Centre Alert System, based on a statistical model that obtains the variables that best predict the deterioration of a centre’s risk quality, used by made it possible to review more than 150 centres in 2006 and take steps to andom improve the weaknesses detected.
In absolute terms in 2006 there was an increase in the non-performing m of loans as a result of the Bank's strong growth in the SME segment and the gers by Consumer credit business. duce the Characteristic of this latter business, the marketing of credit cards entails a greater assumption of risk, but the business itself generates risk premiums that rdination amply cover the cost of the non-performing loans that it generates. The credit risk n, made it in this business is less than 1% of the total risk. e staff of ring the
Non-performing loans ratio by segment (%)
0.50 0.45 0.40 0.35 0.30 0.25 0.20 0.15 0.10 0.05 0.00 4Q06 SMEs Corporate banking Private individuals Total
2006 2005 ANUAL 48-119 ING.qxd 31/5/07 16:33 Página 118
Bankinter 2006 Business Report 06. Business 118
The second cause of the rise in non-performing balances was the Bank's increased presence in the SME business, which had a non-performing loans ratio of 0.49%, which although 4 basis points higher than in 2005 still compares very positively with the sector as a whole. An important part of the activities to monitor non- performing loans is the function performed by the risk managers of forecasting collection of each of the positions. 93% of the non-performing portfolio has been classified, and 81% is considered collectible. It should also be taken into account that 66% of these positions are collected within less than a year.
Breakdown of non-performing (millions of euros)
80 70 60 50 40 30 20 10 0 Dec. Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec. 05 06 06 06 06 06 06 06 06 06 06 06 06
NPL (excl. consumer credit) Non-performing consumer credit
Variation in non-performing balances (thousands of euros)
2005 2006 Non-performing NPL Ratio Non-performing NPL Ratio balance balance Corporate entities 32,811 0.31 43,785 0.34 Private Individuals 21,535 0.18 49,458 0.20
Variation in doubtful credit risk (thousands of euros)
2005 2006 Difference % Beginning balance (1 January) 79,823 71,998 -7,825 -9.8 Writeoffs 11,430 13,717 2,287 20.0 Ending balance (31 December) 71,998 93,243 21,245 29.5 Foreclosed assets 6,380 5,175 -1,205 -18.9 ANUAL 48-119 ING.qxd 4/5/07 09:46 Página 119
Bankinter 2006 Business Report 06. Business 119
s increased Operational risk of 0.49%, 2006 was an important year for operational risk at Bankinter. It culminated in the positively approval by the Board of Directors of the Bankinter Group Operational Risk or non- Management framework agreement which formally sets out the overall ecasting arrangements for management, measurement and control. has been o account The agreement makes it a priority to identify and mitigate the Bank's principal risks in order to reduce the possible losses associated with them. In this respect, Bankinter's first comprehensive map of operational risk was drawn up in 2006. This was done using the self-assessment questionnaires completed by the business areas and supporting departments, after contact by the Operational Risk division with each of them to convey the main concepts and the responsibilities that each of them must assume in this matter.
In parallel, a panel was set up with the first indicators of the status or evolution of various aspects connected with the structure, procedures, activity and staff of the Bank. Since they are early warnings, these indicators provide information on the evolution of the existing levels of risk and alert on the emergence of undesired trends.
Another important milestone was the setting up and first meeting of the Operational Risk committee, consisting of the managers of the areas most involved in this field. This committee has among its missions that of identifying and assessing the most critical risks borne by Bankinter in order to decide onthe v. Dec. corrective measures in relation to them, as well as to ensure compliance with 06 the appropriate protocol for the identification and assessment of the associated risks prior to launching new products and services.
These and the other objectives achieved by Bankinter in operational risk mean that the principal requirements for the Bank’s inclusion in the standard model upon the entry into force of the new Basel Capital Accord have been met. NPL Ratio
0.34 0.20
% -9.8 20.0 29.5 -18.9 ANUAL 120-160 ING.qxd 4/5/07 09:55 Página 1 ANUAL 120-160 ING.qxd 4/5/07 09:56 Página 120
Bankinter 2006 Business Report 120 ANUAL 120-160 ING.qxd 4/5/07 09:56 Página 121
07 Earnings
The difference knowing how to think makes: 19.2% more than in 2005.
The Bankinter Group's annual earnings maintained the growth shown quarter by quarter throughout 2006, with a net profit before tax of EUR 316.3 million, which is 19.2% more than in 2005.
In this section
> Earnings > Bankinter’s Contribution to GDP ANUAL 120-160 ING.qxd 4/5/07 09:56 Página 122
Bankinter 2006 Business Report Bankinter 200 07. Earnings 122 07. Earnings The Group ended the year with a profit before tax of EUR 316.3 million, which is 19.2% more than in 2005.
Earnings
2006 was another very successful year for the Bankinter Group, with substantial increases in all of the lines of income deriving from a sound, recurring and well diversified base of commercial business.
Total assets The commercial efforts made during the year were reflected in the growth of total assets which totalled EUR 46,075 million, an increase of 13% on 2005. Loans and receivables totalled EUR 31,653 million at the end of 2006, which was 21.1% more than at the end of 2005. Most noteworthy of the strong growth of EUR 46,075 loans and receivables was the significant 36.3% increase in the SME business, million while the mortgage business continued to grow at a rate of 14.9%.
The on-balance sheet customer funds amounted to EUR 32,683.5 million, an increase of 19% on the figure for the previous year. The off-balance-sheet 13 % funds (mutual funds and pension funds) recorded growth of 4.3%. more than in 2005 The statement of income presents substantial increases in its principal aggregates. Thus, the net interest income grew by 10.1%; and the gross income by 15.1%, due to the significant contribution of fees and commissions and the gains on financial assets and liabilities transactions with customers. Mention should also be made of the contribution made by Línea Directa Aseguradora, the automobile and motorcycle insurance company that is 50% owned by Bankinter together with Direct Line Group Limited. This company contributed EUR 29.4 million to the Group's earnings under the 'Earnings from companies valued by the equity method' caption, which was 23.3% more than in 2005.
Costs increased by 13.2% year on year to a total of EUR 408 million, leading to growth in the net operating income of 17.1%. The increase in costs was the result of the strategy of expansion, particularly in the SME business, but also in other businesses, and continues to be offset by substantial increases in income. ANUAL 120-160 ING.qxd 4/5/07 09:56 Página 123
Bankinter 2006 Business Report 07. Earnings 123
which
The 'Asset impairment losses' caption amounted to EUR 96.9 million in 2006, a year-on-year increase of 20.9%. At the same time, the figures for bstantial non-performing loans remained lower than those of the rest of the sector, with and well a non-performing loans ratio (doubtful assets as a percentage of total risks) of 0.3% and a coverage ratio (credit loss allowances as a percentage of doubtful assets) of 570%. he growth n 2005. Law 35/2006, which partially amends the Income Tax Law, includes among which was other measures the reduction of the general Corporate Income tax rate to 32.5% owth of for periods starting in 2007 and to 30% for tax periods starting as from 1 January siness, 2008. This reduction in the corporate income tax rate is excellent news, since it will enable the Group to generate greater value for its shareholders in the long term. However it signifies a one-time negative impact on the tax expense for million, 2006, due to the revision of the value of the deferred taxes that the Group has sheet recognised in its balance sheet.
The revision of the value of the deferred taxes signified an increase in the ncipal tax expense of EUR 14 million, which meant that it was up by 38.7% and limited s income the increase in the net profit attributed to the Group to EUR 208 million, which nd the was 11.1% more than in 2005. ention adora, the ankinter R 29.4 ued by the
on, leading was the ut also in income. ANUAL 120-160 ING.qxd 4/5/07 09:56 Página 124
Bankinter 2006 Business Report Bankinter 200 07. Earnings 124 07. Earnings
Comparative statements of income (thousands of euros) Quarterly i
2005 2006 Difference Amount Amount Amount % Interest and similar income 1,076,615 1,455,871 379,256 35.23 Interest an Interest expense and similar charges -655,656 -998,591 -342,935 52.30 Interest ex Of which: return on equity having the substance of a financial liability -7,255 -11,139 -3,884 53.54 Of which Income from equity instruments 9,308 16,354 7,046 75.70 Income fro Total net interest income 430,267 473,634 43,367 10.08 Total net i Share of results of entities accounted for using the equity method 24,645 29,623 4,978 20.20 Share of re Net fees and commissions 189,699 217,119 27,420 14.45 Net fees an Insurance activity income -75 1,694 1,769 2,358.67 Insurance Gains on financial assets and liabilities and exchange differences 67,318 97,532 30,214 44.88 Gains on f Gross income 711,854 819,602 107,748 15.14 Gross inco Personnel expenses -192,398 -227,336 -34,938 18.16 Personnel Other general administrative expenses -160,703 -174,940 -14,237 8.86 Other gene Depreciation and amortisation of tangible and intangible assets -21,031 -24,151 -3,120 14.84 Depreciati Other operating income 13,861 18,471 4,610 33.26 Other oper Net operating income 351,583 411,646 60,063 17.08 Net operat Asset impairment losses -80,143 -96,898 -16,755 20.91 Asset impa Provisions -7,035 -5,892 1,143 -16.25 Provisions Other income 1,040 7,480 6,440 619.23 Other inco Profit before tax 265,445 316,336 50,891 19.17 Profit befo Corporate income tax -77,743 -107,846 -30,103 38.72 Corporate Profit attributed to the Group 187,702 208,490 20,788 11.08 Profit attr Profit before tax + provisions 341,369 404,049 62,680 18.36 Net profit + provisions 237,052 265,503 28,451 12.00
Average total assets 36,815,654 43,264,333 6,448,679 17.52 ANUAL 120-160 ING.qxd 4/5/07 09:56 Página 125
Bankinter 2006 Business Report 07. Earnings 125
Quarterly income statements (thousands of euros) ce 2006 2005 % December September June March December 35.23 Interest and similar income 442,608 379,012 327,692 306,559 290,337 52.30 Interest expense and similar charges -314,756 -264,055 -218,390 -201,390 -184,187 53.54 Of which: return on equity having the substance of a financial liability -4,247 -2,467 -2,380 -2,045 -1,846 75.70 Income from equity instruments 1,851 5,095 4,860 4,548 2,052 10.08 Total net interest income 129,703 120,052 114,162 109,717 108,202 20.20 Share of results of entities accounted for using the equity method 6,241 11,232 6,067 6,083 6,908 14.45 Net fees and commissions 59,794 53,336 52,014 51,975 49,636 ,358.67 Insurance activity income 1,869 -164 661 -672 -931 44.88 Gains on financial assets and liabilities and exchange differences 19,672 22,922 25,407 29,531 34,104 15.14 Gross income 217,279 207,378 198,311 196,634 197,919 18.16 Personnel expenses -62,523 -56,445 -56,070 -52,298 -51,751 8.86 Other general administrative expenses -51,494 -41,684 -40,746 -41,016 -52,296 14.84 Depreciation and amortisation of tangible and intangible assets -6,639 -6,373 -5,914 -5,225 -5,691 33.26 Other operating income 5,525 4,096 5,133 3,717 3,908 17.08 Net operating income 102,148 106,972 100,714 101,812 92,089 20.91 Asset impairment losses -31,244 -22,728 -27,299 -15,627 -29,637 -16.25 Provisions -7,173 -5,271 549 6,003 318 619.23 Other income 2,118 5,727 -546 181 798 19.17 Profit before tax 65,849 84,700 73,418 92,369 63,568 38.72 Corporate income tax -34,406 -25,296 -22,217 -25,928 -17,325 11.08 Profit attributed to the Group 31,443 59,404 51,201 66,441 46,243 18.36 12.00
17.52 ANUAL 120-160 ING.qxd 4/5/07 09:56 Página 126
Bankinter 2006 Business Report Bankinter 200 07. Earnings 126 07. Earnings
Operating profitability (% of average total assets)
2005 2006 Customer s Total & average assets 100.00 100.00 Interest and similar income 2.92 3.37 Interest expense and similar charges -1.78 -2.31 Of which: return on equity having the substance of a financial liability -0.02 -0.03 EUR Income from equity instruments 0.03 0.04 million Net interest income 1.17 1.09 Share of results of entities accounted for using the equity method 0.07 0.07 Net fees and commissions 0.52 0.50 Insurance activity income 0.00 0.00 28 Gains on financial assets and liabilities and exchange differences 0.18 0.23 more t Gross income 1.93 1.89 Personnel expenses -0.52 -0.53 Other general administrative expenses -0.44 -0.40 Depreciation and amortisation of tangible and intangible assets -0.06 -0.06 Other operating income 0.04 0.04 Net operating income 0.95 0.95 Asset impairment losses -0.22 -0.22 Provisions -0.02 -0.01 Other income 0.00 0.02 Profit before tax 0.72 0.73 Corporate income tax -0.21 -0.25 Profit attributed to the Group 0.51 0.48 ANUAL 120-160 ING.qxd 4/5/07 09:56 Página 127
Bankinter 2006 Business Report 07. Earnings 127
Measures of return by business area All of the business areas performed positively in 2006, despite the substantial 2006 Customer segments investment effort. Thus the profit obtained on the activity of all the customer 100.00 segments totalled EUR 256 million in the year, which was 28.8% more than 3.37 in 2005. -2.31 -0.03 EUR 256 The Bank's strategic focus on the SME business meant that this was the 0.04 million segment that recorded the highest growth in 2006: 49.5% year on year; although 1.09 the other businesses also grew considerably: Personal Finance was up by 28.4%; 0.07 Private Banking by 29.6%; Corporate Banking by 26.9%; Banking for Private 0.50 Individuals by 21.7% and Foreign Nationals by 29.8%. 0.00 28.8 % 0.23 more than in 2005 1.89 -0.53 Measures of return by business area (thousands of euros) -0.40 -0.06 2005 2006 Amount % 0.04 Customer segments 198,728 255,965 57,237 28.80 0.95 Personal Finance 19,761 25,373 5,612 28.40 -0.22 Private Banking 36,903 47,835 10,932 29.62 -0.01 Corporate Banking 44,810 56,891 12,081 26.96 0.02 Banking for Private Individuals 66,559 81,012 14,453 21.71 0.73 SMEs 25,466 38,069 12,603 49.49 -0.25 Foreign Nationals 5,229 6,785 1,556 29.76 0.48 Capital market 21,448 33,014 11,566 53.93 Other businesses 20,004 32,583 12,579 62.88 General credit loss allowance -53,687 -61,817 -8,130 15.14 Corporate Centre 1,209 -51,255 -52,464 -4,340.80 PAT attributed to the Group 187,702 208,490 20,788 11.08
Yields and costs The table of yields and costs shows a breakdown of the net interest income, taking into account the relative weight and rates of the assets and liabilities in the balance sheet. In 2006 there began to be signs of a change in trend in the customer spread, with a positive year-on-year variation by year-end (1.45% compared to 1.39% at 2005 year-end). ANUAL 120-160 ING.qxd 4/5/07 09:56 Página 128
Bankinter 2006 Business Report Bankinter 200 07. Earnings 128 07. Earnings
Yields and costs (thousands of euros)
2005 2006 Average Relative Yields & Average Average Relative Yields & Average Balance weight (%) costs rate % Balance weight (%) costs rate % Balances with central banks 342,644 0.93 4,975 1.45 383,995 0.89 7,801 2.03 Loans and advances to credit institutions 3,153,425 8.57 57,626 1.83 4,561,843 10.54 127,756 2.80 Loans and advances to customers (a) 22,877,739 62.14 743,078 3.25 28,735,672 66.42 1,077,621 3.75 Debt instruments 8,222,258 22.33 252,386 3.07 6,869,571 15.88 240,197 3.50 Hedges 18,550 2,496 Equities 536,766 1.46 9,308 1.73 453,487 1.05 16,354 3.61 Average earning assets 35,132,834 95.43 1,085,923 3.09 41,004,569 94.78 1,472,225 3.59 Other assets 1,682,820 4.57 2,259,764 5.22 Average total assets 36,815,654 100.00 1,085,923 2.95 43,264,333 100.00 1,472,225 3.40
Deposits from central banks 692,814 1.88 14,560 2.10 141,621 0.33 3,896 2.75 Deposits from credit institutions 8,638,174 23.46 196,893 2.28 8,579,860 19.83 256,115 2.99 Money market operations through counterparties 161,165 0.44 1,759 1.09 126,339 0.29 3,191 2.53 Customer funds (c) 22,789,618 61.90 386,853 1.70 29,613,974 68.45 711,178 2.40 Customer deposits 14,773,816 40.13 205,657 1.39 16,703,127 38.61 317,346 1.90 Debt certificates including bonds 8,015,802 21.77 181,196 2.26 12,910,847 29.84 393,832 3.05 Subordinated liabilities 393,996 1.07 16,273 4.13 490,150 1.13 21,349 4.36 Hedges 32,063 (8,277) Return on equity having the substance of a financial liability 347,523 0.94 7,255 2.09 347,211 0.80 11,139 3.21 Average interest-bearing funds (d) 33,023,291 89.70 655,656 1.99 39,299,156 90.83 998,591 2.54 Other liabilities 3,792,363 10.30 3,965,177 9.17 Efficiency Average total funds 36,815,654 100.00 655,656 1.78 43,264,333 100.00 998,591 2.31 Customer spread (a-c) 356,225 1.55 366,443 1.35 Net interest income (b-d) 430,267 1.11 473,634 1.05 49 1.1% im
Evolution of customer spread (%) on 200
5
4
3
2
1
0
Dec. Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec. 05 06 06 06 06 06 06 06 06 06 06 06 06
Customer spread Return on lending Cost of customer funds ANUAL 120-160 ING.qxd 4/5/07 09:56 Página 129
Bankinter 2006 Business Report 07. Earnings 129
Analysis of operating costs Total operating costs were EUR 407.8 million, up 13.2% on 2005. This was the result of the strategy for growth being implemented by the Bank, involving the Average expansion of the branch network, mainly of those dedicated to SMEs, and bigger rate % 2.03 investment in a series of businesses which will contribute to the future growth of 2.80 the Bank. 3.75 3.50 Personnel expenses rose by 18.2% year on year to EUR 227 million. The Bank's workforce increased by 269 employees to a total of 3,981 staff at the end of 3.61 2006, which was 7.3% more than in 2005. 3.59 General expenses also rose, by 8.8%, and totalled EUR 175 million at year-end. 3.40 The accrued portion of the value of the options implicit in the outstanding 2.75 Convertible Debenture issues for employees is recorded as personnel expenses, 2.99 the balancing entry being a liability accrual account, until the debentures mature 2.53 or are redeemed early. EUR 2.7 million were recorded as personnel expenses in 2.40 this connection for the outstanding issues in 2006. 1.90 3.05 The efficiency ratio stood at 49.1%, which was an improvement of 1.1% on 4.36 2005, despite the investment efforts.
3.21 2.54 Efficiency ratio 2.31 1.35 1.05 49.1% 1.1% improvement on 2005
Nov. Dec. 06 06 ANUAL 120-160 ING.qxd 4/5/07 09:56 Página 130
Bankinter 2006 Business Report Bankinter 200 07. Earnings 130 07. Earnings
Operating costs (% of total)
Variation 06/05 Contributio 2005 2006 Amount % Personnel expenses 53.40 55.74 2.34 0.04 Salaries and wages 39.10 39.42 0.32 0.01 Social Security costs 8.69 8.83 0.14 0.02 EUR Other expenses 5.61 7.50 1.89 0.34 million Other operating income -5.21 -5.88 -0.67 0.13 Other general administrative expenses 44.61 42.87 -1.74 -0.04 Buildings, fixt. & other fixed assets 9.55 9.64 0.09 0.01 Information technology 15.26 14.02 -1.24 -0.08 19 Other expenses 19.79 19.20 -0.59 -0.03 more t Depreciation, amortisation & writeoffs 5.84 5.92 0.08 0.01 Other operating expenses 1.36 1.36 0 0.00 Total 100.00 100.00 0 0.00
Operating costs (thousands of euros)
Variation 06/05 2005 2006 Amount % Personnel expenses 192,398 227,333 34,935 18.16 Salaries and wages 140,872 160,756 19,884 14.11 Social Security costs 31,301 35,992 4,691 14.99 Other expenses 20,225 30,585 10,360 51.22 Other operating income -18,763 -24,001 -5,238 27.92 Other general administrative expenses 160,703 174,825 14,122 8.79 Buildings, fixt. & other fixed assets 34,424 39,329 4,905 14.25 Information technology 54,981 57,171 2,190 3.98 Other expenses 71,298 78,325 7,027.08 9.86 Depreciation, amortisation & writeoffs 21,031 24,151 3120 14.84 Other operating expenses 4,902 5,532 630 12.85 Total 360,271 407,840 47,569 13.20 ANUAL 120-160 ING.qxd 4/5/07 09:56 Página 131
Bankinter 2006 Business Report 07. Earnings 131
Bankinter’s contribution to GDP
n 06/05 Contribution to GDP The contribution of Bankinter S.A. to GDP in 2006 amounted to EUR 662 million, % which was 19.3% more than in 2005. This contribution was made up as follows: 0.04 0.01 Surplus retained at the Bank (depreciation and amortisation, reserves and 0.02 EUR 662 allowances): EUR 218 million. 0.34 million Remuneration of equity (dividends): EUR 102 million, 10% more than in 2005. 0.13 Direct contribution to the State (corporate income tax): EUR 107 million. -0.04 Employee salaries: EUR 230 million, 23.5% more than in 2005. 0.01 -0.08 19.3 % -0.03 more than in 2005 0.01 0.00 0.00
Value added to GDP (thousands of euros) on 06/05 2005 2006 06/05 (%) % Employee salaries 186,539 230,276 23.45 18.16 Direct taxes 80,922 111,269 37.50 14.11 Income tax 77,743 107,846 38.72 14.99 Other taxes 3,179 3,423 7.68 51.22 Dividend 92,728 102,056 10.06 27.92 Surplus 195,023 218,665 12.12 8.79 Depreciation and amortisation 21,031 24,151 14.84 14.25 Allocation to reserves 94,974 106,434 12.07 3.98 Other provisions 79,019 88,080 11.47 9.86 Total 555,212 662,266 19.28 14.84 12.85 13.20 ANUAL 120-160 ING.qxd 4/5/07 09:56 Página 132
Bankinter 2006 Business Report 132
Shareholders' 08 equity and Bankinter shares
Thinking adds value: a 29.9% higher shareholder return.
The Bankinter Group has a sound and efficient structure of shareholders’ equity, and creating value for shareholders in the long term is one of the Bank’s priorities. Bankinter's shares were among the best performing of banking equities in the year, and obtained an annual return that was above that of the main indexes.
In this section > Shareholders’ equity > Bankinter shares ANUAL 120-160 ING.qxd 4/5/07 09:56 Página 133 ANUAL 120-160 ING.qxd 4/5/07 09:56 Página 134
Bankinter 2006 Business Report Bankinter 200 08. Shareholders’ equity & Bankinter shares 134 08. Shareholde
Shareholders’ equity
The Bankinter Group has a sound and efficient structure of shareholders’ equity, and creating value for shareholders in the long term is one of the Bank's strategic priorities. Accordingly, the Bank conducts appropriate equity management by assigning these scant assets to activities that generate the greatest possible returns.
In accordance with the principles of the Bank for International Settlements (BIS) in Basel, the capital structure totalled EUR 2,521 million, as set out in the following table.
Shareholders' equity (thousands of euros)
Variation 06/05 2005 2006 Amount % Core capital Capital & reserves 1,395,041 1,534,882 139,841 10.02 Minority interests 343,165 343,165 0 0.00 Revaluation reserve -130,143 -104,147 25,996 -19.97 Treasury shares -33,763 -1,048 32,715 -96.90 Intangible assets -43,600 -48,829 -5,229 11.99
Tier 1 1,530,700 1,724,023 193,323 12.63
Supplementary capital Revaluation reserve 130,143 104,147 -25,996 -19.97 General allowances 289,187 498,597 209,410 72.41 Subordinated financing 261,561 313,952 52,392 20.03 General credit loss allowance -68,361 -119,467 -51,106 74.76
Tier 2 612,530 797,229 184,699 30.15
Total capital 2,143,230 2,521,252 378,022 17.64
Risk-weighted assets 20,924,856 25,116,180 4,191,324 20.03
Tier 1 (%) 7.32 6.86 -0.46 -6.28 Tier 2 (%) 2.93 3.17 0.24 8.19 Capital ratio (%) 10.25 10.03 -0.22 -2.15 Capital cushion 469,241 511,958 42,716 9.10 ANUAL 120-160 ING.qxd 4/5/07 09:56 Página 135
Bankinter 2006 Business Report 08. Shareholders’ equity & Bankinter shares 135
The Bankinter Group shareholders' equity was strengthened in 2006 by EUR 377 million: rs’ equity, 's strategic EUR 193 million came mainly from the increase in Tier 1 capital, due to the ent by increase in the retained earnings. sible EUR 184 million came from the increased general allowances and the issuance of subordinated bonds. ettlements The big increase in the risk-weighted assets at the Bankinter Group in 2006 ut in the led the Bank to increase the retained earnings and to maintain the programme of mortgage securitisations as the best means of obtaining funds to finance the growth of the balance sheet.
Thus, in 2006 three mortgage securitisations were launched:
Face value (millions of euros) on 06/05 % Mortgage securitisations Amount Bankinter 12 FTH 1,200 10.02 Pymes 2 FTA 800 0.00 Bankinter 13 FTA 1,570 -19.97 -96.90 11.99 Ratings 12.63 Bankinter continues to have a robust capital structure that is endorsed by the principal rating agencies, which once again gave the Bank an excellent rating.
-19.97 Ratings 72.41 20.03 Short term Long term 74.76 Moodys P Aa3 S&P A1 A 30.15 Fitch F1 A+
17.64 The Bankinter Group is working on the development and future application of the models based on internal ratings, following the methodology laid down 20.03 under the Basel II Accord and supervised by the Bank of Spain.
-6.28 The new regulations will come into force on 1 January 2008 and we are 8.19 expecting a positive impact arising out of lower credit risk usage given the -2.15 historically low level of default and the conservative profile of our portfolio. 9.10 ANUAL 120-160 ING.qxd 4/5/07 09:56 Página 136
Bankinter 2006 Business Report Bankinter 200 08. Shareholders’ equity & Bankinter shares 136 08. Shareholde Earnings per share were EUR 2.7, an increase of 9.4% year on year.
Bankinter shares
The 27.2% appreciation of the Bank's shares in 2006 combined with the dividend paid meant that shareholders obtained a total return of 29.9%.
Bankinter's shares were among the best performing of banking equities in the year, and obtained an annual return that was above that of the main indexes.
The following graph compares the performance of Bankinter shares (27.2%) with the Ibex 35 (31.8%), the DJ Banks (18.7%) and the Euro Stoxx 50 (15.1%) indexes.
Bankinter compared with main stock market indexes
140
130
120
110
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80 Dec. Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec. 05 06 06 06 06 06 06 06 06 06 06 06 06
Bankinter Ibex 35 DJ Euro Stoxx 50 DJ Stoxx 600 Bank ANUAL 120-160 ING.qxd 4/5/07 09:56 Página 137
Bankinter 2006 Business Report 08. Shareholders’ equity & Bankinter shares 137
The salient per share data for Bankinter stock in 2006 are disclosed in the following tables: dividend Per share data (euros) quities in 2005 2006 % 06/05 in indexes. Net earnings per share 2.44 2.68 9.43 Cash flow per share 3.40 3.89 14.41 res (27.2%) Book value per share 17.68 19.52 10.46 (15.1%) Market price: Low 36.80 46.23 High 48.50 61.80 Closing 46.87 59.60
Stock market ratios
Times 2005 2006 P/E ratio (Price/earnings) 19.23 22.46 PCF (Price/cash flow) 13.77 15.32 Price/Book value 2.65 3.05 Dividend yield (%) 2.56 2.18
Both the earnings per share and the book value per share increased in 2006, and this favourable performance was translated into a higher share price, Nov. Dec. reflecting the higher value of the business. 06 06
With regard to stock market ratios, the market continued to give the Bank a premium over its main competitors, as a sign of shareholder confidence in the future performance of the Bank, of the higher rating of Bankinter's solvency, as well as the assessment of a series of other intangible assets.
Earnings per share were EUR 2.7, an increase of 9.4% year on year. A tax adjustment was made in 2006 arising from the changes in income tax made by Law 35/2006; this led exceptionally to a reduction in this growth. ANUAL 120-160 ING.qxd 4/5/07 09:56 Página 138
Bankinter 2006 Business Report Bankinter 200 08. Shareholders’ equity & Bankinter shares 138 08. Shareholde The dividend for 2006 was EUR 1.3, which was 8.3% more than in 2005.
On 14 March 2007, the Board of Directors approved the formulation of the annual financial statements and the proposed distribution of profit, including payment of a dividend out of 2006 income of EUR 0.339552 per share for a total amount of EUR 26.8 million (estimated amount based on data at 31/12/2006), signifying a dividend yield of 2.2%. The pay out in 2006 was 49%.
Pay-out (%)
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0 2001 2002 2003 2004 2005 2006
Dividends
Date DPS (euros) No. of Amount Date of Board shares (thousands of euros) approval July 06 0.310176 77,996,491 24,192,640 14/06/2006 October 06 0.31968 78,585,044 25,122,067 13/09/2006 January 07 0.329724 78,567,255 25,905,510 13/12/2006 April 07 0.339552 79,031,756 26,835,391 17/01/2007 Total 1.299132 102,055,607
ADR’s ADRs are a product that allows residents of the United States of America to invest in foreign companies by means of a certificate of deposit, an ADR, and to receive dividend payments in the manner most convenient to them.
Bankinter's ADR programme is administered by the Bank of New York. In 2006 each ADR represented one ordinary share. From the beginning of 2007, the ratio will be 4 to 1, in order to adjust the price of the ADRs to the features of the market. ANUAL 120-160 ING.qxd 4/5/07 09:56 Página 139
Bankinter 2006 Business Report 08. Shareholders’ equity & Bankinter shares 139 Bankinter’s employees hold a total of 2,162,999 shares, i.e. 2.8% of the share capital.
he annual Share Capital and Treasury shares ayment of As of 31 December 2006, Bankinter, S.A.’s share capital consisted of 78,585,044 mount of fully subscribed and paid shares of EUR 1.50 par value each. The number of ifying a shares at 2005 year-end was 77,916,786. All the shares are represented by book entries, are listed on the Madrid and Barcelona stock exchanges and are traded by the Spanish computerised trading system.
In 2006 the share capital was increased by 668,258 shares (EUR 1,002,387), relating to the conversion of Convertible Debenture Issues I and V. There was a EUR 19 million increase in the share premium in 2006, due to the difference between the face value of the debentures converted and the par value of the shares issued. The increase in this connection in 2005 was EUR 24.9 million.
Bankinter has 87,495 shareholders. The main features of the shareholder structure are as follows:
Resident shareholders own 63,463,313 shares, representing 80.7% of share capital. Non-resident shareholders own 15,121,731 shares, representing 19.2% of share 2006 capital. The members of the Bank’s Board of Directors hold, directly or indirectly, 28,945,759 shares, representing 36.8% of share capital. Bankinter’s employees hold a total of 2,162,999 shares, i.e. 2.8% of the share capital. of Board There was treasury stock at year-end of 17,789 shares. approval Shareholders of record holding more than 10% of the share capital at 2006 year- 4/06/2006 end are detailed in the following table: 3/09/2006 3/12/2006 7/01/2007 Shareholders with an ownership interest of more than 10%
Name Total Shares % Direct Indirect Cartival S.A. 12,815,628 16.31 12,815,628 0 Casa Kishoo S.A. (1) 10,040,753 12.78 9,724,063 316,690 a to invest to receive (1) Including the shares owned by the various companies and parties related to Casa Kishoo, S.A. and the shareholders of this company.
York. of 2007, atures ANUAL 120-160 ING.qxd 4/5/07 09:56 Página 140
Bankinter 2006 Business Report Bankinter 200 08. Shareholders’ equity & Bankinter shares 140 08. Shareholde
Directors’ stakes in share capital
Name No. of directly-owned shares No. of indirectly-owned shares Total % of share capital Juan Arena de la Mora 242,074 627,432 1.11 Pedro Guerrero Guerrero 119,808 330,001 0.57 Jaime Echegoyen Enríquez de la Orden 75,266 994 0.10 Cartival S.A. 12,815,628 0 16.31 Ramchand Bhavnani Wadhumal 10,010 10,030,743 12.78 Fernando Masaveu Herrero 43,324 4,296,988 5.52 Marcelino Botín-Sanz de Sautuola 19,376 0 0.02 José Ramón Arce Gómez 303,647 8,275 0.40 John de Zulueta Greenebaum 14,097 0 0.02 Fabiola Arredondo de Vara 8,096 0 0.01
Share ownership structure by number of shares 31/12/2006
Tramos No. of Shareholders % No. of shares % 1-100 shares 63,832 72.96 911,245 1.16 101-1,000 shares 19,036 21.76 6,480,100 8.25 1,001-10,000 shares 4,206 4.81 10,646,478 13.55 10,001-100,000 shares 370 0.42 9,703,913 12.35 Over 100,000 shares 51 0.06 50,843,308 64.70 Total 87,495 78,585,044
Summary by type of shareholder
Nº de accionistas % Nº de acciones % Residents 87,141 99.60 63,463,313 80.76 Non-residents 354 0.40 15,121,731 19.24 Total 87,495 78,585,044 ANUAL 120-160 ING.qxd 4/5/07 09:56 Página 141
Bankinter 2006 Business Report 08. Shareholders’ equity & Bankinter shares 141
At 2006 year-end, the Bankinter Group had 17,789 shares of treasury stock, as compared with 909,320 shares in 2005 and 1,007,377 shares in 2004. e capital 1.11 In 2006, 1,107,121 shares were purchased, and 1,998,652 shares were sold. 0.57 The gains of EUR 11.5 million obtained on these transactions are reflected in an 0.10 increase in shareholders’ equity. 16.31 12.78 5.52 0.02 0.40 0.02 0.01
Share capital and treasury shares (%)
% 2001 2002 2003 2004 2005 2006 1.16 January 1.97 1.86 1.82 1.33 1.31 1.17 8.25 February 1.96 1.86 1.82 1.33 1.20 1.17 13.55 March 1.96 1.86 1.82 1.32 1.20 1.17 12.35 April 1.96 1.86 1.82 1.32 1.19 1.16 64.70 May 1.95 1.82 1.82 1.32 1.18 1.16 June 1.95 1.82 1.63 1.32 1.18 0.75 July 1.95 1.82 1.70 1.31 1.18 0.58 August 1.95 1.82 1.70 1.31 1.19 0.41 September 1.96 1.82 1.70 1.31 1.18 0.02 October 1.96 1.82 1.57 1.31 1.16 0.00 % November 1.96 1.82 1.47 1.31 1.16 0.02 80.76 December 1.87 1.82 1.33 1.31 1.17 0.02 19.24 ANUAL 120-160 ING.qxd 4/5/07 09:56 Página 142
Bankinter 2006 Business Report Bankinter 200 08. Shareholders’ equity & Bankinter shares 142 08. Shareholde
Market return Bankinter’s share price rose by 27.2% in 2006 to close the year at EUR 59.6. This, combined with the dividend yield of 2.2%, meant that Bankinter shares obtained a return of 29.9% in the year.
Over the past 10 years the market capitalisation of the Bank has risen at an average annual rate of 17.7%. In 2006 it rose 28.3%.
Market capitalisation (millions of euros) Market retu
5,000 Year purch 199
199 4,000
199
199
3,000 200
200
2,000 200
200
200 1,000 200
Bankinter Madrid St 0 1970 1990 1998 2002 2006 ANUAL 120-160 ING.qxd 4/5/07 09:56 Página 143
Bankinter 2006 Business Report 08. Shareholders’ equity & Bankinter shares 143
The table below shows the market return on Bankinter shares over the last 10 59.6. This, years. The return on Bankinter shares is compared with the Madrid Stock obtained Exchange general share price index. The pairs of figures at the intersection indicate the returns obtained by the market and by Bankinter shares, respectively. risen at an
Market return on Bankinter shares compared with Madrid Stock Exchange General Share Price Index (%)
Year sold 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Year purchased 1996 28.76 24.85 35.49 15.91 10.26 2.66 7.08 8.66 9.83 12.80 42.22 39.68 31.34 18.62 13.14 6.09 8.90 10.08 6.93 6.69 1997 21.06 38.98 11.92 6.07 -1.88 3.84 6.06 7.66 10.95 37.19 26.27 11.66 6.85 0.05 4.16 6.13 3.65 5.56 1998 59.55 7.61 1.49 -6.90 0.70 3.74 5.87 9.57 16.22 0.74 -1.70 -7.55 -1.42 1.68 1.97 8.46 1999 -27.42 -19.05 -22.21 -10.24 -4.81 -1.12 2.92 -12.68 -9.59 -14.34 -5.39 -1.00 4.64 11.15 2000 -9.73 -19.46 -3.66 1.86 5.19 10.36 -6.39 -7.89 -2.83 2.15 7.00 19.65 2001 -28.15 -0.47 6.05 9.28 16.05 -23.10 -1.00 5.17 16.21 17.78 2002 37.87 28.84 25.68 36.16 27.44 22.99 12.69 17.48 2003 20.40 43.99 83.10 18.70 43.10 62.13 2004 19.60 52.08 20.56 62.13 2005 27.16 34.49 Bankinter shares Madrid Stock Exchange General Share Price Index ANUAL 120-160 ING.qxd 4/5/07 09:56 Página 144
Bankinter 2006 Business Report Bankinter 200 Brand 144 Brand
Our brand is much more than a logo. ANUAL 120-160 ING.qxd 4/5/07 09:56 Página 145
Bankinter 2006 Business Report Brand 145
> ANUAL 120-160 ING.qxd 4/5/07 09:56 Página 146
Bankinter 2006 Business Report Brand 146
There are many organisations and people for whom a brand is no more than a logo. They relate the word brand only to what is tangible and visible. At Bankinter we think otherwise, our definition of what a brand is goes beyond what is strictly visible.
For Bankinter our brand is: The promise of an experience, a unique experience based on the quality of what we do.
The source of our identity, of what we are and what makes us different.
The emotional and rational 'contract', that we enter into with our different audiences.
Times change, our environment evolves and inevitably demands that we evolve too. Just as the Bank's business strategy has evolved in recent years, so too must its brand strategy.
What we are doing We are currently engaged in a necessary evolutionary process in which we are designing a brand strategy that will strengthen our identity and help us to create an even more relevant and attractive brand image, which in an intelligent manner will establish a dialogue with our existing and potential customers, with our shareholders, with every one of us within the Bank and with the community. ANUAL 120-160 ING.qxd 4/5/07 09:56 Página 147
r relate visible. ion of visible. ANUAL 120-160 ING.qxd 4/5/07 09:56 Página 148
Bankinter 2006 Business Report Bankinter 200 Brand 148 Brand
The programme > Diagnosis DNA New i The programme began with a diagnostic phase Phase two responded to a fundamental ques- In 2007 we which was completed in the second half of tion that every business should ask itself: menting th 2005. -If we did not exist, what would we be depriving clearer and the market of? cation. With the support of Saffron, a consultancy firm specialising in corporate identity matters, This phase consisted of revitalising the brand interviews were conducted with opinion leaders DNA by developing an idea or positioning, toge- within the organisation and an extensive ther with the values which define this essence. 'emotional' and visual audit of our identity was The brand idea is based on something that we performed. do particularly well at Bankinter: knowing how to think. This diagnosis produced recommendations for simplifying the architecture of the Bank's brands with the aim of boosting the unique value of the principal brand. ANUAL 120-160 ING.qxd 4/5/07 09:56 Página 149
Bankinter 2006 Business Report Brand 149
New image
In 2007 we will continue defining and imple- At the end of the programme, we will know that the menting this strategy with a new image and a implementation of the new strategy has been successful if our clearer and more consistent form of communi- brand is seen to: cation. Represent something That it is based on a different and clear idea, tied to a coherent set of values and with a different personality.
Be three-dimensional The brand idea, the values and personalities are not merely a veneer, they must permeate each aspect of the organisation: the products and services, the physical environment, the communication and the behaviour.
Be aspirational as well as pragmatic With something ambitious in what it offers, giving good reasons for standing out among competitors. ANUAL 120-160 ING.qxd 4/5/07 09:56 Página 150
Bankinter 2006 Business Report Bankinter 200 Brand 150 Brand
The brand idea is what makes The brand idea reflects what we are, it helps us to evolve, it is demanding and challenging. It is our brand much more than a also goes against the complexity, the processes mere logo on the door of a and the status quo of conventional banking. For our cus branch office. It fills it with The Bankinter brand idea is focused on Thinking le content by defining the vision Thinking of doing ba Thinking is a vital process for our Bank, it is through rel we must follow to be the best what has made us the benchmark pioneer bank innovation, bank in the world. in Spain. We were the first to provide an with their w Internet banking service, the first to bring making it e banking to cell phones and the first to send them to ma SMS messages to confirm card payments. money and Thinking means we are us always one step their gains. ahead of the rest.
Bankinter is a bank that thinks, for people that think. We are a special bank where lively minds find honest answers to all the needs of
our audiences. For the com It is to invo A bank with staff who really know what they intelligently Promoting are doing, for people who know what they for develop want. A bank that convinces the experts, but also attracts those who are not, with well thought-out, relevant solutions, that add value and are implemented efficiently. ANUAL 120-160 ING.qxd 4/5/07 09:56 Página 151
Bankinter 2006 Business Report Brand 151
For us It means making a joint effort to achieve a joint ambition. For our customers A challenge that brings out the best Thinking leads to a way in each of us. of doing banking through relevant innovation, that fits in with their way of life, making it easier for them to manage their money and increasing their gains. For the financial press It means always offering them an informed, objective and influential point of view, clearly in the vanguard of the banking sector. Audiences Our brand idea must be experienced by each of our audiences so that it becomes something real.
For our shareholders For the community It is a way of generating value It is to involve ourselves through intelligence and intelligently in society. originality. Promoting innovation as a tool for development.
For our partners It is to challenge convention with originality and to share the concern for good thinking and relevant innovation. ANUAL 120-160 ING.qxd 4/5/07 09:56 Página 152
Bankinter 2006 Business Report Bankinter 200 Brand 152 Brand
The values of the brand suggest the model of behaviour that we must follow as a Our values bank. They are in everything that Bankinter says, in everything it does and in A per everything it achieves. These values help us to project and to reinforce the brand idea.
The Bankinter brand has five values: intelligence, relevant innovation, integrity, agility and originality.
1. 2. 3. 4. 5. Intelligence Relevant Integrity Agility Originality innovation and provocation
A bank that thinks We move early and We have quite clear We are and must be We think and we act things through and change the way of that we are more able to provide differently. gives food for thought. seeing and doing responsible for the solutions, quicker and We are stubbornly We use knowledge to things. impact of our actions more efficient than the different, we are surprise. We try hard to At Bankinter, on society. other banks. continually looking for understand the needs innovating is Although it is We take nothing for ways to be unique. of our customers better something we something that is taken granted. We act. To What is logical, if we than any other bank. constantly confirm with for fact in the sector, identify opportunities. are different, is for our In sh facts. we like to reaffirm our To adapt to a society bank to propose Relevant innovation honesty in our way of that is on the move. To something original. To means applying big thinking, speaking and give effective answers. be different. To make ideas to the small acting. We understand simple products. To details as well. If you the true meaning of apply big initiatives to move forward, you do transparency and we the small details. not stay in the same strive to demonstrate it place. To avoid staying every day. To think in the same place, you with integrity. To think innovate. of everything and everyone. ANUAL 120-160 ING.qxd 4/5/07 09:56 Página 153
Bankinter 2006 Business Report Brand 153
ollow as a Because you don’t just have to be, you have to be seen to be. and in A personality the brand If our idea and values define the way we are, our personality defines the way we appear: how we look and the way we speak as a bank.
integrity, Our personality presents us as a bank:
Sophisticatedly simple Intelligent and informed Provocative A trifle arrogant, but not at all egocentric 'Stubbornly different' lity Constant ation With a marked opinion that is highly considered in the sector
d we act
ornly are ooking for nique. al, if we In short, so that Bankinter can continue to be what it is, we are: is for our In short Implementing a brand strategy that will reinforce our position as an innovative ose bank. riginal. To Revitalising our brand’s DNA, both conceptually and visually. To make Being unique and different. ucts. To tiatives to Basing our brand idea on something that we do especially well: tails.
Knowing how to think Winning over with our intelligence. ANUAL 120-160 ING.qxd 4/5/07 09:56 Página 154
Bankinter 2006 Business Report 154 ANUAL 120-160 ING.qxd 4/5/07 09:56 Página 155
Exhibits ANUAL 120-160 ING.qxd 4/5/07 09:56 Página 156
Bankinter 2006 Business Report Bankinter 200 Exhibits 156 Exhibits
Information for shareholders & customers Bankinter Private indi The Statutory Report of Bankinter S.A. is presented at the Annual Shareholders’ Private indi Meeting and is available to all the Company’s shareholders. The information it Private indi contains comprises the period 1 January-31 December 2006. The previous Report, Private indi relating to 2005, was published on 15 March 2006. Private indi Private indi This document, prepared by all the Bank's areas, is addressed to Private indi shareholders, customers and any other stakeholder that has dealings with the Private indi Bank with no restriction whatsoever. Stock mark SMEs (8:00 Quarterly consolidated earnings reports are issued in January, April, July SMEs (serv and October and are available to shareholders. Corporate ( Corporate ( 901 30 33 0 Customer Service Office (SAC) Shareholders Office Information Cecilio Carracedo Fernández Pablo Santos Romero Avda. de Bruselas, 12 Pico de San Pedro, 2 *Business h 28108 Alcobendas - Madrid 28760 Tres Cantos - Madrid 24 hours a Tel. 901 113 113 Tel.: 913 398 330 - 913 397 500 Also, if you Fax: 916 234 421 Fax: 913 398 323 peninsular E-mail: [email protected] E-mail: [email protected]
Communication Blanca Hernanz Bodero Pº Castellana, 29 28046 Madrid Tel.: 913 397 945 Fax: 913 398 051 E-mail: [email protected]
Investor Relations Correspondent banks Gloria Ortiz Portero Jose Gutierrez Ariño Pico de San Pedro, 2 Pº Castellana, 29 - 28046 - Madrid 28760 Tres Cantos - Madrid email: [email protected] Tel.: 913 398 256 Tel.: +34 913 398 134 Fax: 913 398 320 Tel.: +34 913 397 500 E-mail: [email protected] Fax: +34 913 397 556 ANUAL 120-160 ING.qxd 4/5/07 09:56 Página 157
Bankinter 2006 Business Report Exhibits 157
Bankinter Telephone Banking telephone numbers Private individuals (service in Spanish)* 901 13 23 13 eholders’ Private individuals (service in Spanish, calls from abroad) +34 91 657 88 00 ation it Private individuals (service in Catalan) 901 23 23 23 ous Report, Private individuals (service in Catalan, calls from abroad) +34 934 10 84 85 Private individuals (service in English) 901 135 135 Private individuals (service in English, calls from abroad) +34 916 57 88 01 Private individuals (service in German) 901 12 00 68 with the Private individuals (service in German, calls from abroad) +34 916 23 44 16 Stock market specialists 902 13 11 14 SMEs (8:00 a.m. to 8:00 p.m., Monday to Friday) 901 15 15 15 pril, July SMEs (service in Catalan, 8:00 a.m. to 8:00 p.m., Monday to Friday) 901 16 16 16 Corporate (8:00 a.m. to 7:00 p.m. Monday to Thursday and 8:00 a.m. to 6.00 p.m. Friday) 901 10 19 01 Corporate (service in Catalan, 8:00 a.m. to 7:00 p.m. Monday to Thursday and 8:00 a.m. to 6.00 p.m. Friday) 901 30 33 03 Information for non-customers 901 13 13 13
*Business hours d 24 hours a day, 365 days a year, you can call 901 13 23 13 to use the Automatic Service to make inquiries and bank transactions. 7 500 Also, if you wish, you can request the assistance of an operator, Monday to Saturday from 8:00 a.m. to 10:00 p.m. (Spanish peninsular time), by dialling or saying ‘0’. kinter.es
Madrid es ANUAL 120-160 ING.qxd 4/5/07 09:56 Página 158
Bankinter 2006 Business Report Bankinter 200 Exhibits 158 Exhibits
Management structure
Management Committee
Secretary of the Bank and of the Board of Directors Rafael Mateu de Ros
General Manager Customers & Networks Carlos Ruiz-Jarabo
General Manager People and Business Development Chairman CEO Pablo de Diego Juan Arena de la Mora Jaime Echegoyen
General Manager Innovation Fernando Alfaro
Deputy General Manager Markets & Products Lázaro de Lázaro
Deputy General Manager Risks Ana Peralta
Deputy General Manager Technical Resources Jesús Marquina
Deputy General Manager Financial Management & Investor Relations Jacobo Díaz ANUAL 120-160 ING.qxd 4/5/07 09:56 Página 159
Bankinter 2006 Business Report Exhibits 159
Organisation Managers rs Eduardo Ozaita Vega Andalusia Joaquin Da Silva Castaño Balearic Islands Victoriano Hernández Lera Castilla José Luis Dionisio Cervantes Castilla-La Mancha and Extremadura Antonio Fayos Crespo Catalonia Sebastián Alvarado Díaz-Agero Las Palmas Guillermo Pesquera Galdós Eastern Spain José Luis Vega Riestra Madrid - East Juan Villasante Madrid - West Antonio Berdiel Bitrian Navarra-Aragón-Rioja-Soria Antonio Rodríguez Fernández Northwest Luis Fernando Azcona López North José Pérez Jiménez Tenerife ANUAL 120-160 ING.qxd 4/5/07 09:56 Página 160
This document is a translation of a duly approved Spanish-language document, and is provided for informational purposes only. In the event of any discrepancy between the text of this translation and the text of the original Spanish-language document which this traslation is intended to reflect, the text of the original Spanish-language document shall pevail.
The 2006 Bankinter Annual Report is available on CD-Rom; to obtain a copy please contact Bankinter’s External Communications Department or request it by e-mail at: [email protected]. The list of Bankinter’s Branches and Agents is provided in a separate leaflet accompanying this Annual Report.
Published by: Bankinter’s External Communication Department
Front cover and graphic design by: Saffron
Development, execution and graphic production by: Gosban 902 431 766 www.gosban.com
Legal Deposit: B-
Printed on chlorine-free ecological paper.