THE GROUP’S BUSINESS Key figures 31 The Banca March Group 33 Financial year 2019 37 Private banking and Wealth management 39 Unique co-investment products 42 Leaders in financing family businesses 45 Insurance Area 51 March A.M. 54 March R.S. 57 Banco Inversis 58 Corporación Financiera Alba: Investment portfolio 59 30 The Group’s business KEY FIGURES BANCA MARCH GROUP €m 2019 2018 Change KEY BUSINESS FIGURES Equity 1,947.3 1,807.8 139.5 Off-balance sheet Assets under Management 12,818.1 12,113.3 704.8 Loans managed 7,929.0 7,771.9 157.0 Investments in affiliates 648.4 609.1 39.4 Total assets 16,435.6 15,532.9 902.7 RESULTS Net interest income 154.1 144.8 9.3 Fee and commission income 319.0 323.0 -4.0 Operating income 146.4 137.2 9.2 Consolidated profit for the financial year 125.1 106.6 18.5 Profit attributable to the Group 125.1 105.2 19.8 CAPITAL ADEQUACY AND SOLVENCY RATIOS (%) Total capital ratio 16.15 16.02 NPL ratio 1.83 2.56 NPL coverage ratio 54.63 52.85 Foreclosed assets coverage ratio 56.00 59.49 NUMBER OF EMPLOYEES No. of employees 1,889 1,867 31 The Group’s business BANCA MARCH, S.A. €m 2019 2018 Change KEY BUSINESS FIGURES Equity 1,224.7 1,155.2 69.5 Customer deposits 10,878.0 10,479.4 398.6 Loans to customers 8,313.7 7,833.2 480.5 Total assets 13,783.9 12,913.8 870.0 PROFIT Net interest income 128.4 121.7 6.8 Gross income 301.6 305.3 -3.6 Operating income 117.7 133.4 -15.6 Profit for the financial year (*) 79.4 164.3 -84.9 NUMBER OF EMPLOYEES AND POINTS OF SALE No. of employees 1,423 1,401 No. of branches 169 177 No. of ATMs 470 432 (*) Profit for the financial year 2018 includes extraordinary capital gains of 89.8 million euros from the sale of shares in Corporación Financiera Alba, prohibiting a like-for-like comparison of the two years’ results. 32 The Group’s business BANCA MARCH GROUP The structure of the Banca March Group is geared primarily to the undertaking of Banca March’s banking activity, alongside Banco Inversis. The Banca March Group also delivers the insurance and asset management businesses. The Bank also owns a significant holding in Corporación Financiera Alba, one of Spain’s largest industrial investment holding companies. Banca March, the parent company, has been undertaking the Group’s banking activity since 1926. Our business model, which is geared towards entrepreneurs, enterprising families and family businesses as well as wealth management services, is implemented through the bank’s different specialist units: Wealth Management, Private Banking, Retail Banking and Corporate Banking. Our business model, which is geared towards The insurance business is delivered through March entrepreneurs, enterprising families and family Risk Solutions (March R.S.) and March Vida. The businesses as well as wealth management management of collective investment undertakings is delivered through March Asset Management (March services, is implemented through the Bank’s A.M.), March Gestión de Pensiones and Artá Capital. specialist units: Wealth Management, Private In the first half of 2019, Banca March acquired 25% of the insurance broker March JLT Correduría de Banking and Corporate Banking. Seguros. This transaction increased Banca March’s stake in the broker’s share capital to 100%, clearly evidencing its commitment to the future development of the business, which it considers to be a strategic component of its activity. As it embarks on this new era, the insurance broker will undergo a change of name, becoming March Risk Solutions (March R.S.). 33 The Group’s business Banca March also holds 100% of the shares in Banco Banca March’s shareholders are Juan, Carlos, Gloria and Inversis, a Spanish market leader in global investment Leonor March Delgado, who together own 100% of the The Group boasts a technology solutions and in outsourcing financial bank’s share capital; none of the shareholders exercises services to financial institutions, insurance providers and individual control, be it via share ownership or by any retail network of 169 other operators in the investment product distribution kind of agreement. business. Inversis provides investment services branches, including one related to the execution, custody and settlement of In addition, as referenced above, the Group holds a securities (including investment funds), depository and 15.02% stake in Corporación Financiera Alba, S.A., which in Luxembourg. administration services for investment and pension funds, undertakes stable, long-term investments in sector and the distribution of the main international asset leaders including Acerinox, Naturgy, Ebro Foods, Indra management houses’ products via its fund platform. Sistemas, Bolsas y Mercados Españoles, Viscofan, Parques Reunidos, Euskaltel and Cie Automotive. The Group boasts a retail network of 169 branches, including one in Luxembourg. It has eight Wealth Management centres, located in the Basque Country, Valencia, Madrid, Catalonia, the Balearic Islands, the Canary Islands and Alicante, as well as the Madrid Expansion and Luxembourg branches. The Corporate Banking business line is delivered out of five locations in Palma de Mallorca, Madrid, Barcelona and Valencia. Through these branches –in addition to the specialist Private Banking offices– we offer unparalleled tailored advisory services to our clients. 34 The Group’s business BRANCH NETWORK BY BUSINESS LINE 2019 2018 Retail and Private banking 155 162 Wealth Management 8 9 Corporate banking 5 5 International branches 1 1 Total branches 169 177 BRANCH NETWORK BY REGION 2019 2018 Balearic Islands 96 101 Canary Islands 20 22 Catalonia 10 10 Valencia 10 10 Madrid 17 17 Andalusia 9 9 Zaragoza 1 2 Bilbao 2 2 San Sebastián 1 1 Vitoria 1 1 Logroño 1 1 Luxembourg 1 1 Total branches 169 177 35 The Group’s business FULLY INTEGRATED EQUITY METHOD MARCH IGALCA CORPORACIÓN CANARIAS FINANCIERA ALBA 100% 100% 15.02% Fully integrated Fully integrated Equity method MARCH GESTIÓN MARCH ASSET DE PENSIONES MANAGEMENT 100% 100% Fully integrated Fully integrated MARCH MARCH INM. MARHIGAL INMUEBLES PATRIMONIOS 100% 100% 75% Fully integrated Fully integrated Fully integrated MARCH DE PRODUCCIONES INVERSIONES PRINVER 100% 74% Fully integrated Fully integrated PRINVER 43 MARCH VIDA 100% 100% Fully integrated Fully integrated BANCO MARCH RISK BAROJA INVERSIS SOLUTIONS 100% 100% 100% Fully integrated Fully integrated Fully integrated INVERSIS ASERPLAN GESTIÓN 100% 100% Fully integrated Fully integrated 36 The Group’s business FINANCIAL YEAR 2019 2019 RESULTS In 2019, Banca March posted attributable profit of €125.1 million euros, up 18.8% versus 2018. CHANGE VS 2018 The 2019 accounts reflect strong performances across all income streams - net interest income (+6.4%), gross PROFIT FOR income (+3.9%) and operating income (+6.7%) - as THE YEAR well as a substantial investment in technology and digitalisation, which will total 75 million euros upon completion of the 2018-2020 Digital Transformation +18.83% Plan. For the bank as a whole, the strength of the business is reflected by the growth secured in off-balance sheet assets (+11.2%), loans (+2.0%), deposits (+2.5%), equity (+7.7%) and total assets (+5.8%). 125.06 The Private Banking and Wealth Management business € MILLION posted double-digit growth in business volume (+13.8%), customers (+17.9%), off-balance sheet AUM (+10.1%) and customer funds (+13.6%). KEY FIGURES - BANKING ACTIVITY Banca March’s business model continues to be underpinned by robust financial and capital ratios: 2019 vs 2018 the bank boasts the lowest NPL ratio in the Spanish financial sector – 1.83%, versus a sector average of 4.80%, according to the Bank of Spain– without having resorted to discounted portfolio sales. The bank’s capital adequacy ratio (16.15%), LCR (528.26%), DTL (130.7%) and NPL coverage ratio (54.87%) are also among the strongest in the sector. +6.39% +3.94% +6.74% +18.83% Banca March’s consolidated NET INTEREST GROSS OPERATING PROFIT FOR net profit grew by 18.8% to INCOME INCOME INCOME THE YEAR 125.1 million euros. 37 The Group’s business 2019 RESULTS In a sector that destroys The bank launched six new real economy co- investment projects in 2019. At the end of the year, KEY FIGURES - BANKING jobs, Banca March a total volume of 770 million euros had been raised ACTIVITY for investment in a range of fields including logistics, continues to create them startups, care homes for the elderly and security, to ensure it always has among others. At December 2019, 2,236 Banca March customers 2019 Sector average the best teams. had signed up to the added-value Discretionary Portfolio Management (DPM) service, accounting for total investments of 877.4 million euros. This is a 1.83% 4.80% reflection of the excellent uptake levels enjoyed by NPL NPL the service, particularly by Next Generation, which In the Corporate Banking area, Banca March has offers discretionary portfolio management based on RATIO RATIO cemented its strategy as a leader in banking services megatrends for 700 customers, with 91.9 million euros for family businesses and entrepreneurial families, under management. specialising particularly in alternative financing, direct lending, customised treasury solutions and risk March A.M., the Group’s asset management business, 1 hedging. In Corporate Banking, lending grew by 8.2%, has consolidated its leadership position in themed 528.26% 162.2% business volume by 8.6% and customer numbers by funds with the launch of Mediterranean Fund, an LCR LCR 10.5%. environmental impact fund that invests in companies with exposure to the oceans economy, as well as In 2019, Banca March placed over 5.6 billion euros in water use and treatment.