Integrated Report
Governance Report
Financial Statements
Special 50th anniversary
annual report 2015
04. Strategy

Growth and flexibility

Bankinter's strategy is essentially growth oriented. Its trajectory over the course of time has been marked by its commitment to growth. Even during the recent financial crisis, obliging the sector to contract its activities in many areas, Bankinter's main business indicators still continued their upward trend.

Historically, the growth of Bankinter has occurred organically. In its half century of experience, the bank's development has been done by its own means, without external acquisitions. However, in September 2015 Bankinter announced the purchase of the Barclays retail business in Portugal. This was not about a change in strategy, but is an important turning point, because it had never taken a decision with these characteristics and also because it represents the first step toward internationalisation of a bank that --until now-- had been exclusively operating in Spain.

European outlook

The explanation for the operation in Portugal must be sought in the need to expand the horizon of a business model that has proven to be successful on the Spanish market. The eurozone, with a single banking supervisor, a single currency and common legal guarantees, already comprises part of the bank's natural business environment. In addition, Portugal offers a great potential for growth, due to its geographic, economic and commercial proximity, as well as the factor that some of Bankinter's leading customers requested services there. Moreover, the difficult situation of the Portuguese economy is a challenge that can be converted in an opportunity for growth.

The bank's management experience during complex times was roundly proven during the financial crisis in Spain. In that phase of severe reductions and restructurings, Bankinter made good use of its better starting position compared to other institutions, to continue growing and gaining in market share. Finally, the assets acquired from Barclays are a healthy business that is well managed and that fits perfectly with Bankinter's strategic positioning, due to its orientation toward high revenue customers, both for private and personal banking.

Strategic response

The expansion to Portugal is also part of the bank's strategic response to the growing difficulties to make the traditional banking business model profitable, which is largely based on net interest income. The evolution of interest rates, close to zero, limits credit institutions' capacity to earn money by taking deposits and giving loans. To overcome this dependence on interest income, Bankinter wants to take advantage of the network and skills of its professionals in Portugal, with the aim of growing those businesses in which interest rates are not essential, such as private banking and assets management.

To the same end, in 2015 Bankinter strengthened its lines of business that were less dependent on net interest income on the Spanish market. This is the case for Enterprise Banking (with the growing contribution from International Business), Private Banking (well supported by the agent network and complemented by the Luxembourg branch) and even consumer financing. Although the latter is dependent on the evolution of interest rates, thanks to the higher margins in this line of business, it has a greater potential for returns than other areas centred on credit transactions.

The innovation gene

Another of Bankinter's strategic core areas is innovation, which is part of the institution's corporate genes and has let it become established on the cutting edge with regard to its offering of products and services in the national financial sector. From the bank's point of view, the key to the innovation process is not so much having ideas, but translating them into sustainable business sources and foreseeing the large changes the industry will face. In short, it is not about launching loads of laboratory projects on the market but is instead about understanding what customers need and transforming this knowledge into a profitable business opportunity for the bank.

The most obvious example of this policy is COINC. This financial services platform is not simply a project to apply digitisation to the traditional banking business, but instead is a complete digital ecosystem in and of itself same with great operating simplicity. The fact that all operations in COINC can be done online is attractive to young customers and a formula for success, as it makes the disintermediation and entry of large technology companies with which youth are already familiar difficult.

The challenges for 2016

Bankinter's strategic challenges for 2016 can be broken down into two broad areas:

Vertical projects to deepen the organic growth strategy and maximise business in Private Banking, Enterprise Banking and consumer financing, as well as integrating the Portuguese business.

Cross-area projects to renew the technological platform, redesign processes and develop digital banking.

These past and future action lines make Bankinter's flexibility clear for competing in an extremely complex scenario, beset by low interest rates, growing regulatory pressures, new geopolitical balances, the technological revolution, customers' behavioural transformation and more intense competition. The speed of the changes that are taking place in the financial sector demands quick and decisive responses. Only flexible companies will be able to put them into practice successfully.

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