At the end of the third quarter of the year the Bankinter Group consolidated the good performance of its various lines of business throughout the year, in which the Bank’s potential to continue growing and attaining higher market shares and profits is evident. This increased activity and a higher interest rate environment have led to improvements in all account margins and in all ratios: profitability, capital and efficiency.
As the bank explained in a note sent to the Spanish stock market supervisor, the CNMV, the Bankinter Group’s profit before tax at 30 September 2023 exceeded the 1,000 million euro mark for the first time, specifically 1,003.6 million euros, 66.8% more than a year ago. Net profit amounted to 684.7 million euros, 59.2% more than in the same period of 2022, despite having to pay the new financial sector tax this year, which for Bankinter amounted to 77.5 million euros.
Turning to the various ratios, the return on equity, ROE, increased to 17.1%, six percentage points higher than a year ago, with a ROTE of 18.2%, among the best in the European financial sector.
Non-performing loans contained
The NPL ratio remained at an optimal 2.2%, 9 basis points higher than a year ago, but well below the average for the sector, which according to the Bank of Spain stood at 3.5% at the end of July. However, Bankinter’s NPL coverage improved to 66.2% at the end of September.
The Bank’s efficiency ratio at 30 September improved substantially to 34.9%, a substantial improvement over the same figure a year earlier, which was 43.2%. Focusing specifically on the efficiency ratio of the business in Spain, it was 31.6%.
And as regards liquidity, the Bank’s volume of deposits continues to exceed the volume of loans, with a deposit/loan ratio of 104.9%.
Bankinter’s balance sheet
The Bankinter Group’s total assets at 30 September 2023 stood at 108,362.7 million euros.
The customer loan portfolio at the end of the quarter stood at EUR 74,879.2 million, 2.8% more than a year ago. Growth in lending in Spain was somewhat lower: 0.7%, the result of a slowdown in this activity in our market, although it compares well with the sector’s data, which point to a fall of -3.2% with data to August from the Bank of Spain.
Retail customer funds amounted to EUR 78,258 million, 2.6% more than 12 months ago, with a reduction in the current account portfolio but, at the same time, strong growth in time deposits. And all this at a time when there continues to be a shift from these funds to products of greater added value for customers, such as mutual and pension funds. Total off-balance sheet funds under management grew 17% year-on-year. All this growth in funds, on and off the balance sheet, reflects the Bank’s capacity to attract and capture customers in a very competitive environment.
The trend of growth in spreads continued in the first nine months, thanks to a greater commercial drive, particularly focused on value products and, in line with what has been happening since the beginning of the year, an upward trend in interest rates.
Net interest income amounted to EUR 1,638.7 million at the end of September, 53.8% more than a year earlier, with customer spreads rising each quarter to 3.03% at 30 September, reflecting good management of spreads.
Gross income, which includes all the Group’s revenues, amounted to EUR 2,005.1 million, 32.1% more than a year earlier. Net fees and commissions contributed 22% to gross income, excluding the bank tax.
Fees from operating, advisory and management services increased 2.6% in the first nine months. At the same time, fees paid to the Group’s partners (financial agents and customers of Partner Banking) increased 6.1%, given the good performance of these businesses. The difference between the two, net fees, amounted to EUR 459.1 million at September 30, 1.5% more than a year earlier.
Net operating income before provisions rose 51.3% to EUR 1,305.4 million, after absorbing operating expenses that increased 6.8% in the period, due to higher administration costs and higher variable remuneration of the workforce, but in any event lower than the growth in gross operating income.
Growth in all businesses and geographic areas
All the business lines on which the Bank’s diversification strategy is based are advancing at a good pace, consolidating a good year in all the parameters analysed. This is the case both in international business lines, particularly Portugal and Ireland, where growth is stronger, and in those more consolidated in the domestic market, such as Corporate Banking and Wealth Management, where the Bank continues to adapt its value proposition to the demands of the environment and customers’ needs.
In the Business Banking business, which continues to make the greatest contribution to the Group’s income, Bankinter strengthened its lending portfolio in a complicated environment, thanks to its solid commercial drive. This corporate loan portfolio totals 31.3 billion euros, 1.6% higher than a year ago. In Spain, growth was 0.7%, which compares well with the figures for a sector that declined by -4.4% in our market according to data to August from the Bank of Spain.
Within the Corporate segment, International Business continued to be a stronghold for the growth of this activity, with an investment portfolio of EUR 8,500 million in the third quarter, 6% higher than a year earlier. Other recent businesses, such as supply chain finance, are increasingly being well received by corporate clients, with a threefold increase in volume compared with the figures at the end of the year.
Bankinter’s Commercial Banking
As for the Commercial Banking business, or business with individuals, growth continues to be constant in all customer segments, with assets under management totalling EUR 99,400 million, which is EUR 9,500 million more than at 30 September 2022, an increase of 11%.
By segment, in Wealth Management, which includes customers with the largest assets, the volume managed amounted to EUR 55,300 million, 12% more than a year ago, after capturing EUR 2,400 million of new net assets so far this year. Retail Banking, which brings together the rest of customers, managed assets amounted to EUR 44,100 million, 9% more than at 30 September 2022, with net new assets of EUR 1,900 million in the year to September.
Mutual and pension funds
This growth was significant in off-balance sheet managed funds, which include own and third-party mutual funds, pension funds, asset management and sicavs, all of which are products that provide greater value for customers. Growth in these off-balance sheet funds was 17% in the last twelve months and 12% compared to the figures at the end of 2022. By product, own mutual funds grew 16% between September 2023 and September 2022, third-party funds 19%, pension funds 11% and the wealth management and SICAVs business 18%.
The balance of the portfolio of payroll accounts at September 30 was EUR 13,400 million, 19% lower than a year earlier, although part of this fall was due to the transfer of assets to mutual funds and wealth management. On the other hand, it is noteworthy that the number of accounts increased by 4% in the period, which indicates that this product, leader in its category, continues to have great power to attract new customers to the Bank.
Bankinter’s mortgage portfolio
On the assets side, the Bankinter Group’s residential mortgage portfolio at the end of September totalled 34,500 million euros, compared with 33,400 million a year ago, representing growth of 3.2% in the last twelve months.
The current slowdown in the real estate market and, consequently, in mortgage activity, due above all to the rise in interest rates, has resulted in new mortgage production of 4.3 billion euros so far this year, 17% less than in the same period of 2022, which was a good year, although the figure is similar to that for the same period of 2021.
Bankinter’s activity in the different geographical areas in which it operates, outside Spain, continues the growth trend shown in previous quarters. In the case of Portugal, the good performance of business is very noticeable in all the headings of its income statement.
Lending in this country amounted to EUR 8,700 million, with annual growth of 13% and an NPL ratio of just 1.3%. Of this portfolio, EUR 6,100 million corresponds to investment in Retail Banking and the rest to Corporate Banking. Customer funds grew 16% to EUR 7,300 million, while off-balance sheet funds increased 3.9% to EUR 3,900 million.
Growth in Portugal
All this business activity is reflected in the income statement in Portugal, where there was strong growth in all margins: net interest income, up 109%; gross income, up 73%; and income before provisions, up 140%. Bankinter Portugal’s profit before tax amounted to EUR 136 million at the end of September 2023, 154% higher than a year earlier.
The performance of the business in another of the countries in which the Bank operates, Ireland, through the Avant Money brand, is equally satisfactory. The investment portfolio in Ireland amounted to EUR 2,700 million, 29% more than in the same period of 2022. Of this portfolio, EUR 1,900 million corresponds to mortgages, which grew 33% in the year, and the rest to consumer finance, with 20% growth.
Bankinter Consumer Finance, the Bank’s subsidiary specialising in consumer business and where it consolidates activity in Ireland, continued to show the strength of previous quarters. The investment portfolio of this subsidiary amounted to EUR 6,400 million, of which EUR 1,900 million corresponds to the mortgages in Ireland mentioned above, and the rest to personal loans, EUR 3,100 million, with 27% growth, and the rest to cards in their various forms.
Lastly, the Group’s digital brand, EVO Banco, is performing equally well. Of note was the good reception of the new and competitive asset and liability products launched in the last few months. On the investment side, the portfolio grew 30% year-on-year to EUR 3,265 million at September 30, with a very low NPL ratio of 0.5%. New mortgage production in the first nine months amounted to EUR 699 million, 4% lower than in the first three quarters of 2022, although market circumstances today are substantially more complicated than a year ago.