Results 2Q10 Thursday, July 22nd 2010 1
Results2Q10Thursday, July 22nd 2010
1
Bankinter presents its financial statements following format and criteria stated byCircular of Banco de España 4/04.
Bankinter cautions that this presentation contains forward looking statements. Suchforward looking statements are found in various places throughout this document andinclude, without limitation, statements concerning our future business developmentand economic performance. While these forward looking statements represent ourjudgment and future expectations regarding the development of our business ajudgment and future expectations regarding the development of our business, anumber of risks, uncertainties and other important factors could cause actualdevelopments and results to differ materially from our expectations. These factorsinclude, but are not limited to (1) general market , macro-economic, governmentaland new regulations, (2) variation in local and international securities markets,currency exchange rates and interest rates as well as change to market andcurrency exchange rates and interest rates as well as change to market andoperational risk, (3) competitive pressures, (4) technological developments, (5)changes in the financial position or credit worthiness of our customers, obligors andcounterparties.
2
Results AssetQ litQuality
Solvency TheBusiness Business
3
Resilient resultsResilient results
Gross operating -9% 32% operating incomestability
Operational CostsBanking Group
Income from non credit risk businessstability g p risk business
4
The gross operating income shows The gross operating income shows stability despite headwinds
Gross operating income (million €)
-1,8%612,3 601,1
1H09 1H10
5
Increasing diversification of incomegsources
Gross operating income breakdown (million €)
Insurance
32%141,7
24 8
Asset Management
Brokerage
32%24,8
24,2410,3
6
Net Interest Income reflects the effect f th i ld l tiof the yield curve evolution
Net Interest income (million €) Difference between the 12 month
-22,2
Net Interest income (million €)
2 5%
and 3 month Eur12M moving avg
22,2
400,7311,6 1,5%
2,0%
2,5%
302 2
307 6 312 0 303 6
88,78,0
,
0,5%
1,0%302,2
307,6 312,0 303,6
-5,4 -1,0%
-0,5%
0,0%
jun
-08
ag
o-0
8
oct-
08
dic
-08
feb
-09
ab
r-0
9
jun
-09
ag
o-0
9
oct-
09
dic
-09
feb
-10
ab
r-1
0
jun
-10
1H08 1H09 1H10
Basic NII Lag effect Mortgages
7
The ALCO portfolio reduces its contribution to NII
ALCO portfolio’s carry (in million €)
39,7-16,3%
33,2
1H09 1H10
8
Fee income continues to be resilient despite market volatility
Net fees (million €)
1H2010 1H2009 Diff Diff %1H2010 1H2009 Difference Diff. %
Transactional 36,1 36,9 -0,8 -2,2
AUM 23 5 20 4 3 2 15 6AUM 23,5 20,4 3,2 15,6
Insurance 21,1 18,3 2,8 15,4
Broker 20,9 22,2 - 1,3 -5,8
Risk 15,2 12,9 2,3 18,2
Unpayment + other 15,7 25,0 - 9,3 -37,4
Fees received 132,5 135,7 - 3,1 -2,3
Fees paid 32,5 34,6 -2,1 -6,0
Net fees 100,0 101,0 -1,1 -1,1
9
Trading gains are backed by retail businessTrading income(million €)Trading income(million €)
75,685%
Retail client driven
51,9
+Client Business+99% Hedges
+174% Intl. I. Funds
1H09 1H10+31% Intl. equities
10
Other operating results reflect the p gcontribution of LDA insurance business
Other operating results (million €)
97,4
39,4,
1H09 1H10
11
Supported by cost contention efforts Supported by cost contention efforts and efficiency gains
Operational Costs (million €)
-9 2% -8 8%-9,2%Banking
Group29 754 13
-8,8%LDA
comparable
260 236 45,6%236 ,Cost Income ratio
Banking Group
1H09 1H10Banking Group LDA* Intangible Amort.
12* LDA only 2 months in 1H09. Full Year -8,8%.
1H10 pre provision profit continues to h ili d b b ‘09 show resilience and absorbs ‘09
repricing effect.g
Pre provisioning profit (million €)
-13%88,7 8
229 8269,2+17,1%229,8
,17,1%
1H09 1H10Basic Pre Provision Profit Repricing Effectp g
13
Increasing NPL coverage and Increasing NPL coverage and accelerating provisions
Break down by type of provision (in million€)
22,6
74% 110,0
174,474%
coverage ratio
-66,8
1H09 1H10
f
14
Specific Loss recognition acceleration
Generic
1H10 results improve the groups 1H10 results improve the groups solvency and balance sheet structure
1.- Enhanced quality and diversification of income sources
2.- Cost contention, efficiency and productivity gains
3.- Unrealized gains on Balance Sheet untouched
4.- Improved risk coverage and limited use of the generic provisiong p
15
Results 1H10P&L Thousand € jun-10 jun-09 Dif Dif % Interest and related income 569.637 967.637 -397.999 -41,13Interest and related charges 257 948 566 951 309 003 54 50Interest and related charges -257.948 -566.951 309.003 -54,50Net Interest Income 311.689 400.685 -88.996 -22,21Dividend income 11.704 7.580 4.124 54,40Equithy method 4.758 11.636 -6.878 -59,11q y 4.758 11.636 6.878 59,11Net fees and commissions 99.960 101.017 -1.056 -1,05Trading income 75.576 51.944 23.632 45,50Other operating income/expense 97.411 39.391 58.020 147,29Gross Operating Income 601.099 612.253 -11.154 -1,82Personnel expenses -164.043 -154.665 -9.377 6,06General expenses/amortization -159.843 -139.095 -20.748 14,92Pre pro isioning profit 277 212 318 492 41 280 12 96Pre provisioning profit 277.212 318.492 -41.280 -12,96Provisions 2.305 -14.956 17.261 n.rAsset impairment charges -130.241 -110.558 -19.683 17,80Net Operating Profit 149 276 192 978 -43 702 -22 65Net Operating Profit 149.276 192.978 43.702 22,65Gains/losses on disposals of assets -6.015 -1.394 -4.621 331,37Profit Before Taxes 143.261 191.583 -48.322 -25,22Corporate tax -38.050 -52.914 14.864 -28,09
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Net Income 105.211 138.670 -33.459 -24,13
Best Asset QualityBest Asset Quality
1/2 1/3 No significant
SystemNPL ratio
SystemProblematicAssets
sovereign risk exposureAssets exposure
17
Outperforming the system in NPLs p g yover the cycle
*NPL ratio evolution *
1,9%5,50%
Sector
Bankinter
,Developer loans
o/total loans
1/22,69% 1/2Overall NPL ratio
Vs system
86
88
90
92
94
96
98
00
02
04
06
07
08
09
1T
10
2T
10
18
* Sector data : May 2010
NPL entries continue to slow down
Q t l t NPL t i ( illi €)Quarterly net NPL entries (million €)
121,7
87 9
111,4
87,9
51,3
72,9
,
2Q09 3Q09 4Q09 1Q10 2Q10
19
The non performing book has significant collateral coverage
NPL’s distribution by type of collateral
22%29%
54%LTV of NPL
49%
1sr residence <80% LTV Personal guaranteeOther mortgages
20
Foreclosed assets are low compared to Foreclosed assets are low compared to system levels
- Annual gross additions of foreclosed assets (million €) -
350M€0,6%
market share
22%
268
22%Coverage
o/ accounting value
36%59
23Coverage
o/ appraisal value
23
2008 2009 1H10
21
and show a balanced distribution by and show a balanced distribution by type and geography
- Foreclosed assets by type (in million € )-
10
87
10
87
106Commercial
Coastal
Urban
73
Urban
Land
Other
74
22
Facilitating their disposal with no Facilitating their disposal with no negative impact on results
- Evolution of foreclosed assets sales-
163 18045 00
34,438,3
154 163
120
140
160
180
30,00
35,00
40,00
45,00
+120% sales(annualized)
34,4
60
80
100
15,00
20,00
25,00 13% avg. discountOver gross Book Value
2,8
18
0
20
40
0,00
5,00
10,00
2008 2009 2010
Book Value Num. Assets
23
An outstanding asset quality further i f d h ddi h reinforced when adding up other
problematic assets
- “Problematic assets” (in mill €)-
56%Bankinter System*
NPL 1 217 100 372
56%Coverage vs
31% the systemNPL 1.217 100.372
Substandard 166 59.000
Foreclosures 350 59 700Foreclosures 350 59.700
TOTAL 1.733 219.072
Adj t d ti 3 8% 11 6%
1/3Of the system
0,8% market shareAdjusted ratio 3,8% 11,6%
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* Source Bank of Spain financial stability report and statistics
No significant sovereign exposure with No significant sovereign exposure with reduced mark to market risk
Trading bookN t t S i h i i kNo net exposure to Spanish sovereign riskNo exposure to peripheric UE sovereign risk
HTM portfolio : No mark to market risk2,4bn€: 96% Spain Gov, 4% French Gov.
AFS portfolio : limited mark to market risk0,9bn€: 45% Spain Gov., 11% French Gov., 8% German Gov., 35% Corporate
25
Adequate solvency Adequate solvency l llevels
74% 7,2%bl
1,3bn€NPLCoverageR ti
ComparableCore CapitalRatio
Retail depositsin 2Q10Ratio Ratio in 2Q10
26
We continue to reinforce provisions
Total provisions evolution (million €)
We continue to reinforce provisions
Total provisions evolution (million €)
+17%971 +17%Total
provisions
830971
236572
573328
2Q09 3Q09 4Q09 1Q10 2Q10
G i S ifi F l d A tGeneric Specific Foreclosed Assets
27
Better coverage quality and still significant loss net-out potential
Net NPL entries vs. provisions in the quarter (in %)
74%
26 9
64%alfa
57%74%
18,8
26,9
170%38,6 47,1 170%
Coverage w/ guaranties
System Bankinter
Specific cover Generic coverSpecific cover Generic cover
28
Foreclosed asset coverage levels are also adequate and impact of new BoE provision requirements is lowp q
Maximum potential impact of new BoE provisioning system for real estate assets (million €)syste o ea estate assets ( o €)
Year of provision Additional provision Year of provision requirement
Additional provision requirement
2010 5,9,
2011 26,8
2012 2,3
29* Based on existing stock
Solvency is adequate for the business Solvency is adequate for the business risk profile
Comparable core capital ratio (%)
6,517,210,71
Core w/o deduct. Generic net Core comparable
30
Bankinter has an adequate solvency buffer …
1 100Unrealized
Capital and provision coverage (million €)
1.100capital gains
971 3.183
560
2.083552
560
One year pre prov profit
Excess capital Provisions Totalpre.prov. profit
* 1H2010 annualized 31
… even in heavily stressed scenariosy
S l Solvency buffer
X2 X2 current “problematic asset levels”* (7,6% NPA ratio)
6 Yrs3.183
6 YrsThe highest ever cost of specific provisions (486M€ 2009)
lequivalent to 440bn€ “problematic assets” in the system (23% NPA ratio)p y ( )
* Including foreclosed assets and substandard loans 32
Stress assumptions need to account for the distribution of the book and its qualitythe distribution of the book and its quality
Applying standard expected losses sector wide means under stressing pp y g p gweaker institutions and over stressing lower risk profile ones
IImmaterial exposure to developers* and real estate .
1/2 th NPL ti f th t1/2 the NPL ratio of the system
1/3 the NPL ratio of the system in residential 1/3 the NPL ratio of the system in residential
mortgages (59% of the loan book)
Lower regulatory LGS’s Lower regulatory LGS s
Higher provisioning levels
* Developer loans : 1,9% loan book
Higher provisioning levels
33
Working ahead of wholesale gmaturities during 1H10
Annual wholesale maturities vs issues (in bn€)
90%
2 5
3,6 90%2010 maturities
financed
2,5
1,6
2,2
8 5bn€0 0
8,5bn€Liquid assets
2009 2010 2011
M t iti IMaturities Issues
34
Increasing the retail base funding base Increasing the retail base funding base and gaining market share in deposits
- Retail funding evolution (in bn€) -
+1 3bn€1,2
1,0
0,9+1,3bn€
+8% in 2Q10
16,6 15 917,2 +10bps15,9 +10bps
Market share 1,5%
4Q09 1Q10 2Q10
Deposits ex repos Retail CP
35
Deposits ex repos Retail CP
A strong business A strong business d lmodel
33,3 Gaining market
LDANew Clients(thousands)
market share
+5,5%Premiums
(thousands)
36
Clear strategic focus on quality of g q yservice
Evolution of quality ISN indicator
74,22 74,15
4 5 4 3+4,5 +4,3
69,77 69,88
2Q09 3Q09 4Q09 1Q10 2Q10
37
BK Sector
Investing in client acquisition in g qobjective segments
Number of clients acquired 1H10
11.850 14.98911.850Affluents
912
14.989Individuals
5 521Total
912Corporates
5.521Sme’s
33 27233.272
38
Beating the market with a best quality g q ynew mortgage production
Residential mortgages annual growth rate evolution (%)
Internal credit rating of new residential mortgage production
50%
60% 1H10 1H09Volume 1.912,8 1.230,8 Number 9 071 0 5 869 0 6,2
6,4
30%
40%
Number 9.071,0 5.869,0
5,6
5,8
6
10%
20%
4,8
5
5,2
5,4
-10%
0%
Bankinter System
,
Jun
-09
Jul-
09
Ag
o-0
9
Sep
-09
Oct
-09
Nov
-09
Dic
-09
En
e-1
0
Feb
-10
Ma
r-1
0
Ab
r-1
0
Ma
y-1
0
Jun
-10
39
Bankinter System
…. and regaining market share in retail g gdeposits
- Retail funding evolution (in bn€) -
+1 3bn€
0,9
+1,3bn€+8% in 2Q10
17 2
1,0,
+10bps15,9
17,2 +10bpsMarket share
1,5%
1Q10 2Q10
Deposits ex repos Retail CP
40
A clear strategic focus in the affluent gand mass affluent segments
- Bankinter customer income profile-
30%
+16,5%20%
25%
30%
Affluent clients acquisition in
1H10
10%
15%
20%
0%
5%
10%
0%
< 7 7 - 14 14 - 21 21 - 28 28 - 35 35 - 42 42 - 70 > 70
Spain Bankinter
Income in Thous €
41
Spain Bankinter
Developing innovative added value p gservices for our target clients
- Brokerage number of orders (in thousand) -
Broker plusBroker plus
improve your If you wish, I can
986
866improve your vision as an equity investor
6% of total orders(in 3 monts of service)
1H09 1H10
22% Ibex3542
vs -22% Ibex35in the period
Outperforming the sector in the upper d f h ffl end of the affluent segment
Ranked 3º
SICAVS assets under management (million €)
+7% Ranked 3ºIn number of SICAVs
1.1841.266 7,7%
Market share
+5%Number of sicavs
1H09 2H10
43
AUM business is strong and the mix improvement continues
+15 6%Investment funds data
+15,6%fees
In thousand € 1H09 1H10 Dif %
f dOwn funds 5.335 4.494 -15,8%
Third party funds 381 1.046 174,4%
Total AUM 5.716 5.540 -3,1%
% monetary funds 59 46 -13%
Avg Fee (pbs) 66 70 6,1%
44
Distribution of insurance products keeps on supporting business results
+3%Pension funds (in million €)
+6 6% Saving
1 0911.163
+6,6%
+9% l f l
1.091
Non life policies
+15%Life policies
1H09 1H10Life policies
45
LDA continues outperforming the LDA continues outperforming the sector in policy acquisitions
Home insurance policies (in thousand)
55% +5%
Auto insurance policies (in thousand)
93
+55%
1.600 1.678
+5%
60
1H09 1H10 1H09 1H10
5,7%
46
5, %Market share
Transforming the business to achieve technological leadership and excellence in the transactional processesin the transactional processes
gneisgneis.Focalization and specialization
Processes centralization
Value chain differentiationValue chain differentiation
New business opportunities
47
In summary In summary ….
48
Enhanced quality of Best in class quality of results
Best in class asset quality
Solvency Business shows yadequate even in stressed
Business shows strength and clear focus
scenariosclear focus
49
A diff tA differentki d f b kkind of bank,
t bb l stubbornly diff tdifferent.
50