Report. Business Report

Transcription

1 Report Business Report

2 20 Business Report

3 People More talent +13.8% 3,981 A year ago 4,530 Now

4 Growth with profitability +23.5% ROE % ROE % more than in 2006

5 Proven solvency Non-performing loans ratio 0.36% Solvencia demostrada NPL ratio of the mortgage portfolio 0.18% Coverage ratio of non-performing loans 370%

6 An excellent year PBT million +53.2% up on 2006

7 Consolidated financial highlights 6 Consolidated financial highlights /06 (%) Balance sheet (thousands of euros) Total assets 46,5,769 49,648, Loans and receivables 31,653,8 37,580, Loans and receivables ex-mortgage securitisations 34,416,012 39,923, Customer funds 32,683,580 38,774, Off-balance-sheet funds under management 11,499,765 11,350, of which: investment and pension funds 9,988,850 9,468, Controlled customer funds 44,183,345 50,125, Earnings (thousands of euros) Profit before tax 316, , Net profit 208, , Ratios (%) Non-performing loans ratio ex-securitisation Non-performing loans coverage ratio Efficiency ratio ROE ROA Capital ratio Tier

8 Consolidated financial highlights /06 (%) Share data EPS, Net earnings per share DPS, Dividend per share (euros) PER, Price/Earnings ratio (times) Price/book value (times) EPS, Net earnings per share (euros) + provisions Branches and centres Non-specialised branches Commercial management centres Corporate SMEs Private Banking Virtual branches Number of agents 1, ,70 Telephone and Internet branches Workforce No. of full-time equivalent employees 3,981 4,

9 Chairman's Letter to the Shareholders 8 During the months that I have been in charge at the Bank I have been able to observe on a daily basis the power there is in this marvellous business, the huge value of its intangible assets, its capacity for growth, the soundness of its balance sheet and, over and above any other consideration, the qualities of its team of people and its senior management who, in my opinion, are the best in the Spanish financial sector.

10 Chairman's Letter to the Shareholders 9 20 Dear Shareholders: Since this is the first occasion on which I am addressing you as the Chairman of Bankinter, I should first of all like to refer to my predecessor. In April 20, Juan Arena took the decision to tender his resignation as Chairman of Bankinter, after devoting 37 years of his life to the Bank, 9 of them as Chief Executive Officer and the last 5 as Chairman of the Board of Directors. On behalf of the Board and everyone at the Bank I would like to express our gratitude to Juan Arena, who for so many years held the top executive responsibilities with truly unique success, personality and capacity for leadership. To a large extent, the Bank's strategy, based on quality, innovation, technology and talent management, is marked by the imaginative and creative personality of the previous Chairman, with whom I have been actively working on the Board of Directors since Our challenge is to continue his work. And in order to do so Bankinter must continue to set itself apart, to remain unique within the context of the Spanish banking system, with its course set on what has always been our prime objective: creating value for our shareholders in the medium and long term. December 20 brought to a close a year in which the profit after tax amounted to EUR million, by far the biggest in the history of the Bank, and 73.6% more than in The consolidated pre-tax profit was EUR million, which was 53.2% more than in These are record results, the value of which is even greater when we take into account that they were achieved despite the difficulties and uncertainties that arose in the markets as a result of the constraints on liquidity that occurred from August 20. This profit figure includes certain non-recurring earnings which, although similar to those that may also appear in the accounts of other credit institutions, I would like to mention separately: the sale to Mapfre of the life insurance business, generating capital gains of EUR million after tax; and the acquisition of 100% of the consumer credit card business until now jointly owned with Capital One. Excluding the atypical factors, the Bank's net profit would be EUR million, 31% more than the figure published for the previous year. These are splendid results which undoubtedly rank among the best of those achieved by Spanish banks last year.

11 Chairman's Letter to the Shareholders 10 This increase in earnings is especially commendable if we take into account that in 20 Bankinter underwent strong expansion as regards both the number of offices (a total of 72 were opened comprising non-specialised branches and SME, Private and Corporate Banking centres) and the number of employees (the workforce increased by 549 persons, 13.8% more than at the end of 2006). Such significant growth in the installed capacity is initially a burden on the Bank's profit, because the new centres take a while to reach the profitability of the existing branches and there is a fall in the efficiency ratio in the short term, but it is what ensures and drives future growth and is tangible proof of the confidence that Bankinter has in its business model. Although all of the segments of the customer business experienced substantial growth in profit, most noteworthy were the earnings of those which Bankinter considers strategic and in which the Bank continued to invest significantly in 20: SMEs, and Private Banking and Personal Finance, which encompass the private individual customers with the highest net worth. The SME segment experienced an increase of 41.9% in profit after tax, and also recorded increases of 23.4% in lending, 21.8% in customer funds and 17% in active customers. As regards Private Banking and Personal Finance, the increase in profit after tax was 27.8% and 29.2%, respectively. There was appreciable growth in all of the captions of Bankinter's balance sheet. Total assets rose by 7.8%. Customer funds increased by 18.6% and loans and receivables were up by 18.7%. At 20 year-end, doubtful risk stood at EUR million and accounted for 0.36% of the Bank's computable risk exposure, which is much lower than that of Spanish banks as a whole. In parallel, the non-performing loans coverage ratio stood at 370%. The total loan loss allowances were up by 8.2% on All of this confirms the high credit quality of the Group's assets and also its solvency, both of them based on the now traditional internal systems of the analysis, approval and automatic management of risk, the diversification of the portfolio, very limited exposure to property development, the conservative provisions allocated to loan losses, and the virtually zero exposure to country risk.

12 Chairman's Letter to the Shareholders 11 Worthy of a separate mention are the results achieved, once again, by Línea Directa Aseguradora S.A., the company of which the Royal Bank of Scotland Group and Bankinter each own 50%. In 20, LDA achieved a marked increase in its customer base, reaching a total of 1,431,327 policies, and embarked on a number of product diversification initiatives which are already generating earnings additional to those of the company's original business, resulting in a rapid increase in the asset value of our stake and in the synergies between the insurance company and the Bank. The company's profit after tax amounted to nearly EUR 59 million. Other highlights in the year were the sale of 50% of the life insurance subsidiary Bankinter Seguros de Vida to the Spanish sector leader Mapfre Vida, in a transaction carried out in very beneficial conditions that ensures us long-term partnership with such a prestigious and professional group as Mapfre and, also, the acquisition of 100% of the consumer finance business which the Bank shared with the international entity Capital One and which is now trading under the new brand 'Obsidiana'. In both life insurance and general insurance as well as in consumer lines and credit cards, Bankinter now occupies a position of privilege in comparison with its competitors and covers a number of businesses that are complementary to banking and have considerably increased the value of our Group. In 20 Bankinter proved able to respond to the challenges arising out of the turbulence that affected the capital markets from August onwards, the upturn in non-performing loans and the emergence of certain symptoms of a possible economic recession. In the face of persistent liquidity constraints, the Bank continued to strengthen its capital base and diversify its sources of financing, generating assets that are capable of being realised thanks to the solvency of our portfolio of mortgages and other loan assets, innovating through new structures for the value-enhancement of these portfolios with the transfer of all of their risks, and optimising not only the funds from intermediation, but also the raising of typical funds from the Bank's broad customer base that is situated in the top segment of the market. With respect to the upward trend in non-performing loans in the sector, our traditional prudence and the foresight of how the property sector would evolve that we have developed over the last few years have enabled us to present the figures for non-performing loans and coverage that I have indicated above, the best of the Spanish banking system, which place Bankinter in a situation of privilege even if the worst forecasts regarding the immediate economic future were to be confirmed.

13 Chairman's Letter to the Shareholders 12 In 20, Bankinter continued to implement a corporate governance policy that meets the most demanding standards regarding transparency and good governance not only in Spain but also internationally. Mention should be made in this respect of the fact that Bankinter is now in full compliance with more than 95% of the recommendations contained in the CNMV-approved Unified Code of Good Governance for Listed Companies applicable since 20, and is in first place out of all the banks and companies in the Ibex-35 stock exchange index in the league table of best practices. Particularly noteworthy is the fact that on its 'Corporate Reporting' website the consultancy firm PricewaterhouseCoopers UK includes the content of Bankinter's Annual Report as an example of good practice. We realise that in the world in which we live the creation of value is a commitment that a company has not only with its shareholders but also with all of its stakeholders, comprising mainly its employees, its customers and society in general. Regarding the first of these groups, Bankinter reaffirms its conviction that people are its prime asset. Bankinter's workforce, which as I have already said grew by 13.8% in 20, is the youngest and the best qualified in Spanish banking, with an average age of 36 years and 73% of whom are university graduates. The Bank's constant concern for staff management has resulted in Bankinter being acknowledged by the prestigious Great Place to Work Institute in its latest report as the 6th best place to work in Spain and the number one in the financial sector, in a league table in which more than 200 companies from every economic sector put themselves forward for analysis. This is a distinction that fills us with pride. Our commitment to customers is reflected in our traditional concern for quality, which is something we have monitored and managed for many years now and constitutes our principal guideline. In 20 Bankinter maintained its customary position of leadership in this field with a lead of 6 percentage points with respect to the average for banks in terms of ISN (Net Satisfaction Index), which is the technical indicator used to measure this parameter. With regard to relations with society in general, the Bank continued to be one of the sector leaders in job creation, in investment in research and development and in new technologies, as well as in transparency in relations with suppliers. Bankinter reaffirmed its commitment to Social Action, and received significant recognition and awards in this field.

14 Chairman's Letter to the Shareholders 13 In environmental management the Bank was awarded an ISO certificate certifying the implementation of an efficient system of environmental management in the building where the Bank has its corporate headquarters. Our commitment to the disabled and to accessibility continued and was rewarded with the following prizes, among others: diadeinternet, organised by the Spanish Internet Users Association, and the annual prize awarded by the Bip Bip Foundation, both of them in recognition of the Bank's activities in the area of accessibility. Initiatives for volunteer service among the Bank's employees were also encouraged with a variety of actions that were very successful. In short, Bankinter is a model of success, in the first place for shareholders, because the share price appreciated by 5.3% in 20 which, together with the dividend distributed, resulted in a return for shareholders of 7.8%, one of the highest in Spanish banking in the year, but also for employees, for customers, for suppliers and for society in general. During the months that I have been in charge at the Bank I have been able to observe on a daily basis the power there is in this marvellous business, the huge value of its intangible assets, its capacity for growth, the soundness of its balance sheet and, over and above any other consideration, the qualities of its team of people and its senior management who, in my opinion, are the best in the Spanish financial sector. Against this framework I have no doubt that in 2008 Bankinter will continue to be able to offer a value proposal that is unique in the market and a business model that is different, based on excellence and on the generation of ever higher earnings. With full adherence to the Board of Directors remit to me as Chairman, I do not wish to end this letter without reiterating my commitment to service in the interests of all of you, the shareholders and owners of Bankinter, the Bank's employees and customers, and our community. Yours sincerely, Pedro Guerrero Chairman of the Board of Directors

15 Contents 64 People & Knowledge Management 36 Channels and Networks 38. Multi-channel Banking 43. Distribution networks 50. CRM 66. Our value, our values 67. Bankinter, a great place to work 68. People management 74. Recognition Technology 30. Technology 32. IT security 52 Intellectual Capital 58. Human Capital 61. Structural Capital 62. Relational Capital 16 Quality 18. Bankinter Quality 21. Quality in serving individual customers 22. Quality in SMEs 23. Quality in employees 24. Customer Service Office 26. Acting to improve quality

16 175 Appendixes 176. Information for shareholders and customers 178. Board of Directors 179. Management structure 142 Earnings 144. Earnings 153. Bankinter s Contribution to GDP 165 Brand 76 Business 78. Economic environment and international markets 81. Market share 82. Customer funds and loans and receivables 90. Customer segments 99. Capital Markets and Treasury 101. Risk management 154 Shareholders' Equity and The Bankinter share 156. Shareholders equity 158. The Bankinter share 164. Market return

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18 17 01 Quality Year after year the Bank's quality ratios reach levels of excellence that are well above the average for the sector. The degree of customer satisfaction and the extent to which their expectations are met, measured by means of objective surveys carried out monthly, are the variables that guarantee a strong relationship in the long term. In this section: > Bankinter Quality > Quality in serving individual customers > Quality in SMEs > Quality in employees > Customer Service Office > Taking action to improve quality

19 01. Quality 18 We take the utmost care with the terms of our relationship with customers and we pay special attention to their needs. Bankinter Quality The data obtained in any survey of financial customers on the quality of service provided by banks and savings banks show that they have increasing access to information and are ever more sensitive to prices. This has led us to take the utmost care with the terms of our relationship with customers and to pay special attention to their needs. Overall satisfaction by segment 20 (ISN score out of 100) Private individuals Private banking SMEs Corporate banking Foreign nationals The ISN (Net Satisfaction Index) is measured on a scale of 0 through 100 and is interpreted as follows: > 85 Very satisfied/excellent High level of satisfaction Needs improvement. < 60 Needs action Private individuals Private banking SMEs Corporate banking Foreign Nationals AT Bankinter we are obsessed with the needs of our customers, rather than with the attributes of our products, and this obliges us to keep our promises, to exceed expectations and to treat the experience of customers as a clear competence involving all of the Bank's areas. The customers' experience with the Bank is the best mechanism of differentiation. That is why we are building our commercial approach on the basis of doing what is in the interests of the customers and not just what suits the Bank's income statement.

20 01. Quality 19 The Bank's customers maintain a high level of satisfaction with the service received. Checking their opinion by means of surveys performed by independent firms, including INMARK, is the method Bankinter has chosen to ascertain whether the quality of the Bank's range of services is up to standard. This measurement, performed monthly using a dynamic and formal procedure, enables us to ascertain and interpret the customers' opinion from any angle of the relationship: the segment to which they belong and the service platform they use, making it possible to detect and react promptly to correct or improve any anomaly. The measurement of this perception obtained from our customers is checked against innumerable objective indicators: market and product research, internal satisfaction surveys, etc., facilitating structural quality actions which involve adaptation to the quality models, and commercial quality actions, which produce immediate satisfaction among customers. We would not like to miss this opportunity of thanking all our customers very sincerely for the interest, care and time they take to respond to our surveys, thereby enabling us to learn of their experiences, evaluate them and focus our efforts on what their interests are. Obsessed with the needs of our customers The degree of customer satisfaction and, accordingly, the extent to which their expectations are met, measured by means of the objective surveys carried out monthly by the Bank, is the variable that guarantees a strong relationship in the long term. As can be seen from the charts, most of the Bank s segments, networks and platforms scored consistently over 75 points on the ISN scale. Any score above 75 points reflects high service quality.

21 01. Quality Private individuals Private banking SMEs Corporate banking Foreign Nationals Overall satisfaction by segment 20 (ISN score out of 100) Private individuals Private banking SMEs Corporate banking Foreign Nationals Branch network Telephone network Internet network Virtual branches Agents network Overall satisfaction by network 20 (ISN score out of 100) Branch network Telephone network Internet network Virtual branch network Agents network Telephone Banking Bankinter Private individuals Broker Bankinter Bankinter Businesses Mobile phones Overall satisfaction by platform 20 (ISN score out of 100) Telephone banking Bankinter Private individuals Broker Bankinter Bankinter businesses Mobile phones

22 01. Quality 21 Year after year Bankinter stands well ahead, of the market in the segment of private individuals. Quality in serving individual customers The best indicator of the perception of the service received by Bankinter's individual customers and of their greater or lesser degree of satisfaction is the one obtained by comparing the position that Bankinter occupies in relation to other financial entities in the Spanish market and analysing which are the most significant service factors. Using independent consultants we conduct market research on a quarterly basis that enables us to ascertain the degree of perceived satisfaction that customers (private individuals) have with the service they receive from their banks or savings banks ISN points higher than the market average Bankinter vs Market. Private Individuals Bankinter Market Bankinter Market Gap Geographic scope: Nationwide, for towns of over 50,000 inhabitants. Group: General public over 18 years of age, holding demand deposits or savings accounts at a financial institution. Sample: 1,600 interviews per quarter. Survey methodology: Computer-assisted telephone interview. Sampling error: ±2.5%. 14 aspects of service surveyed; the most highly rated would be: Treatment and attention Training and professionalism Advisory services Knowledge of customers' requirements Employee s attitude to incidents Information on conditions and costs Transaction speed Clarity of statements Availability of human and technical resources

23 01. Quality 22 The customers of Bankinter's SME segment rate the Bank higher than the average for the sector. Quality in SMEs The Bank also conducts half-yearly market research to ascertain the level of satisfaction with the service they receive from their bank or savings bank of, in this case, SMEs, as financial service users ISN points higher than the market average Bankinter vs Market. SMEs Bankinter Market Bankinter Market Gap Geographic scope: The whole of Spain (except Ceuta and Melilla). Group: Spanish businesses with an approximate turnover of EUR million. Sample: 1,117 interviews every six months Survey methodology: Computer-assisted telephone interview. Sampling error: ±3.0%. 16 aspects of service surveyed; the most highly rated would be: Treatment and attention Advisory services Training and professionalism Service offered at branch Products and services Clarity of information Simplicity of formalities

24 01. Quality 23 Quality in employees 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 Factor', in which all of the Bank's staff are involved. The perception in 20 remained at good levels in comparison with the previous year, with improvements in 2 of the surveys of all the staff conducted to ascertain the perception of service received internally. This led to a 0.9 point increase in the ISN score given to the Organisations' Central Services by the Branch network, which stood at Likewise, there was a 0.14 point increase in the survey of the Bank's Central Services by the Branch network, with a score of It was in the Bank's Central Services self-evaluation that there was a fall of 0.4, giving a Net Satisfaction Index score of 66.0 points Branches Central Services Organisations' Central Services Overall satisfaction. Branches and Central Services survey Branches Central Services Organisations' Central Services

25 01. Quality 24 Customer Service Office At Bankinter all complaints 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, taking very much into account that customers should perceive that the Bank is acting in their interests. The purpose of the Office is therefore to deal with and resolve complaints and claims, ensuring, in an appropriate and timely manner, that there is a consistent approach. As well as solving customers' problems, this is the department responsible for preventing and correcting the main errors made in any area of the Bank in the marketing of products or the provision of services. In 20 the number of complaints about service and financial claims per million transactions fell to 78.3 per million (compared with 86.7 per million in 2005). As for the time taken to deal with complaints and claims, 70.6% of the incidents were answered in less than 48 hours, and the average time taken was 4.3 days. SAC. Total complaints and financial claims /06 (%) Total no. of complaints (non-financial) 10,821 12, Total no. of claims (financial) 85,371 91, Total 96, , SAC. Total no. of financial claims /06 (%) No. of claims in customer's favour 74,987 82, % of claims in customer's favour No. of claims in Bank's favour 10,384 9, % of claims in Bank's favour Total 85,371 91,

26 01. Quality 25 The purpose of the Customer Service Office is to deal with and resolve complaints and claims, ensuring, in an appropriate and timely manner, that there is a consistent approach. Incidents in Complaints per million transactions Incidents per million transactions Time taken to resolve financial claims Time taken No. of Claims % Attributable to Not attributable to Bankinter (%) Bankinter (%) 0 days 51, days 13, days 16, > 10 days 10, External Customer Ombudsman /06 (%) Claims processed Claims resolved in customer's favour Claims resolved in Bank's favour Claims excluded Bank of Spain /06 (%) Claims resolved Claims resolved in customer's favour Complaints accepted In the Bank's favour Pending resolution Outside Bank of Spain jurisdiction 0 1

27 01. Quality 26 Taking action to improve quality With the aim of raising the quality of service, Bankinter s employees propose improvements throughout the year. In 20, 96 improvement projects were started with the participation of 240 people, i.e. 5.3% of the Bank s workforce. Seeking to recognise the joint effort made by the areas of the Bank that improved their scores most in the 20 ISN surveys, the following awards were made: Territorial organisations with the best performance in terms of customer satisfaction and compared with the market in their geographical area: Tenerife Organisation, North West Organisation and Castile Organisation. Business Areas with the best performance in terms of internal and external customer satisfaction: Corporate Banking Division and Private Banking Division. Central Services with the best performance in terms of internal customer satisfaction: Treasury and Capital Markets, Printing Department, Products Division and Marketing Division. Lastly, three members of staff received Awards for Service Excellence in 20: Diego Lázaro González, Paloma Martínez de Aguilar, Ernesto Argudo Zamora.

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30 29 02 Technology In what is known as the 'information society', the technological strength of a company becomes a differentiating variable. In this section: > Technology > IT security Technology continues to be one of Bankinter's strategic pillars. Over the past year investment was particularly strong in two specific spheres: the enhancements of knowledge management within the Bank and the projects relating to the private banking divisions.

31 02. Technology 30 Bankinter mainly applies its technological strength, to raising the quality of the services and products used by customers. Technology Investment in technology continues to be one of Bankinter's strategic pillars, something that is especially valuable in a world in which this variable plays an increasingly important role in the information society. Bankinter mainly applies its technological strength to raising the quality of the services and products used by customers. Over the past year investment was particularly strong in everything to do with enhancing knowledge management within the Bank. A notable boost was also given to all of the projects concerning one of Bankinter's strategic areas of focus for 20: Private Banking. Also in 20 Bankinter incorporated into its Internet services the most advanced technologies represented by the world of Web 2.0, making them compatible with the Bank's strategy in favour of web accessibility, an option which has enabled groups of people with disabilities to deal with the Bank using the Internet on equal terms with other customers. Worth highlighting is the special project undertaken by Bankinter with the aim, on the one hand, of automating all of the Bank's official information and the medium on which it is held; and, on the other, of developing an ergonomic and functional IT support that will permit proper control and monitoring of operations in the Operating Control Areas. This project has involved an important change in the philosophy of the Bank's applications, so much so that it has modified the generation, management and utilisation of all of the information, making it more versatile and incorporating new functionalities called for by the Business areas. In 20 the Bank also made substantial investments in the systems necessary for accession to Basel II, as well as in improvements to its internal management systems. A final mention should be made of the successful completion of the updating of the Treasury business platform.

32 02. Technology 31 Details of investment in development Investment in 20 36,457,583 In-house investment 8,983,567 External cost 21,000,000 Activation 6,474,016 Response time performance (in seconds) Internet Teleprocessing

33 02. Technology 32 IT security Strategic IT Security Plan Conscious of the important commitment to service and quality, and of the continuous evolution of the technology the Bank uses in its dealings with customers, a project was begun by the IT Security department in 20 - which will be completed during for the purpose of formalising the Bank's Strategic Security Plan. Operating excellence Risk management Regulatory compliance Image creation Value 1 Optimising costs 2 Optimising 3 Minimising 4 Minimising 5 Becoming a operating losses due to costs due to benchmark procedures incidents penalties for the sector Customer External Internal 9 Responding to internal needs promptly, cost-effectively and with quality 10 6 Managing risk efficiently Handling incidents efficiently 7 Obtaining international certifications 11 Ensuring the reliability of the IT services 12 8 Promoting an image of security Complying with the regulatory framework Processes 13 Designing solutions promptly, cost-effectively and with quality Selecting the best technology Analysing and monitoring trends 16 Analysing and managing risks 17 Aligning with standards 18 Security in DLC 19 Handling incidents efficiently 20 Constant monitoring of security 21 Identifying opportunities for improvement 22 Periodic reviews and audits 23 Regulatory compliance Infra. SUPPLY DISTRIBUTION IMPL./DEV. OPERATIONS MAINT. 24 Selecting 25 Instructing, 26 Managing 27 Observatories 28 Gearing internal training projects and collaboration operating and external and raising with other procedures resources awareness institutions to processes

34 02. Technology 33 Bankinter is the first financial institution in Spain to be certified as ISO compliant. This plan has been designed using techniques and models of strategic management that are widely recognised and disseminated by the most prestigious business schools, such as: DAFO analysis, Porter s 5 forces adapted, reds analysis, strategic maps, etc., thereby enabling us to ensure that the Bank's strategy is aligned with its position in the field of security; and consequently to achieve the security objectives linked through Bankinter's mission, vision and corporate values and the Bank's Information Systems division. ISO Re-Certification October 20 was the first anniversary of the ISO Certification of the Bank's 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 next challenge was to be able to keep the certificate, by means of actions and tasks that made it possible to guarantee that the management system is kept alive and continually enhanced. For this purpose, the world-renowned British Standards Institution (BSI) performed the first of the annual re-certification reviews. The result of the procedure was that Bankinter, and more specifically its Security Management System, amply exceeded the requirements established, thereby demonstrating in an objective, clear, evident and visible manner the commitment of the Management and of the Bank itself to the Security Management System.

35 02. Technology 34 Customer security The concept of 'customer security' forms part of the Bank's strategy for protecting its customers. It rests on three basic pillars of security: information, protection and advice, together with the overall premise that customers must play an active role in their own self-protection. In 20, the remote banking services of financial institutions experienced one of their worst years, as a result, above all, of the increasing spread of threats such as phishing, carding, and trojans designed specifically to obtain customers' Internet access and operating information by fraudulent means. Thanks to the experience acquired, the efforts and the investments made in previous years, and the implementation of a package of innovative protection, control and alert initiatives, the Bank acquitted itself well and came out of this situation strengthened, giving customers the peace of mind, security, comfort and reliability of operating through our remote banking service. Bankinter's security and protection systems are periodically audited by independent personnel of high standing, bringing confirmation year after year of the guarantees of security and reliability that have made Bankinter's remote banking service a benchmark in the sector.

36 02. Technology 35 ISMS Forum Spain So far in Spain only a few organisations have set out on the road to a 'security management system, and even fewer have dared to have it certified. For this reason and in accordance with its security strategy, Bankinter - together with a group of benchmark companies and entities in sectors such as energy, construction, telecommunications or distribution - launched an initiative called ISMS Forum Spain, of which the Bank is a founding partner. ISMS Forum Spain is a non-profit organisation whose main objective is to promote the development, knowledge and culture of 'Information Security' in Spain. Its vocation is to serve as an impartial forum for discussion and research where businesses, public authorities, universities and research centres can pool their respective experiences and their points of view on these matters and, in this way, be a point of reference for the knowledge, dissemination and promotion in Spain of Information Security.

37 03 Channels & Networks In this section: > Multi-channel Banking > Distribution networks > CRM A bank with numerous formats and options available for dealings with its customers. At Bankinter customers can interact with the Bank any time and anywhere using the channel that is most convenient for them. The perfect interaction and efficient combination of all of them translate into a distinctive value proposal that increases the level of satisfaction of the customers.

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39 03. Channels and Networks 38 Multi-channel Banking Bankinter has made the multi-channel strategy one of its big competitive advantages; and it continues to strengthen this strategy. At Bankinter customers can interact with the Bank any time and anywhere using the channel that is most convenient for them. The combined use of each of them (Branch network, Telephone Platform, Bankinter.com, ATMs, mobile phone, etc.) means that the service provided reaches levels of perceived quality that make us market leaders. Further significant steps were taken in 20 to integrate our commercial activity through the different channels. This is another area in which Bankinter has a competitive edge. And so, supported by the strength of our CRM, depending on the time, the product and customer preferences, one or another channel for dealings is used, maintaining a unique commercial coherence. This has enabled us to optimise commercial efficiency and multiply the number of contacts while containing costs. There were 1,331.1 million transactions in 20, which was 19.9% more than in 2006; 68.8% of these transactions were carried out using remote channels, which gives an idea of how the multi-channel environment has transformed the Bank. Variation in transactions by channel (%) Mobile phone Cards Internet Telephone Banking Electronic Banking Branches

40 03. Channels and Networks 39 Transactions 1,331 million transactions 68.8% of them performed using remote channels Telephone Platform The business done using this channel in 20, its 15th anniversary year, is mainly apparent from the number of calls handled: they totalled 7.4 million and 54% of them were answered by the automatic system and the remaining 46% by a personal manager. The number of messages handled totalled 73,050. There were several service reorganisations during the year involving the grouping together of some of them, primarily with a view to achieving greater efficiency and higher perceived quality. The training of the workforce staffing this channel is an essential factor. This is embodied in the intensive efforts made over the past year in which 18,318 hours of training were given to 188 members of staff, representing 96.9% of the workforce. The Telephone Platform once again displayed an optimum standard of operation, with 89.2% of the calls received being answered within 20 seconds. This translates into the quality perceived by our customers, who awarded it an aggregate score of 79.4 ISN (Net Satisfaction Index) points during the year. The market similarly singled out the quality of our platform. By the end of the year we had received two prizes, awarded by IZO Systems (the leading consultants in the Call Centre industry), the Spanish Association of Experts in Customer Call Centres, AEECCC (the sector business association) and the International Faculty for Executives, IFAES. One of them describes us as the 'best call centre service in the banking sector', and the other was for the 'best people management in an overall context of call centre services'.

41 03. Channels and Networks 40 The Internet continues to be the channel most used by the Bank's customers. More than 773,869 users performed 55% of the total transactions using this channel. TSF quality ratio 89.2% of the calls were answered in less than 20 seconds 79.4 ISN points for quality Internet Platform The Internet continues to be the channel most used by the Bank's customers. This channel has 773,869 customers who perform more than 63.6 million transactions per month, representing 55.0% of the Bank's total transactions. In 20, the percentage of active users remained steady at 51.5% of total users. Work continued in 20 on expanding the range of investment products, with the launch of the new individual systematic savings scheme - PIAS in Spanish -, improving the advice given to customers by the Investment Adviser tool and introducing new formats for dealings with the Bank with the launch of the new 'Video call Service'. There was a marked increase in the number of log-ons to 3.5 million per month, which confirms the excellent perception that customers of the Private individuals segment have of the web as a channel for dealing with the Bank: its ISN score was 80.3 at year-end.

42 03. Channels and Networks 41 empresas.bankinter.com New products and services were incorporated in the Bankinter for businesses website in 20, including the 'Digital Invoice', which adds great technological and innovative value to the website. Our efforts were also focused on the development of new channels, such as video calls and mobile phones, which make it possible to reach customers in a more personalised and direct manner. Particularly noteworthy is the degree of maturity reached by services such as the online financing of foreign transactions, advances on invoices or even the possibility our customers have of issuing promissory notes with scanned signatures, which simplifies the formalities of this transaction. Due to the efforts made by the Bank in the SME segment, the website has become an essential tool used daily by our business customers, with constant growth in figures of use. We are supported by these pillars: quality of service, personalised advice and growth in the SME segment. In consequence, 72% of the Bank's active customers are also active or habitual customers of the website. At any given minute of the day 24 hrs. 34 users connected 3remittances on average 88 transactions As a result of all this, together with the big marketing efforts made, the website now has 116,134 registered business users, 64,000 of whom are active (both online and at the Bank) and perform transactions worth EUR 130,543 million per year. These same active customers performed 223 million transactions during the year. To give readers an idea, at any given minute of the day or night, at any time of year, the following is happening on the Bankinter for businesses website: there are 34 users connected, who send 3 remittances and perform 88 transactions. And this would make no sense if the quality was not up to the standard our customers deserve. Our scores here are high: 79.1 ISN points at year-end.

43 03. Channels and Networks 42 broker.bankinter.com In 20 we expanded our range of products with the launch of Exchange Traded Funds. We also continued to focus our efforts on making Broker Bankinter an even more useful tool for our customers, if that is possible, by incorporating new Web 2.0 technologies that simplify operating and enquiry procedures. Transactions 81% of all the Bank's equities transactions were performed using broker.bankinter. As a result, this website has become established as the customers' preferred channel for equities transactions. Specifically, it accounted for 81.0% of total transactions, with a steady rise in the number of transactions, as illustrated by the 98,433 transactions performed in the month of December. The picture is similar for log-ons to the website, amounting to 869,411 a month. Broker Bankinter continues to be a benchmark service in the financial sector. The attribute most highly valued by customers was the availability, which is a particularly sensitive factor in equities trading and achieved an ISN score of 84.0 As a result of this, the channel obtained an aggregate overall satisfaction score from users of 77.6 ISN points. SMS Platform The SMS platform offers substantial added value to customers, who perceive the availability and the immediacy of information as excellent attributes. Work was done in 20 to improve all the flows of messages that customers receive; this contributed to achieving total figures of as many as 44.7 million messages sent, with 17.3% of the Bank's customers with a registered mobile phone active in this channel. As a result, the satisfaction indicators reached levels of excellence, with an ISN score of Video Call Service In 20 Bankinter launched a new channel for customer relations, the 'Video Call Service', which uses the possibilities of the Internet to offer interactive, multimedia advice that is personalised and specialised according to each need. With this service, any customer can contact the Bank, or vice versa, using an image and voice system that makes it possible to share documents, computer applications or web pages; this increases not only the capability of the advisory role but also the resolution of doubts or the remote commercialisation of complex products and services. The Video Call Service enables customers to get the best out of each traditional channel: the personal, specialised attention and extended business hours of telephone banking, the remote efficiency and immediacy of the Internet, and the proximity and the human touch of the branch office.

44 03. Channels and Networks 43 Distribution networks Branch network 360 non-specialised branches Branch network At 20 year-end, Bankinter had a network of 360 non-specialised branches, 28 more than in This expansion of the Branch network was located in towns with faster-growing populations, whether local or European non-resident, and in areas where income levels, property development and greater economic activity mean that the investment will be recovered in the shortest possible time. The centres are staffed by a team of professionals (branch managers, assistant managers, account managers, executives, authorised 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 20 on optimising the CRM tool 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 the Social Action objective of participating in projects that improve the lives of the disadvantaged and help them in their daily activities, we continued to develop 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 handicapped persons in By the end of 20, 94% of the branches, a total of 340, were already equipped with these measures.

45 03. Channels and Networks 44 Work also began in 20 to adapt the frontages of the branches to the requirements of Bankinter's new corporate identity. At year-end 27.5% - 99 branches - had been adapted to the new brand image. Apart from this network of 360 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 37 new centres were opened, mainly located in industrial complexes where there is a high density of small and medium-sized enterprises. At 20 year-end, Bankinter had a network of 161 SME Centres distributed among the 13 territorial organisations that comprise the Bank, with a total headcount of 466 employees. Private Banking Centres. The number of these Centres, exclusively dedicated to taking comprehensive, personalised care of the customers in the Private Banking and Personal Finance segments, was 47 at year-end, with a staff consisting of 219 highly-qualified professionals. Business Management Centres. The Bank currently has 51 Business Management Centres, staffed by a total of 237 professionals. These are centres where larger companies and big corporations receive specialised commercial services. Branch Network highlights Non-specialised branches SME Centres Millions of euros Average funds Average loans and receivables Profit before tax ISN score /06 (%) , , , ,

46 03. Channels and Networks 45 Networks with Partners Networks with Partners is the business area comprising the activities of the Agents network and the Virtual branches. Both these networks share the objective of speeding up the growth of the business based on the same premises: Networks with partners ISN score 77.5 Virtual banking 79.6 Agents network The clear focus on managing and providing advice to customers in the Private Banking and Personal Finance segments. The obsession with quality. Realising that this is a crucial differentiating value, the agents and virtual branches have very high quality ratings within the Bank's networks and, consequently, in the market. The ISN score of Virtual Banking is 77.5 points; and that of the Agents network, 79.6 points. The sharing with the partner whether the latter be an Agent or a Virtual Branch of the profit obtained. Networks with Partners is of increasing relative importance within Bankinter, thanks to the strength of the business of the agents and of the virtual branches. At 20 year-end, this business had 10.5% of the Bank's customers, and accounted for 10% of the profit before tax, 14.2% of customer funds and 9.3% of lending of the networks overall. Realising that this is a crucial differentiating value, the agents and virtual branches have very high quality ratings within the Bank's networks.