Bankinter chairman considers consequences of COVID-19 to be unpredictable, even though the bank has stood out in difficult times

Today, Bankinter’s chairman, Pedro Guerrero, addressed shareholders at the Annual General Meeting, saying that the crisis caused by the spread of COVID-19 ‘has the world mired in an unprecedented situation’, the effects of which ‘cannot be assessed’. He also wanted to send a message of triumph over this crisis, reminding shareholders that ‘always, in times of difficulty, Bankinter has done best and stood out’.

The IMF’s forecasts of ‘a slight recovery’ for this year ‘are history’, said Pedro Guerrero. In regard to this new crisis, he added that ‘we are experiencing an unprecedented situation, with a pandemic that has been affecting public health across the planet and paralysing economic activity in major countries in the world’.

In this time of exceptional hardship, he stressed his gratitude toward Bankinter Group employees: ‘I want to thank all of them expressly for their enormous effort these days to keep the bank’s operations running and assist all our customers in such complicated times, with the quality that has always defined us’.

In regard to the 2019 balance sheet, Pedro Guerrero called Bankinter’s earnings of 550.7 million euros (a 4.6% increase from 2018) ‘brilliant’. The bank’s pre-tax profit (PBT) also increased by 2.8%.

The bank had this ‘excellent year’, that marks a new record in Bankinter’s history, even though ‘banks in Spain ran operations in a particularly difficult context’, with interest rates ‘at all-time lows’, decreased lending across the industry (even though it grew by 5% at Bankinter in Spain, without EVO Banco) and ‘regulatory pressures with incessant demands and the increased litigation against banks’.

Remuneration via distribution of Línea Directa shares

In regard to payments to shareholders, the board of directors of Bankinter submitted to shareholders at the Annual General Meeting the approval of the distribution of 263 million euros as a dividend against 2019 earnings (a pay-out of about 50%).

Furthermore, a highlight in this Annual General Meeting was the vote for additional remuneration for shareholders consisting in the distribution of the share premium of 1.184 billion euros in Línea Directa Shares, currently a wholly-owned subsidiary of Bankinter Group. Therefore, each of the bank's shareholders will receive a number of this insurer’s shares equal to the number of shares held by Bankinter, at no cost. It is not an exchange of shares, but rather additional remuneration.

This amount of 1.184 million euros represents 82.6% of the capital of Línea Directa that will be subject to listing in the stock market. This means that the insurer’s shares will be held by Bankinter shareholders when they become publicly traded. 

‘Since we acquired 100% of Línea Directa, we were certain that, as a financial investment for the bank, if the insurer continued to be successful, it should one day be listed’, explained the chairman of Bankinter at the AGM. He further mentioned that the bank decided to spin Línea Directa off, so that it will move forward independently, due to the growth of its business and various business lines as well as the success of its direct insurance distribution model.

‘We propose this deal in the manner we believe to be most beneficial to our shareholders. Bankinter will not sell Línea Directa shares in the market, but rather distribute them freely among its shareholders so they can continue to hold them entirely’.

The bank will retain 17.4% of the insurer’s share capital, as it continues to be committed to its growth and return potential in the long term.

In her remarks, the chief executive officer, María Dolores Dancausa, also mentioned this deal, pointing out that it creates value for shareholders. Following a 462-million-euro investment (with initial contributions from partners and the capital increase to purchase 50% of the company once owned by Royal Bank of Scotland), Línea Directa has generated over 1 billion euros in dividends, in addition to the new distribution of the share premium.

Dancausa also affirmed that, after Línea Directa’s spin-off as an independent company from Bankinter and once it becomes publicly traded, ‘it will be time to replace the income and earnings we once got from it, with income from banking operations, which will be reborn with vigour, something we’ve been working on for a while, because we have not diversified and considerably strengthened our sources of revenue in vain over recent years’.

Aligned against the coronavirus challenge

In regard to the state of emergency caused by the COVID-19, the chief executive officer mentioned that ‘we are fully aligned with the measures adopted in the recent meeting of the Council of Ministers, which aim to mitigate the impact of the coronavirus crisis on groups most affected by it’.

But if the challenge ‘we have before us is immense, so are our talent, our commitment, our sacrifice, our work and the material resources we have to fight this. This is our support to outdo ourselves and overcome whatever comes our way’, said María Dolores Dancausa.

The bank’s CEO also conveyed to shareholders ‘the confidence in Bankinter’s abilities to overcome this unprecedented and enormous challenge, and continue to create value in the future’. She added that ‘now all our efforts and energy’ are ‘focused on three priorities: the health of our employees, jobs and customer service’.

In this crisis, the health of the professionals that make up Bankinter is paramount and, thus, the bank has followed ‘all instructions given by health authorities’, affirmed Dancausa. To this end, the bank ‘has authorised telecommuting for most central services’. In regard to customers, precautionary measures have also been implemented in branches, which remain open since banking services are considered essential in the current situation under the recent decree from the Spanish government. In addition to special sanitary measures taken in the bank’s branches and buildings, a minimum safety distance between people and a limit for the number of people in each branch.

The goal is to provide quality service even in unprecedented times like this. The bank has ‘excellent’ remote services (like the mobile app, the web or Telephone Banking) that allow customers to ‘resolve almost all their banking needs without needing to visit a branch’, said the chief executive officer.

Protecting jobs creates a ‘virtuous cycle’

Another priority María Dolores Dancausa pointed out is ‘to maintain the level of employment’ in Spain in general. The loss of jobs ‘is a human drama that will add to the health drama under way’ which ‘we can’t watch indifferently’. Therefore, ‘we must resist the temptation to eliminate jobs due to a drop in business’, said Bankinter’s chief executive officer. Protecting them ‘generates a virtuous cycle whereby the priority of maintaining employment builds on the net profits that justify it’, she said.

In regard to dividends and profitability in these extraordinary circumstances, María Dolores Dancausa mentioned that ‘if we go through this period safeguarding health, employment and service, profitability and everything that follows will come too’.

When this situation is over, it will be time to ‘put all hands on deck’ to ‘give actual benefits that can be transformed into dividends’ and ‘lay down the groundwork for future returns, in order to see our bank stronger by the day, with a greater dimension and offering higher returns’, added Dancausa.

Changes on the board of directors

At the Annual General Meeting, shareholders confirmed the appointment of Fernando Francés as a new independent director. The departure of Gonzalo de la Hoz and Jaime Terceiro, upon their reaching the 12-year term limit on the board of directors as independent directors. They were both thanked by the chairman of Bankinter for their ‘extraordinary contribution’ to the bank over that time.

Following this change, the number of board members will go from 12 to 11. As a result, the four women directors (María Dolores Dancausa, as chief executive officer; María Teresa Pulido, Teresa Martín-Retortillo and María Luisa Jordá) on the board of directors will represent 36% of all members, compared to 33% before. The independent directors now account for 54.5% of the board. Shareholders at the Annual General Meeting approved all resolutions set out in the meeting agenda.