Goirigolzarri: “Bankia has started 2019 with great sales momentum and has entered a growth phase”

• In its 2018-2020 Strategic Plan, Bankia sets a target of acquiring 400,000 new customers and increasing its share of lending to households (to 12.6%) and companies (7.7%)
• 'Interest rate policies and the deleveraging of the Spanish private sector have exerted a relentless pressure on our recurring revenue,' said Bankia chairman José Ignacio Goirigolzarri, while emphasising that '2019 may see a break in that trend'
• The General Meeting of Shareholders approved a proposal to increase the dividend by 5%, to 357 million euros
• This year the bank will bring more than 200 new professionals into its workforce, including specialists in new technologies and additional staff for the sales network, with the aim of boosting business activity
• With the capital generated in 2018, the ratio of highest quality capital has reached 13.8%, making Bankia the most solvent of the large Spanish banks
• Bankia CEO José Sevilla highlighted the growth in higher value products, which has brought the bank's market share to 5.57% in consumer finance, 7.42% in loans to businesses and 6.55% in mutual funds

Bankia chairman José Ignacio Goirigolzarri said that the bank has started 2019 'with great sales momentum', allowing it to increase new lending to households and companies and acquire new customers.

During his address to shareholders at the General Meeting, held in Valencia, Goirigolzarri emphasised that, following the successful conclusion of the merger with BMN, 'today we are a fully integrated institution, with unified processes and management styles, a united team and a common culture'.

Goirigolzarri recalled how, in the first few months of 2018, in mid-merger, sales activity suffered, 'but in the second half, the activity rebounded vigorously, with steady monthly growth until year-end and with significant market share gains in investment products such as consumer loans and business loans, as well as in higher value products such as mutual funds and payment services'.

The Bankia chairman said he was confident that 'the integration is behind us and we can now focus our attention and our efforts on the most important thing, namely, serving our customers'.

Goirigolzarri drew attention to the fact that 'thanks to this excellent integration, we have been able to bring our synergy plan, as originally announced to the market, forward by one year, which has been extremely valuable from a strategic point of view'.

Business momentum

In terms of sales activity, the bank is making progress towards the customer acquisition target set in its 2018-2020 Strategic Plan, which envisages increasing the number of customers by 400,000. In 2018 alone, Bankia won the trust of more than 120,500 new customers and also gained their loyalty, as by year-end the bank had added a further 103,000 customers with direct income deposit.

As regards lending to households and companies, Bankia is working to accelerate the achievement of its targets over the next two financial years and improve its market share. The bank ended 2018 with 2,928 million euros of new mortgages, up 6%, and 14,484 million of business loans (+13%).

'I honestly believe that 2019 marks the start of a new phase for Bankia from three points of view. First, from the organisational point of view, because the changes will be a spur to performance; second, from the point of view of talent acquisition; and third, from the financial point of view', he explained.

We know that the environment for the financial sector is not easy, but we intend to meet the future with clearly defined plans and programmes

José Ignacio Goirigolzarri
Bankia chairman

Goirigolzarri recognised that 'interest rate policies and the deleveraging of the Spanish private sector have exerted a relentless pressure on our recurring revenue', but added that 2019 'may break this trend, although we realise we cannot expect a change in interest rate levels in the near term'.

The Bankia chairman stated that 'we are working every day to be the Spanish society's bank of choice' and that to achieve this Bankia has 'taken as its reference the satisfaction of our customers, excellent corporate governance, a permanent aspiration to serve society and total respect for our principles and values'.

'We know that the environment for the financial sector is not easy, but I believe we have a clear idea of how we intend to meet the future, along with clearly defined plans and programmes', Goirigolzarri concluded.

Increase in business share

Bankia's CEO, José Sevilla, spoke about the effort made last year to promote higher value products, such as consumer finance, business loans and mutual funds, and the growth in payment services.

'These business objectives were especially ambitious in the context of the BMN merger because, as a rule, mergers tend to result in more or less significant losses in market share, whereas in the Bankia-BMN merger this has not been the case', he explained.

Sevilla pointed out that in 2018 Bankia's consumer credit portfolio grew 14.1%, increasing the bank's market share by 15 basis points to 5.57%. The increase in loans to companies was 4.4%, representing market share growth of 51 basis points, to 7.42%.

Additionally, in a year marked by adverse market trends, Bankia's share in mutual funds rose 17 basis points, to 6.55%, in line with the Strategic Plan.

In payment services, which is a strategic business line for the bank, card revenue grew 12.8%, increasing Bankia's market share by 38 basis points, to 12%. Meanwhile, the volume of sales made using Bankia POS terminals in retail establishments grew 15.2%, bringing the market share to 12.4% (+33 basis points).

Digital transformation

Goirigolzarri noted that the financial sector as a whole is facing major strategic challenges. 'Changes in our customers' habits, combined with an ongoing technological revolution, are giving rise to very deep shifts. One of the most visible changes is the lowering of entry barriers to the financial industry and the consequent entry of new players whose aim is to disrupt the status quo', he said.

The Bankia chairman pointed out that this situation directly affects all the business variables, 'but the challenge is most apparent in the impact these developments are having on our distribution channels', that is, 'the coexistence of online and offline channels'.

Bankia's response to this situation is based on segmenting customers according to their level of digitisation and the depth of their relationship with the bank. 'This scheme is what has enabled us to keep pace with our customers in their digitisation process, respecting their preferences,' he went on.

Goirigolzarri explained that in 2019 more than half of Bankia's customers will be digital, while already last year 25% of their purchases were made through the bank's online channels.

We defend a digital ethic with new technologies transparent and responsible and always guaranteeing the privacy and security of our customers' personal information

José Ignacio Goirigolzarri
Bankia chairman

'Although all this information indicates that we are on the right track, in the process of reflection I mentioned earlier we came to the conclusion that we needed to make a qualitative leap in our digital transformation, looking at the short, medium and longer term', he said.

For that reason, he said, Bankia this year brought 200 new professionals into its workforce, 50 of whom come from fields such as artificial intelligence, Big Data and customer experience.

'We are equipping ourselves with specialists in new technologies', Goirigolzarri said, 'and we are also hiring 150 people to reinforce the commercial networks, which will give fresh momentum to our sales activity.'

According to Goirigolzarri, 'at Bankia we believe we have an obligation to guarantee the privacy and security of our customers' personal information', which means that the new technologies must prove themselves to be 'inclusive, transparent and responsible'. 'That is our standpoint in Bankia,' he said, 'the standpoint of digital ethics'.

Solvency

Strengthening the bank's balance sheet, Goirigolzarri said, 'is an absolute priority for Bankia'. The capital generated in 2018 brought the ratio of highest quality capital to 13.8%, 'making us the most solvent of all the large Spanish banks'.

As a result, Bankia has a capital surplus of 524 basis points above the regulatory minimum, which means 4,313 million euros. Additionally, the bank has further strengthened its balance sheet by issuing 500 million euros of Additional Tier 1 capital, supplemented by 1000 million euros of Tier 2 capital and 500 million of senior preferred securities at the beginning of 2019.

'Reflecting this balance sheet soundness, last January Fitch Ratings announced a further improvement in our rating', the Bankia chairman said.

The bank's CEO explained that an additional factor was the substantial decrease in non-performing assets, which were reduced by 6 billion euros in 2018, leaving the total at 10.9 billion, compared to 16.9 billion in 2017. This is more than double the target reduction of 2.9 billion per year during the three years of the Strategic Plan.

This plan also sets a target of distributing 2.5 billion euros to shareholders over the three-year period. The dividend approved today by the General Meeting of Shareholders, to be paid out of profit for 2018, is 357 million euros, 5% more than the previous year, while the capital surplus generated during the year was 418 million. Therefore, the total amount of capital generated to remunerate shareholders was 775 million.

Responsible Management

Sevilla also explained that the financial statements submitted to the General Meeting of Shareholders for approval included, for the first time, a statement of non-financial information, which reports on environmental, social and employment matters, respect for human rights, the fight against corruption and social issues.

From this information, he highlighted the fact that 'today, 56% of our professionals are women, but we are aware how important it is to continue to actively manage diversity and are taking steps to support the advancement of women into management positions', stating that the aim is that by 2020 at least 30% of the directors should be women.

Goirigolzarri said he believed that 'the sustainability of a project, an industry or a company depends on whether society finds it useful'. So 'you have to listen to society and understand what it wants from you'. In his view, 'society wants us to produce extraordinary results, but to produce them by doing things impeccably'.

Goirigolzarri reported that at the beginning of 2019 Bankia approved its second Responsible Management Plan, which will be implemented over a two-year period. The first pillar of this plan is 'excellent corporate governance, implemented on the basis of well established values and principles', which must aim for 'balanced diversity at all levels of our organisation'.

The chairman added that Bankia must 'contribute to the education of our fellow citizens, because that is the best way to fight against inequality'. To do that, the bank aims to work through its Foundation to support dual vocational training, 'a field in which we are setting new standards'.

Bankia also has 'a clear commitment to the environment and the sustainability of our planet', Goirigolzarri said. 'Accordingly, the climate change recommendations supported by the G20 are central part of our priorities'. For that purpose, the bank periodically assesses its contribution to the United Nations' 2030 Agenda for Sustainable Development.

The bank's chairman noted that 'this year, Bankia contributes primarily to nine of the sustainable development goals, including decent work and economic growth; industry, innovation and infrastructure; and accessible, non-polluting energy'.