All business lines performed positively over the course of the year, despite the complicated backdrop, which was worse than expected. Interest rates remained very low, or negative, putting a squeeze on margins, whilst securities markets evolved poorly, affecting the asset management business. The macroeconomic scenario also deteriorated, due to growing political instability (Brexit, Italy, Germany), the loss of momentum in the main European economies and trade tensions.
Despite this general climate of mistrust and uncertainty, results for the year demonstrated that the strategic model works. Traditional business lines, like Corporate Banking and Commercial Banking, maintained steady and stable growth rates (around 5%), while less mature lines registered very significant increases in income (in Consumer Finance, for example, they increased by 32%); as a result, their weight as a whole at the entity is steadily increasing and their composition is being realigned.
Customer orientation The orientation towards recurring business has also borne fruit. Both the customer margin and its weight in activities at the bank as a whole performed positively during 2018. These excellent results were supported by the strong management of volumes (based on active commercial management) and prices, which decreased on account of pressure from the competition, although not quite as much as expected. The contribution of digital transformation processes was also decisive in the improvement of results, both in Corporate Banking and Individual Retail Banking.
Meanwhile, generally speaking, costs were contained, although there were more significant increases in the insurance business and in Consumer Finance, which, based on their nature, required relevant investments in terms of attracting customers and marketing to continue growing.
Other characteristics of the year were as follows:
Expectations about the near future are still plagued by uncertainty. Problems in the macroeconomic scenario (trade tensions, loss of dynamism in the economy, Brexit) look unlikely to be resolved in the near future. There is also a question mark over the securities markets; although they should react positively following significant losses in 2018. In terms of the price of money, it is likely that the Euribor will progressively rise to around 0%, although given the slowdown of the European economy, official rates are not expected to be increased by the European Central Bank in 2019.
Special mention should also be made of acquisition of the banking business of EVO Banco in Spain and Avantcard, its consumer loan subsidiary in Ireland, which is expected to materialise in the first quarter of the year. The transaction has a strategic element. In terms of the banking business of EVO Banco in Spain, which is very focussed on digital customers, its integration will help Bankinter to improve its position in the young audience with a self-service profile, which is attracted by the model employed by fintech companies. Therefore, in terms of Avantcard, its acquisition will complement the range of Consumer Finance products and enhance the geographic diversification of the entity.
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