Corporate Banking

Corporate Banking, how to grow and protect margins at the same time

The Corporate Banking line faced a difficult environment in 2019. While GDP growth in Spain was reasonable (around 2%), the debt levels held by companies continued to fall, and a scenario of negative rates took hold, complicating the development of the business. Geo-economic uncertainty linked to the US-China trade conflict and the vicissitudes of Brexit did not help either.

Despite this unfavourable global context, the Corporate Banking loan book grew to 24,396 million euros, 6.5% more than the previous year, while the sector saw an overall decline of 2.2%, according to data from Banco de España to December. The Bank started to gain a share of investment in the corporate market in 2019. Half of all loans and receivables corresponded to Corporate Banking (including customers with annual income of over 50 million euros), while the remainder corresponded to medium sized companies (between 5 and 50 million) and SMEs (up to 5 million).

It should also be noted that the increase in loans and receivables was achieved with no impact on margins, largely thanks to the double digit growth in fees. The management

of this segment of income was therefore a key factor during the year, as it was accompanied by a substantial improvement in the customers' perceived quality of the services provided by Bankinter. This is of particular significance as it demonstrates that the increase in fees is consistent and based on increased value for the customer. The areas that made the largest contribution to fees were the International business, the Transactional business and Investment Banking.

These were the most dynamic lines in 2019. Loans and receivables in both the International and Transactional banking segments saw more than double digit growth. This strong pace of growth, which is carrying on from the positive trend seen in 2018, was made possible by the new workforce structure, the strengthening of partnership agreements with large international banks and the reinforcement of the branch network of specialist teams in the international and transactional business units.

In the Investment Banking area, the main business indicators were also favourable for the ordinary advisory and funding activities for business transactions, which allows the Bank to offer customers differentiated products. The loan book increased by 17% and gross operating income by 21%, due mainly to the 37% rise in fees.

From an organisational standpoint, the highlight for the Corporate Banking segment was the implementation of a new portfolio management model that allows specialist professional teams to be set up for each customer income tranche, and includes advanced tools to improve the value added services and products offer. Additionally, as mentioned above, the service quality index rose significantly in the mediumsized enterprises and SME segments, while holding in the Corporate Banking area.

Despite corporate
leverage, the loan book
grew by 6.5%, leading
to an increase in market
share.The global objective for 2020 is to increase the differentiation of products and solutions, which will enhance customer relations and fee management, with a focus on the International Banking businesses (boosting the activity of medium-sized enterprises and SMEs to increase diversification), Investment Banking and Transactional Banking. At the same time, Bankinter will work to increase the efficiency of its critical processes, such as

risk management and the entity's corporate website. According to the size of the customer, the objectives are to increase the specialisation of the Corporate Banking area (key to achieving differentiation), improve the return on equity of medium-sized enterprises (although some progress was made in 2019) and the efficiency of SMEs (especially in risks and attracting new business).

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