Bankinter

Company Profile
Publication Date: 12 Nov 2010

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Bankinter

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TABLE OF CONTENTS

TABLE OF CONTENTS
Company Overview..............................................................................................4 Key Facts...............................................................................................................4 Business Description...........................................................................................5 History...................................................................................................................6 Key Employees.....................................................................................................8 Key Employee Biographies..................................................................................9 Major Products and Services............................................................................13 Revenue Analysis...............................................................................................14 SWOT Analysis...................................................................................................15 Top Competitors.................................................................................................19 Company View.....................................................................................................20 Locations and Subsidiaries...............................................................................23

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Company Overview

COMPANY OVERVIEW
Bankinter is engaged in the provision of retail and commercial banking services.The bank also offers products such as mortgages, insurance, pensions, and credit cards to individuals through its network branches.The company primarily operates in Spain. It is headquartered in Madrid, Spain and employs 4,509 people. The company recorded revenues of E1,245.2 million (approximately $1,736.6 million) during the financial year (FY) ended December 2009, an increase of 18.2% over FY2008. The operating profit of the company was E362.8 million (approximately $505.9 million) during FY2009, an increase of 7.8% over FY2008. The net profit was E254.4 million (approximately $354.8 million) in FY2009, an increase of 0.8% over FY2008.

KEY FACTS
Head Office Bankinter Paseo De La Castellana 29 28046 Madrid ESP 34 91 623 1843 34 91 339 8598 http://www.bankinter.com

Phone Fax Web Address

Revenue / turnover 1,245.2 (EUR Mn) Financial Year End Employees Madrid Ticker December 4,509 BKT

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Business Description

BUSINESS DESCRIPTION
Bankinter is a Spanish bank, engaged in the provision of retail banking services, commercial banking mortgages, insurance, pensions and credit cards through its network of 369 branches, 683 agents and 399 virtual branches. Bankinter operates through several subsidiaries. The company primarily operates in Spain. It also has operations in some European Union countries. Bankinter's service portfolio comprises commercial and private banking, personal finance and lending, corporate banking and ecommerce operations. It also provides mutual and pension funds, leasing, and securities brokerage and dealer services. The bank offers services for both investors and companies, and also operates as an underwriter and placement agent. The bank conducts its insurance activities through its subsidiaries Bankinter Seguros de Vida, de Seguros y Reaseguros and Bankinter Gestion de Seguros. Bankinter offers a comprehensive internet service consisting of eight websites servicing all areas of finance. The bank's main site, www.bankinter.com, is supplemented by other sites such as Broker bankinter, where the customer can trade stocks online, bankinter businesses, specifically devoted to business and includes all products, services, transactions, information and financial operations that a business needs in their daily management, Comparador.com, which provides online comparison of financial products, Confirminet.com, a website to serve the needs of SMEs, movil.bankinter.es, Bankinter's mobile banking website, Proveedores, virtual Bankinter supply centre wherein any business has the chance to add themselves to the offers of suppliers, send estimates, receive orders, consult transactions and view the status of their invoicing and Obsidiana, a website specializing in credit cards and personal loans. For reporting purposes, the bank has various segments including private individual banking, small and medium sized (S&M) Cos, corporate banking, private banking, personal finance and foreign customers. The corporate banking offers the specialist service required by large enterprises and the public sector. The personal finance serves customers with financial assets in excess of E1.8 million. Additionally, the foreign customers segment provides specialist services to European nationals who reside in Spain on temporary or permanent basis. The private individual banking relates to the products and services offered to households. The SME banking provides a specialist service for small and medium-sized enterprises. The private banking business line specializes in integral asset and investment advisory and management services.

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History

HISTORY
Bankinter was established in 1965 under the name of Banco Intercontinental Espaol, S.A., as a joint venture between Banco de Santander and Bank of America. The company was listed on the Madrid stock exchange in 1972 and became fully independent from its founders and transformed itself into a commercial bank. In 1987, when the interest on demand deposits was deregulated in Spain, Bankinter was the first bank to launch a high interest special deposit account, which enabled it to double its managed assets over the following two years. During the 1990s, a number of alternative channels to the traditional branches were created, such as telephone banking, virtual banking, agent network and the internet. Bankinter pioneered the development of mutual funds in Spain, when the regulatory legislation was changed in 1992. Two years later, after a change in the regulation of mortgage loans, Bankinter started to actively market this product. Later, it became one of the most active banks in this market. The companys name was changed to Bankinter, S.A. in 2004. The bank and Vodafone Spain signed a collaborative agreement for the development of banking products and services through mobile devices in 2005. In 2007, Bankinter and Mapfre have signed an agreement to jointly develop the bank's life protection assurance, accidents insurance, life savings assurance and pension funds businesses. Accordingly, each entity will hold a 50% share in Assurer Bankinter Seguros de Vida, whose products will be distributed on an exclusive basis by all of Bankinter's distribution channels, both direct and remote. In 2008, Credit Agricole SA acquired 14.66% stake in Bankinter from Ramchand Bhavnani. As a result, Credit Agricole holds 19.53% stake in the company. Bankinter announced in February 2009 that Cartival S.A. received the permission from Banco de Espana to increase its stake in the bank up to 24.99%. Cartival S.A. currently holds 15.79% in the company. In April 2009, Bankinter S.A. said it will buy Royal Bank of Scotland Group plc's 50% stake in the banks' insurance joint venture, Linea Directa. In May 2009, Bankinter SA decided to raise its capital through a new share issuance worth E361.4 million ($504 million). In June 2009, Bankinter S.A. offered a total of JPY71.9 billion ($775.1 million) of government-guarateed euroyen bonds, in three-year fixed- and floating-rate tranches. The Bank offered JPY35.4 billion ($381.6 million) of 1.223% fixed-rate euroyen bonds and it also sold JPY36.5 billion ($393.5 million) of floating-rate issue. The bonds are due to mature on June 15, 2012.

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History

Bankinter S.A. priced a E900 million ($1,255.2 million), three-year, floating rate offering (FRN), through joint-lead managers Bankinter, Deutsche Bank AG, HSBC Holdings PLC, JP Morgan Chase & Co. and Natixis. This bond will mature on January 15, 2013.

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Key Employees

KEY EMPLOYEES
Name
Pedro Guerrero Guerrero Jaime Echegoyen Enrquez de la Orden Alfonso Botn-Sanz de Sautuola y Naveda Jose Ramon Arce Gomez

Job Title
Chairman Chief Executive Officer Vice-president Director

Board
Executive Board Executive Board Non Executive Board Non Executive Board Non Executive Board Non Executive Board Non Executive Board Non Executive Board Non Executive Board Non Executive Board Non Executive Board Senior Management Senior Management Senior Management Senior Management Senior Management Senior Management Senior Management Senior Management Senior Management Senior Management

Compensation
259614 EUR 190773 EUR 219333 EUR 182202 EUR 181362 EUR 132222 EUR 103360 EUR 100000 EUR 109542 EUR 64224 EUR 188609 EUR

John de Zulueta Greenebaum Director Jaime Terceiro Lomba Marcelino Botn-Sanz de Sautuola y Naveda Fernando Masaveu Herrero Gonzalo de la Hoz Lizcano Director Director Director Director

Jose Antonio Garay Ibargaray Director Rafael Mateu de Ros Cerezo Director and Secretary Lazaro de Lazaro Inigo Guerra Fernando Moreno Pablo de Diego David Perez A. Saez M. Matiacci F. Morillo I. Maguregui R. Rdgez Arrojo Head, Markets and Products Secretariat General Head, Clients Head, Media Head, Risk and Finance Head, Innovation and Corporate Development Head, Auditing Head, Retail Banking Head, Technology Head, Intangible Assets Management

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Key Employee Biographies

KEY EMPLOYEE BIOGRAPHIES

Pedro Guerrero Guerrero
Board: Executive Board Job Title: Chairman Since: 2007 Age: 57 Mr. Guerrero has been the Chairman and President at Bankinter since 2007. He is a State Lawyer, Exchange Agent and Stockbroker and Madrid Notary (On leave). Mr. Guerrero was President of the Governing Company of the Madrid Stock Market and of the Stock Market Company. He is the Founding Member and Vice President of A.B. Asesores Burstiles and President of A.B. Asesores Gestion and A.B. Asesores Red. Mr. Guerrero has been the Director of Prosegur since March 2005. Currently, he is also the Director of Lealtad Desarrollo, SCR, President of Valores Darro, SICAV, and joint and several Corporacion Villanueva. Mr. Guerrero has a law degree from the Universidad Complutense de Madrid.

Jaime Echegoyen Enrquez de la Orden

Board: Executive Board Job Title: Chief Executive Officer Since: 2002 Age: 54 Mr. Enrquez de la Orden has been the Chief Executive Officer at Bankinter since 2002. He started working at the Bank of America in 1979, where he held various positions of responsibility in merchant and market banking in Madrid, New York and London. Mr. Enrquez de la Orden joined Bankinter in 1988 with different duties of management responsibility in the business areas, capital market, private banking and distribution networks. In 1995, he was named Corporate Manager of the Business Areas and Capital Market. Furthermore, Mr. Enrquez de la Orden is also a Director at Lnea Directa Aseguradora and a member of the Foundation's Committee for Technological Innovation. He graduated with a Law Degree from Colegio Universitario San Pablo CEU and a Degree in Public Relations from Centro Espaol de Nuevas Profesiones.

Alfonso Botn-Sanz de Sautuola y Naveda

Board: Non Executive Board Job Title: Vice-president Since: 2005 Age: 40

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Key Employee Biographies

Mr. Botn-Sanz de Sautuola y Naveda has been the Vice-president, the representative of CARTIVAL, at Bankinter since 2005. He worked at Salomon Brothers in the areas of corporate finance and mergers and acquisitions, until 1995. Since 1995, he has managed several Bankinter areas within the banking businesses division and was the person in charge of creating the capital risk division. Mr. Botn-Sanz de Sautuola y Naveda is currently the President of Lnea Directa Aseguradora, insurance and reinsurance company, Vice President of Aleph Nuevas Tecnologas, SCR, Aleph Inversiones, SCR, and Aleph Capital SGECR. He graduated Magna Cum Laude in Economics and Classic Civilizations from Boston University.

Jose Ramon Arce Gomez

Board: Non Executive Board Job Title: Director Since: 1996 Age: 69 Mr. Gomez has been a Director at Bankinter since 1996. He developed his professional career at LILLY from 1963 to 2001, was Chief Executive Officer from 1976 to 1995 and President from 1992 to 2001, of said company. Mr. Gomez has been the Director of Faes Farma since 2002 and is currently the President of Chester Investments SICAV. He has a Law Degree from the Universidad Complutense de Madrid. Mr. Gomez graduated in Business Administration from E.O.I in 1963 and with a degree in Marketing Management from Columbia University in 1969.

John de Zulueta Greenebaum

Board: Non Executive Board Job Title: Director Since: 2001 Age: 63 Mr. Greenebaum has been a Director at Bankinter since 2001. He began his professional career at The Boston Consulting Group. Mr. Greenebaum joined PepsiCo in 1978, where he was later named President and Director-General of Productos PepsiCo. In 1985, he became part of the Grupo Cadbury-Schweppes, being named Chief Executive Officer of Schweppes and later on President of Cadbury-Schweppes Espana and Vice President of Southern Europe. Mr. Greenebaum was Chief Executive Officer of Sanitas de Seguros (BUPA Group) until March 2009. He has a degree in Modern History from Stanford University and Masters in Business Administration from Columbia University Business School.

Jaime Terceiro Lomba

Board: Non Executive Board Job Title: Director Since: 2008

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Key Employee Biographies

Age: 64 Mr. Lomba has been a Director at Bankinter since 2008. He has been the Head of the Economic Research department at the Universidad Complutense de Madrid since 1980 and full academy member of the Real Academia de Ciencias Morales y Polticas. Mr. Lomba has been Director-General of the Banco Hipotecario de Espana, independent advisor of Union Fenosa for eighteen years, and President of its Auditing Commission. Starting in 1988, and for nine years, he was Executive President of Caja de Madrid and its Financial Corporation. Mr. Lomba has been an independent advisor of Sogecable since 2000 and a member of its Executive Committee. Mr. Lomba has a Doctorate in Engineering Aeronautical from the Universidad Politcnica de Madrid with honours and a degree in economic sciences from the Universidad Autnoma de Madrid with honours.

Marcelino Botn-Sanz de Sautuola y Naveda

Board: Non Executive Board Job Title: Director Since: 2005 Age: 48 Mr. Botn-Sanz de Sautuola y Naveda has been a Director at Bankinter since 2005.. He is also currently the President of Aleph SCR. Mr. Botn-Sanz de Sautuola y Naveda graduated with a degree in Naval Architecture and Yacht Design from Southampton University, England in 1994.

Fernando Masaveu Herrero

Board: Non Executive Board Job Title: Director Since: 2005 Mr. Herrero has been a Director at Bankinter since 2005. He was Director of the Banco Herrero y Rioja Alta. Mr. Herrero was also Vice President of the Patronal Cementera Espaola OFICEMEN and of the Instituto Espaol del Cemento y sus Aplicaciones. He joined the Masaveu Group in 1993, where he has fulfilled various roles, currently occupying the Presidency of the Group, as well as the Executive Presidency of the Corporacin Masaveu and the General Administration and Presidency of the Company Tudela Veguin. Mr. Herrero is the President of the Comisin de Auditora de Hidroelectrica del Cantbrico. He is also the President of the Fundacin Masaveu and of the Fundacin Mara Cristina Masaveu Peterson. Mr. Herrero represents the Masaveu Group in numerous domestic and international Companies, Foundations and Corporations. He is the Director and a member of the Executive Committee of the Prince of Asturias Foundation. Mr. Herrero graduated with a law degree from the Universidad de Navarra.

Gonzalo de la Hoz Lizcano

Board: Non Executive Board

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Key Employee Biographies

Job Title: Director Since: 2008 Age: 67 Mr. Lizcano has been a Director at Bankinter since 2008. He was the Chief Executive Officer of Lnea Directa Aseguradora from 1995 to 2008. Previously, he had been Director General of Operations (Media) at Bankinter, where he developed his professional career starting in 1989. Mr. Lizcano held several positions of responsibility at IBM Espana, at IBM USA and at IBM Europe, where he directed the Development of European Products for Banking and Insurance from 1985-1987. He has a degree in Industrial and Information Engineering from the Universidad Politcnica de Madrid and a Masters in Electrical Engineering from the University of Texas.

Jose Antonio Garay Ibargaray

Board: Non Executive Board Job Title: Director Since: 2009 Mr. Ibargaray has been a Director at Bankinter since 2009.

Rafael Mateu de Ros Cerezo

Board: Non Executive Board Job Title: Director and Secretary Since: 2009 Age: 57 Mr. Mateu de Ros Cerezo has been a Director at Bankinter since January 2009. He is a government lawyer (on extended leave of absence). Mr. Mateu de Ros Cerezo is currently a Director of Lnea Directa Aseguradora and a trustee of Bankinter's Fundacion para la Innovacion and of the AMREF Foundation. He is also a professor of Instituto de Empresa in Madrid, a partner of the Ramn & Cajal Abogados law firm, and a member of the Madrid Bar Association. Mr. Mateu de Ros Cerezo is the author of many works on company law, banking law, new technology law and corporate governance. He has a law degree with a special distinction. Mr. Mateu de Ros Cerezo has Doctorate in Law from the Universidad Complutense of Madrid and graduate of the Harvard PMD programme

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Major Products and Services

MAJOR PRODUCTS AND SERVICES

Bankinter provides retail and commercial banking services. It also offers products such as mortgages, insurance, pensions, and credit cards. The company's products and services are as under: Business banking services Consumer banking services Electronic (internet) banking services Insurance Investment funds Leasing services Mortgages Mutual and pension funds Retail and commercial banking Securities brokerage and dealer services Telephone banking services Virtual banking

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Revenue Analysis

REVENUE ANALYSIS
Bankinter The company recorded revenues of E1,245.2 million (approximately $1,736.6 million) during the financial year (FY) ended December 2009, an increase of 18.2% over FY2008. Bankinter generates revenues through six business divisions: Banking for Private Individuals (32.1% of the total revenues in FY2009), SME's (17%), corporate banking (12.8%), private banking (6.7%), personal finance (3.9%) and foreign customers (1.6%). Revenues by Division In FY2009, the Banking for Private Individuals division recorded revenues of E399.3 million (approximately $556.8 million), an increase of 2.5% over FY2008. The SMEs division recorded revenues of E211.1 million (approximately $294.5 million), a decrease of 5.1% over FY2008. The Corporate Banking division recorded revenues of E159.03 million (approximately $221.8 million), an increase of 3.3% over FY2008. The Private Banking division recorded revenues of E83.6 million (approximately $116.6 million), a decrease of 35% over FY2008. The Personal Finance division recorded revenues of E48.7 million (approximately $67.9 million), a decrease of 10.8% over FY2008. The Foreign Clients division recorded revenues of E19.6 million (approximately $27.3 million), a decrease of 9.7% over FY2008.

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SWOT Analysis

SWOT ANALYSIS
Bankinter is a Spanish bank, engaged in the provision of retail banking services, commercial banking mortgages, insurance, pensions and credit cards through its network of 369 branches, 683 agents and 399 virtual branches. The strong financial performance is ensuring liquidity even in the toughest of times. However, high reliance on wholesale funds increases ALM risks. Strengths Strong financial performance ensuring liquidity Favorable risk profile enhancing profitability Diversified revenue sources reducing business risk Opportunities Increasing adoption of non traditional banking channels may restrain operating costs Acquisition of Lnea Directa Aseguradora offers significant scope for synergies and business growth Positive outlook for asset management industry Weaknesses High reliance on wholesale funds increases ALM risks Relative lack of scale hampering competitive strengths

Threats Increasing competition likely to affect profitability and market share Weak economic prospects in Spain and other European countries could affect business volume Increasing regulatory spending

Strengths

Strong financial performance ensuring liquidity Bankinter delivered a strong performance in 2009. The company recorded revenues of E1,245.2 million (approximately $1,736.6 million) in FY2009, an increase of 18.2% over 2008. This growth was primarily driven by 17.7% increase in the bank's net interest income. The banks net profit was E254.4 million (approximately $354.8 million), considering the difficult operating environment the bank faced during the year. This translated into a big increase in the number of customers attracted in high income segments. Strong financial performance ensured ample liquidity even in the toughest times. Favorable risk profile enhancing profitability T

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SWOT Analysis

he bank has a risk profile that is much lower than that of the rest of the sector. The non performing loans ratio of the company is 2.46% for FY2009, which is half the average in the system. The bank has an insignificant level of exposure to the property development sector. The total exposure to this sector is just 2.5% of total loan investments, compared to 17.6% average in the system. In the residential mortgage business, the bank's non performing loan ratio is 1.27%, approximately one third of the average. The favorable risk profile clearly shows the quality of Bankinter's mortgage portfolio and enhances the profitability of the company. Diversified revenue sources reducing business risk The bank has a diversified revenue sources. It offers a wide range of retail and commercial banking services to private and corporate customers. Its activities include business banking services, consumer banking services, electronic (internet) banking services, insurance, leasing services, mortgages, mutual and pension funds, securities brokerage and dealer services, etc. The bank generates its revenue from different divisions: banking for private individuals account for 32.1% of the total revenues in FY2009, SME's division generated 17%, corporate banking produced 12.8% and private banking accounted for 6.7%. Diversified operations reduce the business risk of the company.

Weaknesses

High reliance on wholesale funds increases ALM risks Bankinters balance sheet shows its high reliance on wholesale funds. For instance, for FY2009, the companys low cost current and savings deposits (CASA) accounted for just 23.9% of total customer funds. The rest was contributed by either high cost time deposits or debt securities (wholesale funds). Unlike retail customer deposits (CASA or time deposits), wholesale funds mature in lumps and create asset liability management (ALM) risks if the bank is unable to find refinancing at favorable rates. High reliance on wholesale funds increases ALM risks for Bankiter. Relative lack of scale hampering competitive strengths Bankinter lacks scale to compete with certain domestic peers. Although, it has nation-wide presence in Spain, however, the number of its branches is far less than that of Banco Santander, S.A. and Banco Popular Espanol, S.A. Bankinters lack of scale is also evident from market capitalization, revenue, profits, and number of employees. For instance, in 2009, Banco Santander, S.A. recorded revenues of E39,381 million ($56,446 million), net income of E8,943 million ($12,818.3 million) and employed 169,460 people. Similarly, Banco Popular Espanol, S.A. recorded revenues of E4,285.1 million (approximately $5,976.2 million), net income of E766.1 million (approximately $1,068.4 million) and employed 14,431 people. Relative lack of scale is hampering Bankinters competitive strengths against its domestic peers.

Opportunities

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SWOT Analysis

Increasing adoption of non traditional banking channels may restrain operating costs Bankinter follows multichannel and non traditional distribution model, and the bank's customers can interact with the bank any time and anywhere using the channel that is most convenient for them including branch network, telephone platform, Bankinter.com, ATMS, mobile phones. The bank has progressively increased its commercial capability without significantly increasing the number of its employees or its branches. In this regard, it is worth noting that 81% of all transactions were carried out through remote channels in 2009. The Internet continues to be customers' favourite channel. Through this channel, 54.9% of all transactions carried out in the Bank during 2009 were executed. The growing use of non traditional banking channels may restrain operating costs of the company. Acquisition of Lnea Directa Aseguradora offers significant scope for synergies and business growth The acquisition of the 50% stake in Lnea Directa Aseguradora, a subsidiary of the Royal Bank of Scotland Group and a leading firm in the motor insurance direct sales segment gives Bankinter full ownership of a company which, with 1,600,000 policies, more than 1,200,000 customers and pre-tax profits of close to E100 million a year, offers significant possibilities for marketing synergies and a great opportunity for business growth. The medium- and long-term benefits that may accrue in both Bankinter and LDA as a result of the closer commercial and management relations will give a unique opportunity to the Bank and its shareholders. Positive outlook for asset management industry The total assets under management (AUM) of the company have grown up significantly. In FY2009, total AUM were E54.5 billion ($76 billion) compared to E40.8 billion ($56.9 billion) in 2005. Moreover, asset management industry outlook turned positive after a negative outlook in FY2009. The global asset management and custody banks sector recorded assets under management (AUM) of $70,758.3 billion, representing a compound annual growth rate (CAGR) of 6.9% for the period spanning 2005-2009. In 2014, the global asset management and custody banks sector is forecast to have AUM of $142,366.5 billion, increasing at a CAGR of 15% during 2009-2014. The main factors driving this growth would include the need for private individuals to make provision for their pension requirements. Positive outlook in the global asset management market would enable the group to improve its asset management revenues.

Threats

Increasing competition likely to affect profitability and market share The financial services industry is highly competitive. The company competes on price and service with other banks and financial companies such as savings and loans companies, credit unions, finance companies, mortgage banking companies, insurance companies and brokerage firms such as Banco Popular. Competition in the Spanish banking industry is continuously intensifying as a

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SWOT Analysis

result of industry consolidation and increasing availability of products and services from non-banking financial companies. Bankinter faces strong competition in all of its business segments from providers of similar products and services. Its competitors include Banco Bilbao Vizcaya Argentaria, Banco de Castilla, Banco de Vasconia, Barclays, Banco Popular Espanol, Banco Santander and Banco Sabadell. The entry of on-line banks into the Spanish banking system has increased competition, mainly in customer funds businesses such as deposits. Insurance companies and other financial services firms also compete for customer funds. Like the commercial banks, savings banks, insurance companies and other financial services firms are expanding the services offered to consumers in Spain. Foreign banks also have a strong presence in Spain. Intense competition may put more pressure on the group's revenues and could result in a loss of market share. Weak economic prospects in Spain and other European countries could affect business volume The Spains economy has entered a major downturn in the face of the most dangerous shock in mature financial markets since the 1930s. Against an extremely uncertain background, International Monetary Fund (IMF) has projected a negative growth rate of 0.3% for 2010 and growth rate of 0.7% for 2011, when measured in terms of real GDP. The outlook is subject to considerable downside risks. According to the latest IMF projections, growth rate for the advanced economies for 2010 will be 1.1%. According to IMF projections, Euro area growth rate has been projected 0.2% for 2010. Rising trend in volatility is expected to continue in 2010 as well. There is a need to remain cautious on the major Western economies, because of a number of imbalances threatening their return to higher growth, including high levels of consumer and government debt, budget deficits and unemployment. The economic downturn is likely to impact the profitability and the performance of the company. Increasing regulatory spending In the wake of the current financial crisis, regulators across the world have become more stringent for strengthening global capital and liquidity regulations with the goal of promoting a more resilient international banking sector. The Group of Central Bank Governors and Heads of Supervision, the oversight body of the Basel Committee, announced a comprehensive set of measures to strengthen the regulation, supervision and risk management of the banking sector. The measures include: raising the quality, consistency and transparency of the capital base, enhancing risk coverage, introducing a global liquidity standard. The reforms will fundamentally impact the profitability and business models of many banks, as well as mandating significant process and systems changes.

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Top Competitors

TOP COMPETITORS

The following companies are the major competitors of Bankinter

Barclays PLC ING Groep N.V. Socit Gnrale UBS AG Banco Popular Espanol, S.A. Collins Stewart Tullett Plc Sogefi S.p.A. Bank Austria Creditanstalt Banco Santander, S.A.

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Company View

COMPANY VIEW
A statement by Pedro Guerrero Guerrero, Chairman of the Board of Directors of Bankinter, is given below. The following statement has been taken from the company's 2009 annual report. I should like to begin my comments by reflecting on the difficult economic situation our business has faced over the past year. The sharp slowdown experienced by the global economy since the summer of 2008 culminated in 2009 with the worst recession since the second world war, causing, among other things, a global lack of confidence which led to moments of critical liquidity. The serious difficulties faced by the global financial system and the sharp decline in business throughout the world led central banks to make drastic cuts in interest rates. Likewise, in various countries monetary authorities and governments applied additional measures to inject liquidity to mitigate the deterioration in the interbank markets and credit markets in general, thanks to which they stabilised somewhat in the course of 2009. As far as Spain is concerned, the crisis was reflected in a drop in GDP of around 3.6%, the worst in more than 50 years, and a very big increase in unemployment, the consequence above all of our high dependence on the property sector, one of the sectors worst hit by the crisis. Despite this difficult environment, 2009 was a historic year for Bankinter results if we compare ourselves with the competition; this past year we profited from the differentiation of our business model and lower risk profile, posting a net profit of EUR 254.4 million, with growth of 0.8%. Modest growth, to be sure, but absolutely exceptional in a financial year in which listed domestic banks posted an average fall in net profit of 24%. These results are even more impressive if we take into account the fact that they are based entirely on recurring earnings, meaning we have managed to keep intact the unrealised capital gains inherent in our balance sheet which form part of the Bank's intangible assets, contrasting with the generation of extraordinary income which, in the system a whole, was needed to offset high costs of arrears and writedowns. All the information on our income statement is described in full in this Report, so I shall not go into detail, although I would like to highlight a few figures that reflect just how different Bankinter is. The Bank has a risk profile that is much lower than that of the rest of the sector, as shown by its 2.46% non performing loans ratio (half the average), an insignificant level of exposure to the property development sector, of just 2.5% of total loan investments, approximately one seventh of the 17.6% average in the system, and consequently a level of foreclosed property assets of just EUR 326 million, also extremely low in comparative terms. It is also worth highlighting the fact that in the residential mortgage business, the Bank's non performing loan ratio is 1.27%, approximately one third of the average, which clearly shows the quality of Bankinter's mortgage portfolio.

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Company View

Likewise, the non performing loans coverage ratio is 74% (one of the highest in the system), while allowances made for the possible impairment of foreclosed property assets already totals 20% of their book value, meaning a cover of 46% vis--vis its appraised value. The lower rate of non performing loans, the limited exposure to the property development sector and the strength of our allowances make Bankinter more resistant to the cycle, something which, alongside the lower losses expected from the loan portfolio, bear witness to our adequate solvency levels, with a capital ratio of 10.41% and surplus capital of EUR 757 million. I should now like to take a moment to express my heartfelt thanks to all of your for the extraordinary support which you gave during this past year to the Bank's capital increase, which was carried out with great success, being fully subscribed during the preferential subscription period without needing to be underwritten. The EUR 361 million capital increase served to finance the acquisition of the 50% of Lnea Directa Aseguradora that was held by the Royal Bank of Scotland, giving us full ownership of a company which, with 1,600,000 policies, more than 1,200,000 customers and pre-tax profits of close to EUR 100 million a year, offers Bankinter significant possibilities for marketing synergies and a great opportunity for business growth. In relation to this operation, I should like to make some remarks on the solvency of the Bank. Capital consumption involved in the acquisition of Lnea Directa Aseguradora, calculated in accordance with Bank of Spain rules, is close to 100% of the net amount disbursed for the purchase, which is why, despite the capital increase, capital ratios remain stable. However, this capital is invested in an extremely profitable and solvent asset which improves the group's risk diversification, as well as its growth expectations. Apart from purely financial and typical business variables, Bankinter has a number of other competitive advantages which, despite not appearing expressly in the financial statements, make Bankinter a company which is admired and respected in the European financial sector. These include our advanced corporate governance policy, an area in which we continue to apply the most demanding standards, making us one of the most prestigious of listed companies. Corporate Responsibility, Bankinter's way of thinking and acting, our relationships with our stakeholders and, in short, the management of our intangibles - these are the key factors that set us apart as a company. Our most valuable assets are our staff. Our workforce is young, with an average age of 37, well educated (73.8% are graduates), enthusiastic and motivated to do new things, with initiative, talent, pride and a sense of belonging. In short, our workforce is happy to be working for a company like Bankinter, which was again selected as one of the best places to work by the Great Place to Work Institute, and was the only financial institution and the only Ibex35 company to be included in this list. In terms of our relationship with our customers, we strive constantly to provide a quality service, something which is part of our DNA as a service company. I should point out that Bankinter continues

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Company View

to exhibit service quality ratios way above our competitors, especially among individuals, where we are 4.8 above the market average in the NSI (Net Satisfaction Index). I also take this opportunity to mention some of the prizes awarded to the Bank in areas relating to our support for the most disadvantaged sectors of society, for society in general and also for the environment. Not for nothing are we considered, according to the GS Sustain index, as the best Bank in terms of responsible environmental management. This year we were awarded the Tecnet 2009 prize for Corporate Social Responsibility for the project creating IT classrooms in retirement homes managed by Sanitas Residencial; and one of the National Prizes awarded by the Federacin Nacional de Parapljicos y Grandes Discapacitados Fsicos (ASPAYM), for "universal accessibility and design for all", for our projects in favour of the integration of the disabled, including full access to the Bank's website and network of branches. In terms of our relationship with society, the business world, universities and entrepreneurs, we have always acted in accordance with our values, supporting innovation and talent as a driver for change and progress. Accordingly the Bankinter Foundation for Innovation continues to be one of the best examples of the Bank's aspirations. This is a different type of Foundation - open, multidiscipline and participative, which seeks to encourage innovation in our entrepreneurial and educational environment, as the only advantage sustainable over time, and as a model of behaviour in which we can all see ourselves reflected. That's all. I would just like to say that the new financial year, which will be challenging, will also be full of opportunities for the Bank, as it ushers in a new era in which honesty, responsibility, prudence, best practice, quality of service, and the ability to innovate will be the definitive benchmark values in the financial world. And it is precisely in these areas that Bankinter is strongest. You may rest assured that, in such an environment, we shall succeed in generating value for all of you, and that as Chairman I will put all my efforts and enthusiasm into achieving this.

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Locations and Subsidiaries

LOCATIONS AND SUBSIDIARIES

Head Office
Bankinter Paseo De La Castellana 29 28046 Madrid ESP P:34 91 623 1843 F:34 91 339 8598 http://www.bankinter.com

Other Locations and Subsidiaries

Bankinter - Madrid (Shareholders' Office) Pico de San Pedro 2 28760 Tres Cantos Madrid ESP Bankinter Madrid (Investor Relations) Avda. de Bruselas 12 28108 Alcobendas Madrid ESP

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