Loan Book Growth: 5% increase. Retail Deposits Growth: 4% increase. Off-Balance Sheet Products Growth: 23% year-on-year increase. Net Interest Income Growth: 5.5% increase. Fee Income Growth: 13.5% increase. Return on Equity: 17%. Total Business Volume Increase: EUR 17 billion year-on-year, representing a 9% increase. Total Gross Operating Income: EUR 2,151 million, a 7% increase. Operating Expenses: 6% increase. Profit Before Taxes: EUR 1,083 million, an 8% increase year-on-year. Net Profit: EUR 731 million, a 7% increase year-on-year. Net Interest Margin: 2% decrease quarter-on-quarter. Cost to Income Ratio: 35% year-to-date. Loan Loss Provisions: EUR 262 million. Cost of Risk: 40 basis points. NPL Ratio: 2.2%. Fully Loaded CET1 Ratio: 12.56%. Dividend Yield: 6.2%. Tangible Book Value Per Share: EUR 6.24, a 10% increase versus last year.

Warning! GuruFocus has detected 3 Warning Sign with BKIMF.

Release Date: October 24, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Bankinter SA (BKIMF) reported strong financial results with a 7% increase in net profit year-on-year, reaching EUR 731 million. The company achieved a 17% return on equity, significantly above the cost of capital, indicating strong shareholder value creation. Bankinter SA (BKIMF) demonstrated robust growth in its loan book by 5% and retail deposits by 4%, with off-balance sheet products growing by 23% year-on-year. The company successfully diversified its income sources, with net interest income increasing by 5.5% and fees growing by 13.5%, reflecting successful commercial activities. Bankinter SA (BKIMF) maintained an exceptional cost-to-income ratio of 35%, showcasing strong operational efficiency.

Negative Points

The company experienced a 2% decrease in net interest margin on a quarter-on-quarter basis due to interest rate movements. Deposit costs increased by 7 basis points, impacting the overall cost structure. There is anticipated volatility in net interest income over the coming quarters due to fluctuating interest rates. The company faces challenges in maintaining customer margins amidst changing interest rate environments. Bankinter SA (BKIMF) noted a temporary impact on quarterly net interest margin due to the rapid repricing of corporate banking books.

Q & A Highlights

Q: Can you provide your plans regarding the ALCO portfolio and confirm if you expect to grow total revenues in 2025? A: We have room to increase the ALCO portfolio within our risk appetite, but it won't be a large figure. We believe we can grow total revenues in 2025 due to a combination of net interest income (NII) and fees, despite potential rate reductions. We expect to compensate rate reductions with growth and reduced deposit costs, maintaining positive income growth. - Jacobo Diaz, CFO

Story Continues

Q: Could you elaborate on the average cost for term deposits maturing in Q4 and your sustainable view on customer credit spreads? A: The average cost for term deposits maturing in Q4 is about 60 basis points lower than current rates. We believe our current customer margin levels are sustainable, with ECB rates expected to remain above 2%. We are actively managing deposit repricing to adapt to market changes. - Jacobo Diaz, CFO

Q: How do you plan to manage cost growth in light of lower rates, and what are your ambitions for deposit gathering in Ireland? A: We aim to maintain our cost-to-income ratio within 35-40%, with slight positive operating leverage in 2025. In Ireland, we aim to replicate our successful model in Portugal, focusing on client acquisition and engagement rather than just closing funding gaps. - Gloria Ortiz, CEO

Q: What was the percentage of time deposits repricing in Q3, and how do you see the mix of time deposits evolving? A: In Q3, we focused on digital account campaigns and strategic deposit gathering, impacting costs. We expect the mix of time deposits to decrease as rates fall, with term deposits becoming less attractive. Our strategy is to manage deposit costs effectively as rates decline. - Jacobo Diaz, CFO

Q: Can you provide insights on lending yields and corporate lending volumes? A: Lending yields have seen an eight-basis point reduction, with corporate banking repricing quickly and mortgages repricing slowly. We see opportunities in corporate lending, particularly in international banking and next-generation EU funds, and expect to continue outperforming the market. - Jacobo Diaz, CFO

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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