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In 2018, Bankia presented its 2018-2020 strategic plan, aimed at enhancing efficiency and cost control, strengthening the balance sheet, improving business performance, and increasing the bank’s market shares in mortgage lending, lending to companies, consumer loans, mutual funds, payment services and insurance.

Strategic Plan

2019 was the second year of the three-year Strategic Plan presented in February 2018.

The four main components of the bank’s roadmap are: integration with BMN; efficiency and cost control; revenue growth through increased sales of value-added products; and accelerated reduction of Non-performing assets.

The plan’s financial targets were calculated assuming Spanish GDP growth of more than 2% over the three years, a Euribor of 0.73% at the end of the period, and a gradual recovery of credit. The fact that interest rates are negative has affected the goal of reaching a profit of 1.3 billion euros at the end of the period.

Over the last two years, Bankia has succeeded in capturing the synergies of the BMN merger earlier than projected and in boosting the estimated amount of the synergies from 190 to 220 million euros. The bank has also increased its pay-out ratio to 65%, up from 50% in 2018, and has continued to generate capital above the Fully Loaded CET1 ratio of 12%.

ECONOMIC FORECASTS FOR 2020

In 2020, Bankia will be operating in a Spanish economy that is still expanding, but with GDP growth easing to 1.7%.

Unlike in the past, the current expansionary phase is more balanced and has a sounder basis. Growth is proving compatible with the correction of the traditional macroeconomic imbalances, which tended to cut short any expansion. The economy is thus showing itself capable of growing while at the same time generating currentaccount surpluses and reducing the indebtedness of private agents.

Only a negative external impact could drive the country into recession.

Forecasts suggest that to the extent that agents’ confidence and expectations begin to stabilise or recover, the slowdown could be moderate.

The main external risks to this scenario include a further weakening of Spain’s export markets, especially the European Union; a resurgence of protectionism; possible geopolitical tensions affecting the oil market; and the uncertainty arising from the outcome of Brexit.

BUSINESS PROSPECTS FOR THE BANKIA GROUP

Throughout the last year of its strategic plan, Bankia will continue to work to consolidate the business, with the primary aim of strengthening its competitive position, improving its profitability and growing so as to generate capital organically.

The bank will seek to grow its revenues through increased sales of high-value products and through the new lines of business it has been able to start since the restrictions imposed under the Restructuring Plan that ended in December 2017 were lifted. These businesses include real estate development financing, long-term lending to large corporations with access to capital markets, both in Spain and abroad, and other feegenerating products (project and acquisition finance). The bank also expects double-digit growth in fees and commissions.

CHANGES IN THE BANK’S MANAGEMENT TARGETS STRATEGIC PLAN 2018-2020
  2018 2019 Strategic Plan Target
EFFICIENCY AND COST CONTROL
Synergies (Million euros) 130 220 190
CUSTOMERS
  Individuals/Businesses Individuals/Businesses Individuals/Businesses
Satisfaction 86.9% / 93.6% 90.3% / 93.6% 92% / 95%
DIGITISATION
Digital customers
(percent of total customers)
45.4% 53.3% 65%
Digital sales 25.8% 36% 35%
SHARE OF LENDING AND HIGH-VALUE PRODUCTS
Balance of mortgage lending 13.22% 12.46% 12.6%
Balance of lending to businesses 7.42% 7.83% 7.7%
Balance of consumer finance 5.58% 6.08% 6.6%
Balance of Mutual funds 6.55% 7.05% 7.2%
MIX OF STOCK OF PERFORMING LOANS
Housing 64% 61% 58%
Consumer finance 4% 5% 5%
Businesses and real estate developers 31% 34% 37%
BALANCE SHEET QUALITY
Reduction of non-performing assets*
(Billion euros)
5.9 8.4 8.9
NPL ratio 6.5% 5.0% 3.9%
Coverage ratio 54.6% 54.0% ~ 56%

 

* Reduction of non-earning assets accumulated since December 2017.

Meanwhile, it will continue to reduce problem assets organically, so as to improve the quality of the balance sheet and free up liquidity and resources for new loans in segments in which Bankia wishes to increase its new lending and market shares.

The increase in lending will therefore be accompanied by further reductions in Non-performing loans and foreclosed assets (an estimated 8.9 billion euros in the period 2018-2020).

Responsible management plan

In 2019, Bankia started its 2019- 2020 Responsible Management Plan, aimed at driving the bank’s leadership in the area of sustainability. This plan, founded on sound corporate governance, has four strategic lines of action:

  1. Customer satisfaction and customer relationship.
  2. Sustainable development and transition to a low-carbon economy.
  3. Talent and commitment.
  4. Support for society.

In total, there are 57 projects and initiatives in progress that contain129 specific targets and involve 17 management units. In 2019, 80.7% of the projects have been completed having achieved their target o are at a positive stage of development.

To monitor the Responsible Management Plan, Bankia has a specific dashboard, which is reported quarterly to the Responsible Management Committee and semi-annually to the Appointments and Responsible Management Committee, made up of four independent directors, so that decisions can be made and action plans designed based on the results obtained.

During 2019, this committee analysed and/or approved or discussed the following topics:

  • Responsible Management Plan.
  • Application, requirements and reporting of the Non-Financial Information Act.
  • Climate change training.
  • Adaptation to TCFD recommendations.
  • Human Rights due diligence.
  • Strategy and reporting of contribution to SDGs.
  • Signing of the Principles for Responsible Banking.
  • Result of the Reputational Risk Assessment.
  • Results of the main analysts and sustainability indices.
  • Adoption of the Collective Commitment on Climate Action.
  • Agreements reached at COP25.

MATERIALITY

Over the course of 2019, the bank conducted another materiality exercise to identify the most relevant issues to stakeholders. Stakeholders consider that Bankia’s overall reputation has improved in recent years, thanks to having a management team that has proven its professionalism, independence of political influence and commitment to high ethical and social standards; the absence of reputational crises; its public status, which ensures closer supervision compared to other banks; and the efficiency it has shown in its response to the crises suffered by the financial sector.

The issues that matter most to stakeholders are information security and privacy, ethics and integrity, information transparency, and corporate governance. Also included among the priorities are responsible marketing, and solvency and liquidity.

RANKING OF MATERIAL ISSUES

(Order of importance for Bankia and for stakeholders)

  • Information security and privacy.
  • Ethics and integrity.
  • Information transparency.
  • Corporate governance.
  • Solvency and liquidity.
  • Responsible marketing.
  • Appropriate arrears management.
  • Innovation and digitisation.
  • Compliance and risk management.
  • Talent management.
  • Accessibility and financial inclusion.
  • Social contribution.
  • inclusion of environmental and social aspects in the business.
  • responsible purchasing.
  • direct environmental impact.

Innovation

Innovation has become an enterprise-wide lever for Bankia’s organisation to assist the creation of new business models and the development of products and services that make life easier for customers, without neglecting profitability, sustainable development or the bank’s contribution to society and the environment.

The bank’s Corporate Innovation and Cyber Security Directorate is implementing a Strategic Innovation Plan. Trend and competition analyses have helped build a portfolio of innovation challenges. Areas the bank has studied and analysed – and in many cases has embraced and is scaling up to the entire organisation – include artificial intelligence, chatbots, virtual assistants, roboadvisoring, robo4Advisoring, agile, neobanks, payments and P2P lending.

Among the main innovation projects undertaken in 2019 are the development of startups to implement new projects in the banking sector; support for fintech through financial investment products; the development of new models of customer communication that improve the bank’s customer response and support; and the incorporation of new technologies, such as blockchain, in the development of innovative projects in the field of sustainability.

  • Bankia Fintech
  • Whatsapp and Google Assistant
  • Commitment to Environmental Protection

Bankia Fintech by Innsomnia, a project driven by Bankia and managed by Innsomnia, has established itself as Spain’s largest open innovation centre. Headquartered in the Valencia Royal Marina, in 2019 it expanded its capacity with the opening of new offices in the centre of Madrid.

Since 2016, Bankia Fintech by Innsomnia has issued five national and international calls for proposals, with a total of 493 applications submitted and 65 national and international projects selected for development.

The aim of the programme is to encourage collaboration between startups and Bankia in meeting their strategic challenges, addressing technological change as an opportunity and developing proof of concept and minimum viable products that can be incorporated into the bank’s production and management.

In investment, Bankia has created the Bankia Fintech Venture fund, through which it aims to invest up to 20 million euros over a period of five years in fintech projects carried out by financial startups.

Bankia has opened the first official Whatsapp account of any bank in Spain, to give its customers an easy and convenient way of contacting the bank. Initially, the account is being used to answer questions and respond to inquiries about mortgages, although the aim is to expand the service offered by this channel and incorporate other products.

The bank is also present in the virtual voice assistants of Google (Google Assistant) and Amazon (Alexa), offering a service to help customers and non-customers find branches or ATMs nearby or at a certain address or location.

In collaboration with Aenor and Everis Ingeniería, Bankia has launched a project to create a national market for the generation and exchange of carbon credits. The platform allows individuals or companies wishing to offset their carbon footprint to access carbon credits generated in projects in Spain.

In this project, for which it has become a member of the World Bank’s advisory group, Bankia contributes its Stockmind asset tokenisation platform, which uses blockchain technology to create an immutable registry that avoids double counting of GHG emission reductions, bringing transparency to the exchange and clearing of verified credits.

Besides acting as financial intermediary and facilitator of the CO2 Market Place tool, Bankia will be able to create specific financial products for real estate developers who support the energy transition by carrying out emission reduction projects in Spain.

This initiative is expected to be operational and officially launched in May 2020 at the Innovation4Climate fair to be held in Barcelona.

Digital tranformation

To further promote the transformation programme set out in the 2018-2020 Strategic Plan, the Digital Transformation and Strategy Directorate has continued to develop and implement the 2019-2020 IT Plan.

In this context, demonstrating the bank’s strong commitment in this area, in January 2019 Bankia created the Deputy General Directorate for Transformation and Digital Strategy, whose mission is to put the bank at the forefront of digitisation in the industry. The bank therefore adopts a responsible approach in all its initiatives, giving priority to privacy and proper handling of customer data.

The main digital transformation tasks set out in that plan are:

PLAN TO EVOLVE THE DIGITAL CHANNELS

During 2019, further development was done on Bankia Online, adding capabilities such as the possibility of aggregating products from other banks, single signature for procurement processes, a vehicle leasing simulator, and a benefits and contributions simulator for pension plans. Added to this was the launch of a new channel, Bankia Online for the Self- Employed, and an overhaul of Bankia Online Empresas.

The bank’s digital insurance business has been reinforced with the launch of a range of online car insurance, which will be enriched during 2020 with other products, including payment of insurance in instalments, home insurance, life insurance and consumer credit protection.

Efforts have also been channelled into the development of digital financing products (Préstamo_ON and Hipoteca_ON) and digital investment products (portfolio management through Bankia Gestión Experta Online).

PROCESS REDESIGN

Work continued on the implementation of new digital signature processes, customer onboarding via video ID (not only in the digital channels but also in branches, with the installation of digital totems), and new operational processes that have made it possible to start to remove paper printers from branches.

 

ARTIFICIAL INTELLIGENCE

Over the course of 2019, Bankia promoted the development of artificial intelligence with a view to improving efficiency and customer service. This has been done by identifying cases that offer scope for relieving employees of administrative tasks or gaining a better understanding of customer problems in the bank’s processes as a whole.

New capabilities have been added to the cognitive platform, so as to benefit from economies of scale in new artificial intelligence projects. These new cognitive capabilities relate mainly to artificial vision and natural language processing and are built as a robust, centralised system designed to meet customers’ needs.

Bankia has expanded the cognitive platform with various new capabilities, including an initiative aimed at better understanding the interactions that take place in the customer service centre, so as to improve customer satisfaction.

CHAT ASSISTANTS

During the year the bank began deploying an ecosystem of chat assistants aimed at improving the customer and employee experience and achieving greater efficiency.

OPTIMISATION AND EVOLUTION OF PLATFORMS

The API platform has been used to give strong impetus to the Open Business solutions the bank offers its business and personal customers, which are expected to deliver significant results during 2020.

At the same time, Bankia has continued to expand its multicloud platform, which currently includes the largest public cloud providers in the market. Through this platform the bank is able to achieve an optimal balance of agility, scalability and cost reduction in digital channels, while maintaining data security and regulatory compliance

ADVANCED ANALYTICS

One of the main pillars of Bankia’s digital transformation is the use of advanced analytics based on Big Data technologies. The marketing and sales process has been enhanced by using the knowledge generated from data to interact with customers at the most appropriate time and in the most appropriate channel and context.

Using this knowledge, the bank is able to respond to customers’ actions with personalised, contextualised communications. This helps generate a differentiating customer experience based on knowledge and support.

Supplementing this scenario is a new system for analysing customer behaviour in digital channels, which is used to understand how and when customers use these channels, what types of transactions they carry out and what happens in the purchase process. Based on that information we can then offer them the products and services that will best meet their needs.

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