Bankia : focuses on ‘Responsible Management’ model to become best bank in Spain by 2020

• Four cornerstones of Bankia's 'Responsible Management' approach are: excellent corporate governance, committed teams, satisfied customers, and the bank's commitment with the Spanish society
• 'This management model should put us ahead of the other largest banks in terms of efficiency, profitability and solvency'
• 'To achieve sustainable financial results, we must achieve them with an excellent treatment towards all stakeholders' or groups of interest with which the bank has a relationship
• 'We must dig deeply into what is known as responsible digitalisation, where customers' privacy and careful management of their data are our top priority'
• 'By 2020, Bankia will be a franchise that turns a profit of around 1,300 million euros, offers a double-digit ROE, has an efficiency ratio of close to 45% and a robust balance sheet'

Bankia's Chairman, José Ignacio Goirigolzarri, said today that the bank has embarked on 'a new era of growth' with a view to becoming the 'best bank in Spain' by 2020. In other words, the most profitable, efficient and solvent of the largest banks in the country, while offering service excellence.

To achieve this, Bankia has opted for a 'Responsible Management' approach, the cornerstones of which are: excellent corporate governance, committed teams, satisfied customers, and the bank's commitment with the Spanish society.

'To achieve sustainable financial results, we must achieve them with an excellent treatment towards all stakeholders' or groups of interest with which the bank has a relationship, such as customers, shareholders, professionals, suppliers and society, noted the bank's Chairman during his speech at the General Shareholders Meeting in which he declared that 'this management model should put us ahead in terms of efficiency, profitability and solvency'.

Bankia in 2020

Consequently, by 2020 when the Strategic Plan presented recently comes to an end, Bankia will be a franchise with 'a profit of around 1,300 million euros, a double-digit ROE, an efficiency ratio close to 45% and a very robust balance sheet, well capitalised and with NPL ratios of below 4%'.

Furthermore, under this plan, shareholders will receive 'over 2,500 million euros' in two ways: the ordinary cash dividend, with a payout(percentage of profits distributed) of between 45% and 50%; and the distribution of any excess capital that exceeds the 12% CET1 Fully Loaded threshold.

'To put this into perspective, these 2,500 million euros equate to 20% of Bankia's current capitalisation,' said Goirigolzarri.

Bankia's 'Responsible Management' model

However, these objectives cannot be met just in any way. Goirigolzarri was clear that 'the sustainability of any business project is not founded solely on results, but on how they are achieved'.

'We are aware that these financial objectives cannot be achieved without a 'Responsible Management' model, which goes beyond just turning a profit. 'This model interlinks the 'whats' - the results - with the 'hows' -how things are done,' Goirigolzarri pointed out.

Thus, 'Bankia's project is founded on the premise that there are no results or objectives that can warrant going back on our principles and values,' he added.

Corporate governance

Having excellent corporate governance that 'maintains the highest standards' in this field is crucial, because 'it is not possible to build an excellent business that is sustainable over time, if it is not founded on excellent corporate governance,' he argued.

On this point, Goirigolzarri said that Bankia has the highest score from the most important proxy agency in the world, ISS, 'and our goal is to keep this score over the term of the Strategic Plan'.

The bank's Chairman informed that the various corporate policies, as well as the corporate governance system have been reviewed to incorporate the most recent recommendations on this subject. Here, he highlighted Recommendation 14 of the Good Governance Code, which pursues the goal of having at least 30% of total board members occupied by women directors before 2020. In this way, 'Bankia fully complies with each of the recommendations of the Good Governance Code that are applicable to it'.

Customer satisfaction

The second pillar of the 'Responsible Management' model is to 'continue to focus our attention on the satisfaction of our customers'. 'Customers are at the heart of the Strategic Plan they are the foundations of our business and give meaning to the project'. Without customers' trust, 'the sustainability of our project would amount to nothing,' he said.

Goirigolzarri expressed his great satisfaction with the results achieved since the bank's new positioning (to be approachable, straight-forward and transparent) was unveiled in January 2016, where customers who have their salaries paid directly into their accounts are no longer charged the main fees and commissions.

Over this period, Goirigolzarri said that, 'the customer satisfaction index has improved from 80% to 90%'. Further, 'we have very significantly enhanced our ability to attract new customers'.

Bankia's goal for 2020 is to increase the number of retail customers by 400,000 - 5% more - and boost their satisfaction scores to 92%.

In the business segment, the goal is to raise the number of customers by 20%, while retaining the same level of satisfaction as now, with the score currently standing at 95%.

'Responsible digitalisation'

Goirigolzarri explained that another of the objectives established by the bank in its management model was to dig deeply into what is known as 'responsible digitalisation', 'where customers' privacy and careful management of their data are our top priority'.

Regarding the matter of customer digitalisation, he argued that the situation is complex because 'we have a range of customers with different habits which are constantly changing, and we must offer an excellent service to all of them'. 'Responding to this complexity is perhaps the biggest strategic challenge that we face as bank managers'.

To offer a service that is tailored to its customers' needs, he explained, Bankia has developed its distribution channels, creating a personalisation model based on the extent to which customers use digital channels and their customer loyalty with the bank.

Over the last three years, this model has enabled Bankia to almost double the number of customers with a personal advisor.

'It is an extremely flexible set-up that we can adapt as our customers' habits evolve. Flexibility and the speed with which we can respond and implement change will be the strategic key points in this regard, because banks cannot change the way in which society behaves,' Goirigolzarri pointed out.

Commitment with the Spanish society

The third pillar of Bankia's 'Responsible Management' model is its contribution and commitment to the Spanish society, to offer answers to the main challenges it faces - primarily unemployment and the environment.

In his speech, the Chairman mentioned the effort dedicated to employment and education through the Dual Training Foundation set up in 2016 with professional training being its main priority.

He also promised to 'continue working to protect our environment by optimising how we use our resources and by developing banking products and financing projects that help achieve environmental goals'. In this respect, he mentioned that Bankia 'is one of two Spanish banks that are ranked as 'Category A' on the Carbon Disclosure Project Index, and we want to retain this leadership'.

Committed teams

The fourth pillar of Bankia's 'Responsible Management' model is having teams that are committed to a professional project that rewards people on merit and with the bank's values. Goirigolzarri underlined that the bank currently has 'highly-professional teams, who are really proud to belong to the bank and are strongly committed to the project'.

He also encouraged these teams to 'continue working to the highest standards because we want to be a high-performance organisation that delivers consistent results to the market'. He also called for management to lead by example, as it is 'the only way that these demands for high standards can be justified'.

According to Goirigolzarri's explanation, being the best bank in Spain is to bring to fruition each and every one of these pillars on which Bankia's 'Responsible Management' model is founded, as this is 'the best way of gaining society's recognition: the basis for creating value and therefore, contributing to repaying the public aid'.

BMN integration at a 'very advanced' stage

Goirigolzarri wanted to use his speech to acknowledge 'the high level of competence and commitment' shown by all the teams involved in the BMN integration.

He declared that the process is at a 'very advanced' stage, having signed an agreement with the trade unions to adjust the workforce, change the brand name, complete practically all the branch closures announced at the time of the merger and integrate the IT platforms.

He highlighted the 'huge complexity, both technically and in terms of human resources' involved in the integration of the systems that have been carried out. From a technical perspective, he explained that over 22,000 devices had been installed in branches to replace, for example, 4,250 PCs and 3,200 scanners and tablets; and that 67,000 files containing information of over 1.7 million customers and nine million contracts had been exchanged.

On the human resources side, the integration required 'people to make an extraordinary effort to adapt because, for staff working in integrated branches, it is like switching jobs, as all their day-to-day practices and procedures have been changed'.

To respond to this challenge, the teams at the integrated branches 'have received 259,000 of training and have counted on the support of 770 colleagues who have come from other regions of the bank and are very familiar with the systems we are implementing'.

Bankia's Chairman declared that following the IT system integration, 'over the coming months, we need to push forward with greater urgency to integrate our management systems and cultures'.

All to ensure that 'our service is excellent and standardised at all points of sale'. He concluded that this is the way 'our customers can see the benefits of the merger, which is our top priority'.

José Sevilla highlighted Bankia's 'major sales drive'

Meanwhile, the bank's CEO, José Sevilla, said during his speech at the General Meeting that last year 'was characterised by a major sales drive,' due to the new positioning unveiled by the bank, which 'puts the customer at the heart of everything we do and offering them a personalised service is our priority'.

He said that during 2017, the bank 'added 158,000 new names to its customer base, had 107,000 customers sign new direct salary deposit arrangements, and achieved very significant growth in the credit card and point-of-sale terminal businesses'.

Sevilla also referred to the bank's robust capital ratios. Even after the merger with BMN, 'the Fully Loaded total capital ratiostood at 15.44% at the end of the reporting period - up 59 basis points year-on-year, putting us at the top of the Spanish banking sector in terms of solvency'.

Additionally, 'the highest quality or CET1 component of the total capital ratio stood at 12.66% - above the 12% target we set when we presented the BMN integration'.

Bankia's CEO ended his speech declaring that 'the objective for this year is to ensure an excellent integration of the BMN business, allowing us to capture additional profits'.