Banesto has posted a resilient set of
full-year results with impressive increases in customer numbers and
cross-sell metrics. In an effort to boost flat retail deposits, it
has launched a savings account offering a 1 percent bonus if
Banesto-sponsored Spain wins the football World Cup. Rodrigo Amaral
and Douglas Blakey report.
Banesto, the retail-focused
Spanish-based lender in which Santander has a near 90 percent
stake, has reported net attributable profit after extraordinary
income and provisions of €559.8 million ($760.5 million), in line
with analyst forecasts but down 28 percent compared with a year
ago.
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While the bank’s prudent and conservative
business strategy, concentrated on cost-conscious retail banking,
has helped Banesto to avoid the worst of the global crisis, it has
not escaped unscathed from the ongoing recession in Spain.
The continued lack of demand for loans was
reflected in a 2.9 percent fall in total lending, while the bank’s
non-performing loans ratio soared from 1.62 percent a year ago to
2.94 percent at the end of 2009. Provisions increased more than
six-fold.
Despite the challenging economic environment,
positive metrics included:
• Net interest income rose by 9.6 percent to
€1.7 billion;
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By GlobalData• Cross-sell ratio success: Though the retail
banking cross-sell ratio remained flat at 4.6 banking products per
customer, the bank said that 49.1 percent of its customers now held
more than 4 products, up from 47.2 percent a year ago;
• A gain in new customer numbers of more than
347,000 during 2009, bringing total new customer numbers to 1.1
million in the past three years; and
• An increase in retail mortgages market share
of 160 basis points year on year to 11.3 percent despite a
weakening of the home loans market.
Banesto’s branch rationalisation programme –
it closed more than 30 branches in 2008 – accelerated in the past
12 months. With a further 142 outlets closing, the network was
reduced to 1,773 at the end of the year.
The branch cuts helped Banesto to restrict operating
expenses, which rose by only 0.9 percent, while it successfully
reduced its cost-income ratio to 38.9 percent at the end of the
year from almost 40.5 percent in the previous year.
Increasing use of the bank’s direct channels
has also helped to drive down costs, with alternative channels now
accounting for more than one-third of all transactions, compared
with 20 percent in 2002.
The bank’s mortgage, payroll and flat-fee
packaged current accounts have been particularly successful in
boosting Banesto’s cross-sell metrics, but total retail deposits
fell by 0.6 percent during fiscal 2009 and the bank’s retail
deposits market share remained flat at 9.17 percent.
A World Cup win?
In an effort to boost retail
deposits and tap into Spain’s love of football, Banesto launched an
innovative savings account at the start of February tied to its
sponsorship of Spain’s international football team.
Banesto became official sponsor of La Roja, as
the Spanish team is affectionately known by supporters in November
2009, in the process replacing Barcelona-based rival La Caixa as
the only bank sponsor of the team.
While terms of the sponsorship deal have not
been disclosed, Spanish press reports suggest the bank is paying at
least €2.5 million a year as the team’s banking partner.
The soccer-themed deposit account, Depósito
Selección, offers customers interest of 3 percent, but in the event
of Spain winning the FIFA World Cup at the South Africa-based
tournament, the bank will pay a rate of 4 percent to customers (see
image, below right).
A retail mortgage product
and cards associated with the Spanish team have also been
released.
“As the tournament approaches, a lot of
companies will have campaigns linked to the World Cup,” Rami
Aboukhair, Banesto’s head of products and marketing told RBI.
“We immediately launched an effort to take
advantage of the link with the national team well before the start
of the World Cup.”
The offer is open to both current and new
clients, subject to the condition that the funds deposited
represent new funds to Banesto and are transferred from another
bank.
Banesto’s objective is to grab €1 billion in
new deposits this year with the help of the football sponsorship
deal.
Aboukhair said that the public had warmed to
the campaign, and in less than one month after the launch, €500
million of new deposits had been attracted.
“The national team is a unique symbol, as
everybody in Spain loves it. It is a young team that has plenty of
fight in it and a lot of talent too,” he said.
Hipoteca Selección, the mortgage loan tied to
the football sponsorship, charges a competitive rate of Euribor
plus 0.8 percent.
Customers taking out the loan receive as an
incentive a prepaid card credited with €1,500 that they can spend
on furniture and electrical consumer goods from the Expert retail
chain, also official sponsors of the Spanish team.
Cross-sell metrics will be boosted by the
requirement for Hipoteca Selección customers to have their mortgage
funded from a Banesto account, while ramping up debit cards and
home insurance sales is also part of the marketing strategy.
Holders of the Depósito Selección account are
required to use the bank’s direct debit facility and also required
to use their Banesto debit card at least five times in a six month
period.
“We want to share our clients with the least
possible number of other banks. We want our relationship with
customers to be just like a marriage,” Aboukhair said.
A range of cards linked to the Spanish team is
being released with further product launches in the pipeline for
release in the first quarter.
“As the World Cup looms, focus will be ever
more intense on the national team, as this is the first time Spain
has a real chance of winning the trophy,” he said.
That confidence is shared by a growing number
of Spaniards who are becoming increasingly confident that Spain’s
footballers can emulate the country’s other global sports stars,
Santander-sponsored Formula 1 driver Fernando Alonso and tennis
star Rafael Nadal, a Banesto brand ambassador since 2007.
For Aboukhair, the aim is for Banesto to
repeat the instant hit of the payroll account campaign fronted by
Nadal.
“The all-encompassing nature of the Nadal
phenomenon has played well to Banesto’s strengths. Rafa Nadal is
loved by everybody here, from 5-year-old kids to people in their
80s,” said Aboukhair.
“We are a universal bank and we have clients
in all segments of society. We don’t aim at niches.”
New account customer numbers of accounts
linked to Nadal total 800,000 in the past three years.
Banesto has also recently launched a new loan
product designed at persuading customers to switch from rival
banks, with all transfer expenses paid by Banesto, under the
Hipoteca Smash banner.
Rafael Nadal also co-stars in Banesto’s first
TV ad along with the members of the Spanish football team.
Leveraging sports
sponsorship
The advent of the soccer World Cup
has spawned a number of banking sponorships, including South
Africa-based FirstRand which is the exclusive banking sponsor of
the tournament.
In addition, Hana Bank became the official
sponsor of the South Korean national football team while looking
ahead to the 2014 tournament in Brazil, the country’s biggest
lender Itaú-Unibanco is banking on its sponsorship as a means of
fostering a sea-change in consumer payment habits in the country
(see RBI 619).
|
Performance |
|||
|
Banesto – fundamentals, |
|||
|
2009 |
2008 |
% change |
|
|
Total assets (€bn) |
122.3 |
117.2 |
4.4 |
|
Net interest income (€bn) |
1.73 |
1.58 |
9.6 |
|
Net commissions (€bn) |
0.61 |
0.62 |
-1.9 |
|
Gross operating income (€bn) |
2.56 |
2.44 |
4.8 |
|
NPL ratio (%) |
2.94 |
1.62 |
132 bps |
|
Total expenses (€bn) |
0.98 |
0.98 |
0.9 |
|
Ordinary consolidated profit (€bn) |
0.82 |
0.82 |
0.3 |
|
Net attributable profit (€bn) |
0.56 |
0.78 |
-28.2 |
|
Cost-income ratio |
38.94 |
40.46 |
(152bps) |
|
Tier 1 |
8.72 |
7.70 |
102 bps |
|
Source: Banesto |
|||
Sports sponsorship generally in Spain has
become increasingly popular among the country’s banking sector.
Basketball star Pau Gasol, who plays in the
NBA league in the US, is a brand ambassador for Banco Popular. BBVA
is also the official sponsor of the country’s leading football
league.
Other sports-related initiatives include
Banesto’s agreement with four of the most popular football clubs in
the Spanish league, including Real Madrid.
Supporters of arguably the country’s most
celebrated club side can use a dedicated online bank,
www.ibanestorealmadrid.com, and contract credit cards, a current
account, a special mortgage loan, car insurance and other products
linked to their beloved club.
An official Real Madrid shirt is gifted to
those who open a deposit in a Conta Azul account, which pays 3.10
percent. Partnerships with the other three clubs – Atlético de
Madrid, Sevilla and Athletic Bilbao – are less comprehensive.
Supporters are mainly able to
have a range of cards – debit, credit and prepaid – co-branded
between Banesto and their clubs and a number of club-related
advantages linked to them.
But in the meantime, until at least the World
Cup kicks off, Aboukhair is most excited by the opportunities
offered by Depósito Selección.
With the typical optimism of a sports fan
Aboukhair concluded: “Pretty soon Banesto will be paying 4 percent
on the account. [The traditional favourites at the World Cup] such
as Brazil could finish second this time.”
