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Banca March - Crecemos con valores, crecemos juntosNews

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At Banca March, we want to keep you always informed, and this section gives you the opportunity to find out whatever you want to know about.

09/30/2019

First half 2019 results

  • Banca March has posted attributable profit of 61.3 million euros year to June, down by 0.9% versus the like-for-like figure for the same period of 2018, with improvements in net interest income (+7.0%) and gross income (+0.7%) and major investments undertaken in technology and digitalisation. Banca March continues to roll out its Digital Transformation Plan, which features an ambitious investment of 75 million euros over the 2018-2020 period.
  • Consolidated profit for the first half of 2019 is calculated using the equity method following the sale of 5% of Corporación Financiera Alba (CFA) late last year, which positioned Banca March's stake in CFA at 15%. The new accounting method shows Banca March's results with greater clarity.
  • Business volume in the Private Banking and Wealth Management continued to grow (+3.9%), and customer funds were up by +10% over the first half.
  • Banca March's business model continues to be underpinned by robust financial and capital ratios: it boasts the lowest NPL ratio in the Spanish financial sector (2.24%) without having resorted to discounted portfolio sales, and among the highest solvency ratio (15.29%) and LCR (307.5%).
  • In the Corporate area, Banca March has cemented its strategy as a leader in banking services for family businesses and entrepreneurial families, specialising particularly in alternative financing, direct lending, customised treasury solutions and risk hedging. Lending in the Corporate Banking area also grew by 13.6% over the first half.
  • The figures for the Balearic Islands business reflect sustained growth, thanks to the bank's in-depth understanding of the market and its competitive advantage in the region. The NPL ratio in the Balearic Islands stood at 0.94%, and business volume was up by 6% to June.
  • For the bank as a whole, the strength of the business is reflected in the double-digit growth secured in loans (+16.3%), deposits (+11.3%), equity (+12.5%) and total assets (+12.4%).
  • Against a challenging backdrop for returns on traditional assets, Banca March has stepped up its range of Joint Investment products with six real economy investment undertakings, specifically in the fields of logistics, real estate financing, startups, care homes for the elderly, hotels and security.
  • Banca March holds over 1,600 discretionary portfolio management contracts totalling over 710 million euros in assets under management. This AuM figure is a testimony to the excellent take-up of Next Generation, the discretionary management product based on future megatrends, which has already generated over 400 contracts and 60 million euros.
  • The Board of Directors appointed two new non-executive directors over the first half of the year, Agatha Echevarría and María Antonia Otero. Including the bank's Executive Vice Chair, Rita Rodríguez Arrojo, there are now three women on the bank's Board of Directors, which comprises a total 15 members, of whom five are non-executive directors.
  • In an industry where jobs are being lost, Banca March has continued to create new professional opportunities; in order to ensure it has the very best teams in place to roll out the 2017-2019 Strategic Plan, the bank hired almost 70 professionals in the first half of 2019.

Banca March's consolidated attributable profit in the first half of 2019 stood at 61.3 million euros. This reflects a decrease of 0.9% versus H1 2018 when calculated on a like-for-like basis, using the equity method of consolidation and with a 15% stake in Corporación Financiera Alba (CFA), as opposed to using the full consolidation model in place last year, with a holding of 20% in CFA.

Net interest income was up substantially by 7.0% and gross income grew by 0.7%, despite the significant investment in technology and digitalisation.

Banca March CEO José Luis Acea said: “Given the challenging backdrop for the financial sector as a whole, these H1 2019 figures maintain our strategic positioning and underscore Banca March's capacity to continue to consolidate its business model, which is focused on private banking and corporate advisory, whilst simultaneously building and safeguarding – through intensive investment – our future as a profitable, agile, efficient bank that can respond to the needs of customers both in this generation and the next. Our investments have focused largely on the digitalisation process, which sought to identify, across all areas of the organisation, the potential offered by technology to improve the way the bank adds value. The Digital Transformation Plan features an investment of 75 million euros for the three-year period between 2018 and 2020, and will allow Banca March to harness future growth opportunities and offer added value, especially in the specialist areas of Private Banking and Wealth Management.”

MORE TRANSPARENT CONSOLIDATED ACCOUNTS

The consolidated profit for the first half of 2019 was calculated using the equity method, following the sale of 5% of Corporación Financiera Alba (CFA) late last year, which took Banca March's stake in CFA to 15%. This change in accounting criteria was the final step in the transformation and professionalisation process launched by Banca March in 2016, ahead of the 2017-2019 Strategic Plan. The new accounting technique — the equity method — reflects the results of the two companies involved, Banca March and CFA, with greater clarity and independence. These two companies have always been managed independently, but the full consolidation accounting method used until now generated a certain interdependence.

To allow for a year-on-year comparison on a like-for-like basis, the consolidated profit for H1 2018 is also presented pro forma, recalculated under the equity method and based on a 15% holding in CFA, as opposed to under the full consolidation method used last year.

SOLVENCY

In line with its philosophy of prudent, long-term management, Banca March's business model continues to be underpinned by robust financial ratios. The solvency ratio, following the change of accounting method for CFA, stood at 15.29% at the end of March, which is one of the highest in Spain. The bank's NPL ratio was 2.24%, the lowest in Spain and less than half of the sector average (5.64% in May, according to the latest figures). The liquidity coverage ratio (LCR) stood at 307.5%.

LEADERS IN FINANCING FAMILY BUSINESSES

Banca March continues to cement its position as a leader in the Spanish financial sector in the area of Corporate Banking, specialising particularly in businesses, family businesses and entrepreneurial families. In the first six months of 2019, lending in the Corporate Banking area increased by 13.6%.

As well as its traditional banking services (financing, payment services and foreign trade, among others), the bank also offers a series of value-added consultancy products, such as alternative financing (short, medium and long-term), M&A, direct lending, customised treasury solutions and risk hedging. This highly-specialised range of products is unique in the Spanish market, and is underpinned by the bank's unwavering commitment to affording companies access to the best possible financing options through a family bank with zero conflicts of interest.

One of Banca March's core strategic lines in the Corporate area is to advise its clients on identifying alternative sources of funding, such as commercial paper and bond issuances on the MARF and the Irish Stock Exchange. To this end, the bank created its Capital Markets business unit in early 2013. 

In 2018, Banca March placed over 3.4 billion euros in short-term financing in the capital markets, up 57% versus 2017, and the total amount issued year to June 2019 stands at 2.2 billion euros. Banca March currently boasts a MARF market share of over 50% of the total outstanding balance of securities issued.

Banca March is one of the most active financial institutions in the market in short-term issuances for Spanish companies, and aspires to achieve a similar position in the bond market.

Last year, Banca March reinforced its Corporate Banking and Markets area by creating the Equity Capital Markets (ECM) unit. This business unit will offer the bank's customers solutions to obtain equity and also afford them the opportunity to adjust their shareholder base by transferring blocks of shares. Our ECM unit has already secured its first mandates to execute trades of blocks of shares and is expected to further consolidate its activity by obtaining additional mandates going forward.

The M&A unit continues to provide strategic and financial advice to family businesses and enterprising families, such as the advisory services offered in relation to the acquisition of Ice Cream Factory Comaker (ICFC) by the Ferrero Group. The bank is also working on a range of transactions currently underway in the food, hotel and technology sectors, among others.

SUSTAINED GROWTH IN THE BALEARIC ISLANDS

Banca March, which was founded in 1926 in Palma de Mallorca, continues to enjoy robust activity in its market of origin, where the bank's figures evidence its extensive knowledge of the market and the competitive advantage it enjoys as a result. The bank's NPL ratio in the Balearic Islands stood at 0.94% at the end of June. The bank has shored up its resources and customer service model in the region, as well as offering greater added value, with a highly-specialised service for the hotel sector.

UNIQUE JOINT INVESTMENT PRODUCTS

Banca March's joint investment products are unique and inimitable in the Spanish financial sector and virtually unparalleled at the European and global levels. These products, which allow our customers to invest in the same products as the bank does, are exclusive to Banca March and come in two formats.

Firstly, the three institutional SICAVs managed by March Asset Management (March A.M) are an excellent example of joint investment products, one of the hallmarks of Banca March. Torrenova is Spain's largest SICAV, with 1.11 billion euros under management at June 2019. It was created over 20 years ago as an investment vehicle for the bank's shareholders; today, more than 5,170 customers hold investments in the fund. Bellver (468 million in AUM and 3,398 shareholders) and Lluc (222 million in AUM and 1,757 shareholders) complete the trio of products. All three products offer a unique SICAV model which is available to any of the bank's customers with a minimum investment of just one share, allowing them to benefit equally from the returns generated by these financial instruments. The three institutional SICAVs have generated outstanding returns year to date: Torrenova has gained 4.4%, Bellver 8.19% and Lluc 11.5%.

Secondly, the fact that Banca March is 100% family-owned means it can undertake real economy investment projects that require a medium- to long-term investment commitment. These investments are undertaken through three operations: Banca March, the Juan March Foundation and Corporación Financiera Alba, one of Spain's largest independent financial holding companies.

Banca March's background in joint investment is endorsed by the over 1.45 billion euros – of which 38% has been contributed by the Group – invested over the last 10 years in real economy projects. In 2018, the bank worked intensively on identifying new investment opportunities, which served to lay the groundwork for projects undertaken over the course of last year and others which have been launched since the beginning of 2019.

Of the 163 projects studied last year, only eight were approved, with a total investment of 450 million euros. These projects will all continue to be implemented throughout 2019. Around a third of the transactions studied had a real estate component, one fifth were lending or private financing transactions and another fifth were in the private equity area. Half of the projects were based in Spain, and the remainder had an international component.

In the first half of 2019, Banca March stepped up its investments in private equity – traditionally the most heavily weighted asset in its joint investment products – specifically in the international arena, through Carlyle's fifth European private equity fund, Carlyle Europe Partners V. This is the first joint investment initiative in the share capital of unlisted companies outside Spain and Portugal, and will be rolled out over the coming years through additional funds and regions.Durant aquesta primera part de l’any 2019, Banca March ha expandit la inversió en capital risc, la classe d’actiu que concentra més pes en la història de la Coinversió, concretament en l’àmbit internacional, amb la participació a Carlyle Europe Partners V, el cinquè fons europeu de Carlyle. Aquesta inversió suposa la primera iniciativa de Coinversió en el capital de companyies no cotitzades fora d’Espanya i Portugal, i que tindrà continuïtat al llarg dels propers anys amb estratègies i geografies addicionals.

The bank continues to invest in niche alternative financing strategies (unlisted), with an investment committed to the third investment vehicle managed by Oquendo, which will finance growth projects for Spanish companies via mezzanine debt.

One noteworthy project in the real estate sector are the investments underway with Pavasal to develop a dozen logistics warehouses of substantial size to respond to existing operators' latest needs. These logistics projects, located in Madrid, Barcelona and Valencia, include additional improvements to the access roads and the logistics assets' surroundings, and will create over 500 permanent jobs.

Also within the field of real estate investment, Banca March invests, alongside Azora, in the SOCIMI Adriano Care, which acquires care homes for the elderly and leases them to prestigious operators in Spain's major urban hubs

A LEADER IN PRIVATE BANKING AND WEALTH MANAGEMENT

Banca March's strategic Private Banking and Wealth Management business, a segment in which the bank is seeking to position itself as the Spanish market leader, continued to enjoy growth in terms of business volume (+3.9%).

The Group's asset management business, March Asset Management (March AM), ranks third in the Spanish market by volume of assets under management in SICAVs, with a total of 2.60 billion euros under management in these vehicles at the end of March.

March AM, which had total assets under management of 5.84 billion at the end of June, is a crucial component of the Group's strategy. The outstanding returns offered by all March AM's investment products is a reflection of the excellent management undertaken across all product classes. In fixed income, Fonmarch has gained 2% year to date. The profiled funds have also posted remarkable returns: March Patrimonio Defensivo is up by 2.37%, March Cartera Conservadora by 4.61%, March Cartera Moderada by 6.90% and March Cartera Decidida by 9.85%. On the equities side, March Global has gained 16.27%, March Europa Bolsa 8.33% and March New Emerging 8.08%. In the Basque Country, March Acciones EPSV generated a return of 17.26% year to June and March Moderado EPSV gained 5.83%.

March AM's pension funds also outperformed over the first half of the year: March Pensiones 80/20 gained 5.66%, March Pensiones 50/50 9.23%, March Acciones 18.01% and March Pensiones Protección 13.13%.

Back in April, March AM received the award for Best Equity Manager 2018 in the XXX edition of the Expansión-Allfunds Awards, organised by the financial daily Expansión and Allfunds Bank.

Within the framework of MiFID II, part of Banca March's core strategy is to offer its own products whilst also affording its customers the opportunity to invest alongside the bank in joint investment initiatives. However, Banca March already operates, de facto, as an independent company; it offers a full catalogue of investment services, applies an open architecture approach (selling its own products and third-party products) and its interests are clearly aligned with those of its clients (through joint investment). The fees collected by the financial institution are therefore twofold: implicit (or indirect fees) on execution services and specific advisory services, and explicit (or direct) fees in the case of Discretionary Portfolio Management (DPM). For ongoing advisory services, fees are both explicit and implicit.

One of the cornerstones of Banca March's philosophy is the constant search for innovative products for its customers. In response to that goal, in 2018 the institution launched a high added-value DPM offer which has generated outstanding take-up levels among its customers, with a total of 1,060 contracts at the end of March.

EXCELLENT PROFESSIONALS FOR THE STRATEGIC PLAN 2017-2019

The excellent technical quality of Banca March's managers is partly thanks to a Human Resources policy based on ensuring a meritocracy and prioritising the professional development of the workforce. Banca March's investment in training per employee is substantially higher than the sector average, which translates to outstanding customer service.

In an industry where jobs are being lost – an estimated 80,000 finance positions have disappeared over the last five years – Banca March has continued to create new professional opportunities. In the first half of the year, almost 70 new professionals were recruited. With a view to ensuring we have the best teams in place to roll out the Strategic Plan 2017-2019, which has been approved by the Board of Directors, the bank is currently undertaking an intensive renewal of the professional profiles in the Wealth Management and Corporate Banking areas. In net terms, the Banca March workforce increased by almost 100 people in 2018.

All Banca March employees participate in a training course on financial advice and information, so the bank complies more than comfortably with the MiFID II guidelines published by the European Securities and Markets Authority (ESMA). Thanks to this plan, the bank provides training not only for those employees who provide advice directly to customers, but also those who provide information and marketing services, as well as those in the bank's technical and administrative areas. The rate of professional certifications continues to increase, with an 87.5% pass rate for EFPA Spain’s EFA (European Financial Advisor) and EIP (European Investment Practitioner) qualifications.

As regards Spain's new Real Estate Loan Agreements Act (Ley de los Contratos de Crédito Inmobiliario, or LCCI), 67.13% of the professionals who require the certification stipulated under the Act, which came into force on 17 June, have already obtained it.

Banca March's value proposition is underpinned by four key pillars: shareholder commitment, exclusive products, outstanding service quality and excellent professionals. In 2013, Banca March launched its Talent Programme for new graduates with strong professional skills and language proficiency. The young professionals who join the team through this programme rotate through the bank's various areas for two years, gaining a broad understanding of the entire organisation. They are also assigned a personal mentor and given specific training in line with their professional profile. The bank now has 126 young professionals who have successfully completed the programme and joined the Banca March workforce.

Whilst all of the bank's areas have participated in this recruitment drive, the main focus are the areas that work most closely with the bank's customers, in which Banca March is a sector leader: Retail and Private Banking, Corporate Banking and Wealth Management – 62% of the participants in the Programme joined these areas. The bank also maintains its internal promotion policy.

COMMITMENT TO GOOD CORPORATE GOVERNANCE

For years now, Banca March has upheld an unwavering commitment to the strictest global governance standards, ensuring that its commitment in the field is aligned with the most demanding listed companies. The new additions to its Board of Directors since the beginning of the year have been undertaken in the spirit of this commitment. In January, Agatha Echevarría Canales, who has extensive experience in taxation and foreign investment and in-depth knowledge of family businesses, was appointed as a non-executive director. More recently, María Antonia Otero was appointed to the Board, also as a non-executive director. María boasts impressive experience in the telecoms sector and offers great expertise in the implementation of corporate governance policy and structures, with a particular emphasis on the risk, compliance, audit and control functions.

These additions to the Banca March Board of Directors clearly reflect the bank's commitment to appointing outstanding professionals who will help the bank achieve its goal of offering an unparalleled range of private banking and corporate advisory services, based on unique, exclusive products, outstanding quality service and excellent professionals.

The Banca March Board of Directors now comprises 15 members, of whom five are non-executive directors, and following the appointments of Echevarría and Otero, three of these members – including the bank's Executive Vice Chair, Rita Rodríguez Arrojo – are women.

COMMITMENT TO TECHNOLOGY

Banca March continues to roll out its Digital Transformation Plan, which will carry a total investment of 75 million euros over the 2018-2020 period.

The bank's digital strategy, which is overseen directly by Banca March Executive Vice Chair Rita Rodríguez Arrojo, responds to three broad objectives: enhance customer experience, expand the range of digital tools available to managers and improve the efficiency of internal processes.  

The bank's digitalisation efforts are a response to its strategic goal of positioning itself as the leading provider of private banking and corporate advisory in the Spanish market, and to its business model, which is underpinned by four key pillars: shareholder commitment, unique, exclusive products and services, outstanding quality service, and excellent professionals..

Banca March is also transforming its branches into business centres providing multichannel advisory services, which is already making it easier for customers to access the banking processes they require. Around 50% of all Banca March customers use the bank's digital channels, and that percentage jumps to 62% in the core segments of Private Banking, Wealth Management and Corporate Banking.

The bank has updated its mobile app and launched a new investment website. Using the website, customers can access information on the financial markets which is relevant to their investment portfolios. They can also view the details of their contracts and products, and can carry out transactions. In 2018, Banca March expanded the digital payment services available to its customers to include Google Pay and Apple Pay. The bank's latest innovation was the launch of the first ever voice assistant with Smart Display for use in private banking. 

In addition, as part of the Digital Transformation Plan, Banca March's Technology Unit is rolling out a range of projects aimed at updating the bank's infrastructure, with a view to implementing cutting-edge, mature, flexible, reliable technology that facilitates and ensures the development and sustainability of the business, its digital transformation and its operating model. To this end, an agreement was signed with Telefónica in June to optimise data management with cutting-edge technology. Within the scope of this project, which will run for five years, global telecoms leader Telefónica will provide Banca March with data storage, management and administration services at its tech hub TecnoAlcalá, which has secured Tier IV certification from the Uptime Institute. Telefónica will also provide the platform, management and administration for Banca March's hyperconverged infrastructure and its operating system.

Among others, the core lines of the technology transformation process are focused on providing top-level cybersecurity solutions, updating communication lines to afford greater capacity and speed, acquiring next-generation server virtualisation solutions and quicker, more frequent IT backup solutions, updating the physical network of firewalls to reinforce information exit and entry points, adapting the architecture to receive cloud-based services from various suppliers and modernising workspaces.

The non-profit organisation @asLAN, which comprises over 120 tech companies that share a passion for innovation, recognised the work of Banca March's IT team with the award for Private Sector CIOs, in recognition of their clear contribution to promoting the deployment of digital infrastructure and providing support for applications and business processes.

 
BALANCE SHEET CHANGE CHANGE
30/06/2019 30/06/2018 AMOUNT* % 30/06/2018 AMOUNT* %
Loans and advances 9.793 8.422 1.371 16,3% 8.647 1.146 13,3%
Customer deposits 11.287 10.138 1.149 11,3% 10.138 1.149 11,3%
Equity 1.836 1.632 204 12,5% 4.910 -3.074 62,6%
Total assets 17.088 15.202 1.885 12,4% 18.746 -1.658 -8.8%

*Amount on million €

INCOME STATEMENT (1) (a) CHANGE (1) (b) CHANGE
30/06/2019 30/06/2018 AMOUNT* % 30/06/2018 AMOUNT* %
Net Interest Income 75.5 70,6 4,9 7,0% 68,3 7,2 10,5%
Gross Income 215,9 214,3 1,6 0,7% 306,3 -90,4 29,5%
Operating Income 69,0 72,5 -3,5 -4,9% 136,3 -67,3 -49,4%
Attributable profit 61,3 61,9 -0,6 -0,9% 65,0 -3,7 -5,7%

*Amount on million  €

MAIN RATIOS 30/06/2019 30/06/2018
NPL ratio 2,24% 2,89%
NPL coverage ratio 61,31% 53,74%
Capital 30/06/2019
Solvency ratio 15,29%
Tier 1 15,29%

(1) For the sake of clarity, these figures include:

  • (A)  Pro forma figures for Q2 2018 to allow for like-for-like comparison with Q2 2019, calculated using the equity method of consolidation and assuming a holding by Banca March in CFA of 15%.
  • (B) The figures for Q2 2018 as published, calculated based on the full consolidation method and on a 20% holding in CFA, which are not homogenous and therefore not comparable with the figures for Q2 2019.

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