Bankinter, S.A.

Good morning. This is Lori Shepard. On behalf of Investor Relations of Bankingta, it is our pleasure to welcome you all to the Bankingta's earnings call for the first half of 2024. Please note that our related financial statements were posted with market authorities earlier this morning. This presentation is also available on our corporate website. On today's call, we are joined again by Bankingta's Chief Executive Officer, Gloria Ortiz, and Chief Financial Officer, Jacobo Diaz. At the end of the presentation, they will be available to respond to questions in a live Q&A. As a reminder, you will need to press star 5 on your phone to be able to submit a question. Please refer to the disclaimer in the presentation and note that this call is being recorded. I will now turn over to Gloria Ortiz to review highlights.

Thank you, Laurie, and good morning to everyone in the call. Before starting, I would like to emphasize that the results on this first half of 2024 are very satisfactory and show very significant growth in activity in all business and geographies in which we operate. A first half of the year of intense commercial activity that translates into a result after tax of 473 million euros, 13% above that reported in the first half of 2023. In addition, these results are supported by solid management ratios from return on capital through efficiency as well as all the ratios related to the bank risk profile. Well, having made this preamble, I will start the presentation with a review of the highlights of the first half of 2024 and share with you some important trends in our commercial activity that drive growth in business volumes and revenues. Then I will hand over to Jacobo to review in depth the financial results and the performance of our businesses across Spain, Portugal, and Ireland. Let's start with some key highlights on page five, where I would like to emphasize four key pillars that underpin our strategy. Firstly, we continue to differentiate ourselves through diversified business volume growth with our customers across the different segments as well as geographies. In this first half of the year, we have grown our loan book by 5.5%, our retail deposit base by 4%, and we report a robust 20% increase in off-balance sheet volumes as a result of a successful strategy of saving relocation from deposit to value-added products. Secondly, backed by the strong commercial activity, all the revenues in the income statement continue to grow. Net interest income grows by 9% compared to June 2023, despite the decline in Euribor in the period. Euribor was at 3.68% compared to 3.88% in the second quarter of 2023. This is 20 bps less. The growth of net interest income is supported by volume growth, the management of customer margins that remains stable, and an active asset and liability management that has reduced the sensitivity of the balance sheet to rate movements. On the other hand, fee income grew by double digit, a solid 13% due to the good performance of balance sheet funds and customer transactional activity. Third, all this growth has been achieved while keeping our risk appetite intact. which is reflected in the improvement in the MPL ratio, which stands at 2.17%, and increase in the coverage ratio by two percentage points that stands at the end of June at 68%. Lastly, we preserve best-in-class efficiency levels at 37%, a robust return on equity ratio, which in the last 12 months stands at 17.7%, improving the ratio reported in the first half of this year. I fully believe that we have achieved these solid results by adhering and consistently delivering on our long-term strategy. The reported volume growth is particularly commendable because we have managed to continue growing in shrinking markets, gaining market share year after year in a diversified and profitable manner. On the top of the page, you can see two graphs that show the evolution of growth rates both for the sector and Bank Inter in Spain. We have clearly outperformed the system in our core market, where we have grown 26 percentage points above the industry, both in loans and retail deposits. This growth differential with the industry also happens in Portugal, where we have grown 62% since 2019, while the sector reports 10% growth in that same period. In the case of Ireland, where we have started our mortgage business in 2021, we have reached a market share of 2.2% in the back book that stands now at 2.6 billion euros. In slide seven, we can see the solid growth in business volumes across the group. If we add lending, retail funds, and of balance sheet funds, the total business volume amounts to 212 billion at the end of June 2024, an 8% or 16 billion euro increase year on year. Going into detail, lending stood at 79 billion at the end of the quarter, which is 4 billion more than in June 2023, and represents 5% growth. On the other hand, retail funds amount to 81 billion euros, 3 billion more than in the first half of 2023. And we have added 9 billion to the off-balance sheet business, which stands at 53 billion, an impressive 20% growth rate in the last 12 months. This intense commercial activity translates into strong increases in fee income. On slide eight, you can see a chart that shows the evolution of business volumes since 2019. This is the sum of lending on and off balance sheet funds from clients, as well as the evolution of fee income. Business volumes have grown by 43% in the period, and fees have presented a solid annual compounded growth rate of 7.4%. Well, there is a clear correlation between business volumes and fee income, as you can see. Moreover, fee income is well diversified and based on value-added products like wealth management, advice brokerage, and custody that represents circa 60% of net fees, but also is based on transactional activities from clients that account for 40% of net fee income. Sustained and diversified growth is what allows us to report net results in the first half of the year of 473 million euros, 13% above last year and 75% more than in the first half of 2022. We continue to increase the return on equity that reached a robust 17.7% in the last 12 months, improving the figure reported in 2023 as well as above 2022. We therefore continue to generate shareholder value, both in terms of dividend yield, which stands at 6.4%, and in retained value in the business, since the tangible book value stands at 5.94 euros per share, which is 11% more than last year. In summary, a solid and increasing second quarter earnings resulting from a consistent delivery of a unique business model. I trust that we will continue to deliver successful growth in the future and remain confident that we will continue to create value for our shareholders by adhering to our strategy. Well, I cannot end this chapter of highlights of the period without mentioning several strategic decisions that we have taken this quarter. These are long-term investment decisions that aim to maintain the pace of diversified business growth in the future. The first decision has to do with the absorption of EvoBanco into Bank Inter. This decision is part of a firm commitment to digital business and customer growth. Evo has done an extraordinary job in the last five years since its acquisition, proving that it is possible to grow profitably with 100% digital model and a simple value proposition. However, the fact is that it is a completely separate legal entity, and it presented two problems. First, that Bank Inter's customers did not benefit from the innovations in digitalization that were taking place in Evo, and second, that Evo lacks the benefits of scale needed in a digital business. At this stage, we want to make a winning and decisive leap forward in digital banking by combining the best of both worlds, Evo's talents and digital experience, with banking their greater investment muscle and scale. The absorption of Evo is accompanied by the creation of a digital organization that joins the 11 already existing organizations in Spain and that has set ambitions growth goals. The second relevant decision has to do with Ireland. In Ireland, as you know, we acquired Avant Money in 2019, which was a consumer finance operation to which we have added quite successfully residential mortgage business in recent years. We believe that there is a great opportunity for growth in Ireland and this is why we have decided to turn the consumer operation into a bank. To this end, we have already registered with the Central Bank of Ireland the file to open a Bank Inter branch in Ireland and absorb Avant Money operations into it. This will allow us to expand the offer of our products and services to our customers and therefore continue to grow and diversify the business in Ireland. Finally, we have launched an ambitious digitalization project in Portugal, where in the coming years we will prioritize in the group a sizable investment with the aim of improving the digital experience of our customers, gaining efficiency and productivity to continue growing profitably. Well, this was all from my part. Jacobo, now over to you, please.

Thank you, Gloria. Good morning. I'll talk through the financial results of this quarter. On page 11, you can see that revenue lines continue to perform particularly well and support our increased optimism for the year with higher for longer rates, resilient margins, and excellent fee growth. With a 9% increase in NII and 13% increase in net fees, we reach total gross operating income of 1.4 billion euros, an increase of 10%. Operating expenses remain at plus 6% year-on-year as we look to support business growth and projects, but also intend to move to more equally smooth total year expenses volumes over each quarter while maintaining our positive operating jobs this year. Cost of risk has increased 7% year-on-year, reflecting provisions for additional growth this quarter. Our profit before taxes reaches €715 million and net profit €473 million, an important increase of 13% year-on-year. On slide 13, you can find an additional table with a comparison between quarters. Here, I would like to highlight that we have been able to deliver an increase of NAI quarter-on-quarter, resulting from our ability to continue to grow volumes as well as manage customer margins that I will comment on the next page. Again, delivering strong net fee results, both on a quarter-on-quarter basis of plus 6%, but also a seasonally strong Q2 this year versus the second quarter of 2023 with a 17% increase. Other income and expenses line has reduced this quarter due to the payment of the bank charge last quarter, as well as the benefit of not having to fund the single resolution fund this year in Q2. Now, I would like to provide some additional detail into each of the results categories. net interest income reached another record level of 583 million euros. We have continued to grow versus last quarter by 1% and up 7% versus second quarter of 2023. Our customer margin remains resilient at 301 basis points, up 3 basis points, versus last quarter and at similar levels to 2023. On the asset side, customer credit yields performing well at 441 basis points, as we see that recent interest rate reduction may impact us more gradually than initially expected. Containment in deposit costs has been achieved with a similar mix of deposits between site and term deposit versus prior quarter. Here, we will continue to manage these costs closely in following quarters. In terms of our net interest margin, we have also been able to maintain stability above the 2% level, consistently one of the highest in the Spanish market when considering our peers over time. Our NIM in the first half of the year was an average 208 basis points. In terms of our outlook for the future, we are committed to maintaining resiliency at current levels in both customer margin as well as NIM. Next page, next slide, we continue to strengthen, diversify, and increase gross and net fee revenue sources. As Gloria mentioned at the beginning of this presentation, our business model and volume growth are the drivers for not only fee growth in our asset management and brokerage business, where we see increases of 20% and 8% respectively, but across the board in our transactional feed lines, where we are performing strongly across the board in payments, risk, and insurance category. Even our FX feed line are now increasing after a slower first quarter. All these factors contribute to our capacity to deliver a substantial accumulated increase of 13% in net fees year on year. contributing 24% to gross income. We continue to exceed last quarter results, reaching 176 million euros in this quarter, a record quarter in recurring net fees and a clear tendency of our expectations for coming quarters. Fees in an area of the bank where we have increased optimism for the following year, given our unique business model that leads to this exceptional feature generation results in a consistent and diversified manner. Moving on to the other income and expenses lines, I would only highlight that we have reported lower trading income and dividends versus last year, mainly due to seasonality and variances due to our regulatory charges that I have already mentioned. Moving to the next slide, the total operating income up 10% year on year, a 133 million euro increase versus the first half of 2023, and a 14% or 93 million euros increase versus the first quarter. Moving on to operating expenses, considering we ended 2023 with an already best in class cost to income ratio of 37.3%, significant improvement has been achieved to reach current levels of 36.6 on a last 12 months basis. This is a direct result and proof of our continued focus on efficiency and productivity in the group. As I previously mentioned, we are looking to smooth our expenses across quarters while still delivering positive operating jobs quarter on quarter with operating expenses growth at 6% currently this year. This can be compared to our gross operating income growth at 10%, allowing us quarter on quarter to improve our cost to income ratio despite our current projects at hand. We maintain leadership across the industry with exceptional levels of 34.1% on a year to date. This figure for the year even includes the bank charge paid in the first quarter. On page 19, we share the key asset quality metrics. Loan loss provisions total 176 million euros with cost of risk at the high end of our annual guidance at 40 basis points. However, we do feel this is a result of some additional seasonality of the quarter due to our asset growth levels. In other provisions, we continue to see a downward trend year and year with some stabilization of volumes on a quarterly basis this year. We currently have no evidence of any negative impact to consider modifying our annual guidance in cost of risk. So in summary, on page 20, another strong financial quarter, reaching 750 million euros in profit before taxes, this is plus 14%, and total group net income of 473 million euros, growing quarter on quarter by 13% on a year-on-year basis. Now, moving on to the pages on credit risk and solvency. On page 21, the group's NPL ratio stands at the comfortable levels at 2.17%, and in Spain at 2.5%. Both data points at the group and Spain level have decreased versus last quarter. Our NPL ratios continue to be considerably lower from the sector average in Spain at 3.6%, where we see an improvement in households and stability incorporates. I also would like to highlight our prudent coverage ratio at 68% currently, increasing from 64 last quarter. And this is a new record high in our case. These figures clearly outline the excellent asset quality of our book and reflect upon our prudent risk management policies, not only in Spain, but also in Portugal and in Ireland. In page 22, with the growing loan book, accompanied by increases in deposit base in the quarter, our commercial gap regained levels similar to the end of June 23. As a result, loan to deposit ratio in the quarter ended at 95.6%, similar levels to a year ago. Since in the first quarter of this year, we repaid our last outstanding TELTRA program, we have no further maturities this year. On the following page, Last slide in this section's details are fully loaded set one ratio, finishing the quarter at 12.44%, an increase of 14 basis points from the end of the year, given the strong retained earnings generation of 66 basis points. We remain well ahead of the 7.85% set one minimum requirement set for the group, the fifth lowest across Europe and lowest in Spain. With strong capital buffers, as well as adequate MREL and leverage ratio, we continue to meet our regulatory requirements by far. Moving into the next section. Let's move and see and review the geographies and business. I will give an overview of the commercial activity and performance of each. Bank Inter Spain, our core business. We continue to grow our loan book year-on-year, reaching now 62 billion euros, supported by a strong growth rate in corporate SME loans of plus 6%, and a recovering and now stable retail banking book. The outlook for growth is also quite positive, with improving growth forecast at 2.4% by the International Monetary Fund announced a couple days ago, with Spain leading growth across Europe. Deposits grew a solid 5% year-on-year, even with a strong savings reallocation to off-balance sheet funds, where we see growth rates of 20% year-on-year. As for the income statement, we maintain growth for both NII and fees to reach 1.2 billion euros in gross operating income, an increase of 10% year-on-year. In this year, we have been able to maintain cost to incorporation at an impressive level below 30%, reinforcing the efficiency as well as the scalability of our business model. Profit before tax up 14%, up to 686 million euro, a very solid contribution from our core business in Spain. Moving into Portugal, this is our quite admirable and growing franchise in Portugal. We continue to deliver exceptional double-digit business volume growth and robust financial results across the board. Our loan book increasing at 12%, now at 10 billion euros. Retail banking increased by 6%. Corporate SME banking also continued to grow by an impressive 25% year-on-year. Deposits up to 8 billion euros, an increase of 13% from a year ago, in an increasingly competitive environment. Just as with Spain, the business model to reallocate savings to off balance sheet products continues to be successful, reaching 5 billion euros, up 24% year on year. As for the income statement, gross operating income grew by 17%, supported by double-digit growth, both in AI and fees. We continue to improve efficiency with costs growing below revenues to maintain exceptional levels of cost to income below 30% in a year. All the above made possible for Portugal to deliver profit before taxes of €102 million, a 20% increase year-on-year. So now moving into the Irish operation. We continue to see remarkable loan growth across mortgages, up 51%, and consumer credit, mainly consumer loans, up 19% both year and year. Total new loan origination this year in Ireland almost doubled versus last year to reach 600 million euros in June. In terms of the income statement, we are delivering growth in NII and fees, have positive operating jobs, and contain loan loss levels, contributing in profit before taxes 20 million euros, up 20% versus last year. In summary, a franchise in Ireland that has all the levers to grow and where we will continue to invest. Now moving into the corporate SME business. The corporate SME loan book in the group continues to grow year-on-year by 7%, fueled by double-digit growth in Portugal of 25% and our international banking segment, noting that in both countries we are well above the market growth rates for the industry. In terms of additional drivers for commercial activity and growth, we have the international business segment loan book up by 17%, closing in to reach 10 billion euros. And supply chain finance multiplying volumes by four year-on-year, expanding to and attracting new international customers to the bank with a unique product and servicing model. This international activity together with Portugal and the increased financing and pipeline from the next generation EU funds will continue to provide relevant sources of growth in our corporate and SME banking business line in the future. Moving to the next page, let's have a look at the wealth management retail business line. We can see the total customer wealth under management increased by 14 billion this past year to reach record levels of 122 billion euros in June when combining the wealth management with the retail banking segments together. This is an increase of 12% year on year. If we look only at the increase in 2024, customer wealth under management increased by 9 billion euros, where almost half of it is net new money inflows into the bank. The other half of increase is or come from the market effect. In total, we have increased with the net new money a total of 4.3 billion this year so far. In the past? On average, we have increased between 5 to 7 billion in a year, which means we are well on the way to reach new record levels in the net new money inflows this year. Continuing with the wealth management and retail banking business line on slide 30, we can see the highly diversified mix of products that comprise of balance sheet funds. In total, a considerable increase of 8.9 billion euros, a 20% increase year on year. As a reminder, within our Orff Balance Sheet Fund offering to customers, we offer an open architecture with a diversified product offering. All product classes are growing double digit. We are currently especially strong not only in third party funds, but also in our proprietary Bank Inter funds and advisory management services, where we have higher average fees from asset management, custody, and distribution. Turning into the next page, salary accounts in the group continue to grow at a steady pace of plus 4% year-on-year, with good levels of new customers both acquired and in the pipeline. New mortgage production, initially impacted by weaker demand in the first quarter, is now seeing a recovery in this second quarter. We are proud of our strong market positions in Portugal, Spain, Ireland, and we have achieved new residential market share from 9% plus 10% this year. Also, still performing well above industry growth rates across each geography. Our total group mortgage-backed book continues to grow quarterly, reaching over 35.6 billion euros in June, showing an increase of 4% year-on-year and above December 23 figures, as well as above March 24 levels. So, before I hand back to Gloria for closing remarks, I would like to review our expectations for the year in light of the review of our first half results. Related to loan volumes, we expect continued growth in all geographies and businesses. Portugal, in all three businesses, mortgage, corporate, and consumer loan books. Ireland continue focus on mortgages and growth in consumer credit. And for Spain, we are seeing a pickup in mortgage lending and short term financing in the corporate book. That means that we are optimistic with our ability to keep growing our loan book at the same levels. We do believe there is an upside risk with NII in a higher for longer rate environment supported by long growth and with resilience in client margins, albeit with the need to continue to manage deposit cost. For these reasons, we upgrade our guidance from stable to close to meet single digit for the year. Fee income results are going well and we remain very optimistic with our very high single digit guidance. Groups cost will grow to support our new projects but should end lower than the rate of growth of incomes and provide positive operating jobs this year. We may be closer to the upper range of our guidance of low to mid single digit by the end of the year. And finally, for cost of risk, we still expect to finish the year 24 within our annual guidance of 35 to 40 basis points. In summary, we believe NII will provide better than expected results, fees will reach better than expected income, and costs will stay at mid-single digit due to the new growth initiatives. So, Gloria, I will hand it back to you for closing remarks.