annual report 2020 banca march the group’s business

THE GROUP’S BUSINESS

Key figures 37Banca March Group 39Full year 2020 results 42Support and advisory services for family businesses 45Innovative private banking products with compelling returns 49Insurance Area 51March Asset Management 53March Private Equity 55March Risk Solutions 56March Vida 57Banco Inversis 58Corporación Financiera Alba: equity investment portfolio 60

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ANNUAL REPORT 2020 BANCA MARCH

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KEY FIGURES

BANCA MARCH GROUP

€m 2020 2019 Change

KEY BUSINESS FIGURES

Equity 1,963.7 1,947.3 16.4

Off-balance sheet Assets under Management 13,458 12,818.1 639.9

Loans managed 8,747.6 7,929 818.6

Investments in affiliates 603.4 648.4 -45

Total assets 17,236.2 16,435.6 800.6

PROFIT

Net interest income 153.2 154.1 -0.9

Fee and commission income 334 319 15

Operating income 98.3 146.4 -48.1

Consolidated profit for the financial year 69.7 125.1 -55.4

Profit attributable to the Group (*) 69.7 125.1 -55.4

CAPITAL ADEQUACY AND SOLVENCY RATIOS (%)

Total capital ratio 16.43 16.15

NPL ratio 1.52 1.83

NPL coverage ratio 58.99 54.63

Foreclosed assets coverage ratio 54.55 56

NUMBER OF EMPLOYEES

No. of employees 1,850 1,889

(*) Profit for 2020 was adversely affected due to the impact of Covid-19 on the results of Corporación Financiera Alba, of which Banca March owns 15%.

ANNUAL REPORT 2020 BANCA MARCH THE GROUP’S BUSINESS

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BANCA MARCH, S.A.

€m 2020 2019 Change

KEY BUSINESS FIGURES

Equity 1,256 1,224.7 31.3

Customer deposits 11,157.6 10,878 279.6

Loans to customers 8,971.5 8,313.7 657.8

Total assets 14,474.9 13,783.9 691

PROFIT

Net interest income 127.1 128.4 -1.3

Gross income 297.9 301.6 -3.7

Operating income 106.7 117.7 -11

Profit for the financial year 72.8 79.4 -6.6

NUMBER OF EMPLOYEES AND POINTS OF SALE

No. of employees 1,394 1,423

No. of branches 146 169

No. of ATMs 438 470


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BANCA MARCH GROUP

The structure of the Banca March Group is geared primarily to the undertaking of Banca March’s banking activity, alongside Banco Inversis. The Banca March Group also delivers the insurance and asset management businesses. The bank also owns a significant holding in Corporación Financiera Alba, one of Spain’s largest industrial investment holding companies.

Banca March, the parent company, has been undertaking the Group’s banking activity since 1926. The bank’s business model, which is focused primarily on entrepreneurs, family businesses and medium to high net worth individuals, is implemented through its various specialist units: Wealth Management, Private Banking, Corporate Banking and Business Banking.

The insurance business is delivered through March Risk Solutions and March Vida, and the management of collective investment undertakings is delivered through March AM and March Gestión de Pensiones. Banca March also owns 100% of Banco Inversis, a Spanish financial sector leader specialising in the provision of investment services related to the execution, safekeeping and settlement of securities (including investment funds), administration and depositary services for collective

investment schemes and pension funds and the distribution of investment funds for the main international managers through its fund platform.

In 2020, Banca March incorporated the private equity company March Private Equity with a view to expanding its range of alternative investment products, primarily for private banking customers.

The Group boasts a retail network of 146 branches, including one in Luxembourg. It has eight specialist Wealth Management centres, located in the Basque Country, Valencia, Madrid, Catalonia, the Balearic Islands, the Canary Islands and Alicante, as well as the Madrid Expansion and Luxembourg branches. The Corporate Banking business line – geared specifically towards entrepreneurs, family businesses and medium to high net worth individuals – is delivered out of six locations in Palma de Mallorca, Madrid, Barcelona, Valencia and the Basque Country. Through these branches, in addition to the specialist Private Banking offices, the bank offers its customers unparalleled tailored advisory services.

BRANCH NETWORK BY BUSINESS LINE

2020 2019

RETAIL AND PRIVATE BANKING 131 155WEALTH MANAGEMENT 8 8BUSINESS BANKING 6 5INTERNATIONAL BRANCHES 1 1

TOTAL BRANCHES 146 169


2020 2019

Balearic Islands 76 96

Canary Islands 18 20

Catalonia 10 10

Valencia 9 10

Madrid 17 17

Andalusia 8 9

Zaragoza 1 1

Bilbao 3 2

San Sebastián 1 1

Vitoria 1 1

Logroño 1 1

Luxembourg 1 1

TOTAL BRANCHES 146 169

146 Branches2020

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IGALCA

Consolidation method

100%

MARCH GESTIÓN DE PENSIONES


100%

MARCH ASSET MANAGEMENT


100%

MARCH INMUEBLES


100%

MARCH PATRIMONIOS


100%

INM. MARHIGAL


75%

MARCH DE INVERSIONES


100%

PRODUCCIONES PRINVER


74%

PRINVER 43


100%

MARCH VIDA


100%

BANCO INVERSIS


100%

MARCH RISK SOLUTIONS


100%

MARCH PRIVATE EQUITY


100%

INVERSIS GESTIÓN


100%

ASERPLAN


100%

CORPORACIÓN FINANCIERA ALBA

Equity method

15.02%

MARCH CANARIAS


100%

CONSOLIDATION METHOD

EQUITY METHOD

Banca March is owned by Juan, Carlos, Gloria and Leonor March Delgado, who together hold 100% of the bank’s share capital. None of the shareholders exercises individual control, be it via share ownership or by any kind of agreement.

In addition, as referenced above, the Group holds a 15.02% stake in Corporación Financiera Alba, which undertakes stable, long-term investments in sector leaders including Acerinox, Naturgy, Ebro Foods, Indra Sistemas, Viscofan, Parques Reunidos, Euskaltel and Cie Automotive.


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FULL YEAR 2020 RESULTS

In one of the most complex, challenging years in living memory, Banca March shored up its equity, held firm in its strategy and fortified its business model, which has always been underpinned by robust financial and capital ratios. It closed 2020 with a CET1 ratio of 18.43%, the highest in the Spanish banking sector and among the highest in Europe.

Banca March continues to boast the lowest NPL ratio in the Spanish financial sector, even without having resorted to discounted portfolio sales: 1.62% at December, versus a sector average of 4.51% (latest Bank of Spain data).

The bank’s liquidity levels – LCR (237%) and DTL (138%) – and NPL coverage ratio (58.89%) are also among the strongest in the sector. Supported by these robust foundations, Banca March is well prepared and ideally positioned to embark upon the post-crisis era, and fully committed to continuing to support its customers.

Profit after tax from banking activity stood at 87.3 million euros, down 16% versus 2019, due to the precautionary 13% increase in loan loss provisions. Even with these extraordinary provisions, Banca March’s cost of lending stands at 0.41%, versus a sector average of 0.73%. Despite the challenging landscape, operating profit remained stable versus the previous year and revenues from the provision of services were up 3.9%.

The Banca March Group’s consolidated profit fell by 44.3% to 69.72 million euros, due to the impact of Covid-19 on the results of Corporación Financiera Alba, of which Banca March owns 15%.

The specialist Private Banking and Wealth Management areas delivered outstanding performances despite the market volatility, with an 8.9% increase in assets under management, an 8.7% increase in investment and 7.5% growth in customer numbers.

Banca March boosts its capital adequacy ratio to 18.43%, the highest in the Spanish banking sector, and posts profits from banking activity of 87.3 million euros.

Banca March boasts the lowest NPL rate in the Spanish financial system: 1.62% versus a sector average of 4.51%.

Banca March

LCR

Sector average

DTL

2020 RATIOS

Solvency Ratio CET 1 The highest in the Spanish banking sector and among the highest in Europe.

Liquidity Ratio

NPL Ratio

1.62%

237%

18.43%

4.51%

138%


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euros, of which 34.67% of the total volume and 48.56% of the transactions took place in the Balearic Islands.

In the Balearic Islands, the Retail and Private Banking area, which accounts for the majority of the bank’s activity in the region, saw lending increase by 4.5%, assets under management rise by 2.6% and customer numbers grow by 9.5%. The area posted increases in both net interest income (7.6%) and operating income (11.1%).

Banca March was the first EU bank to reach agreements with the European Investment Bank to provide special EIB-backed credit lines to mitigate the impact of Covid-19, and will channel more than 600 million euros into Spanish SMEs and large companies.

The bank has supported all of the incentives rolled out by the Spanish government to mitigate the severe crisis triggered by the pandemic, participating in ICO-backed loans for companies and the self-employed and sector-specific payment holidays and moratoria, including some measures regulated by Royal Decree and others at the bank’s own initiative. Banca March also participated in the ISBA-COVID lines of credit implemented by the Regional Government of the Balearic Islands for a total amount of 1.42 billion

Net inflows into AUM grew to 1.29 billion euros, of which 200 million went into real economy co-investment products and 240 million were raised by the global private equity fund of funds March PE Global I, March Private Equity’s first vehicle.

The Corporate Banking business chalked up a new record in family business advisory services provided. The business line cemented its leadership position in short-term debt placements, advising on a total of 34 issuances with a total issuance volume of almost 4.8 billion euros. In the Large Companies unit, business volume was up by 15.5%, customer numbers grew by 5%, lending was up 12% and customer funds grew by 37%.

In 2020, the specialist Private Banking and Wealth Management areas posted a substantial increase in:

+8.9%assets under management

+8.7%investment

+7.5%customer numbers


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“The Covid-19 outbreak in 2020 meant we were forced to focus our efforts on a range of different factors, all of which were key to ensuring the continuity of our activity and guaranteeing quality services for our customers, and we were absolutely committed to doing so. First and foremost, we took full responsibility for safeguarding the health of employees and customers, and at the same time, we protected the continuity of our business. We collaborated and engaged with all of the initiatives rolled out to mitigate the impact of Covid-19 on families and companies, joining forces with the rest of the sector to ensure we were part of the solution to the most complex, challenging situation in recent history. The pandemic has endorsed Banca March’s robust business model and strategy and cautious, long-term approach, a feature which sets us apart from the rest. We are very clear that this commitment must extend beyond a public health solution to contain the pandemic; the devastating effects of this crisis

have made us determined to be closer than ever to our customers over the years to come. “Use the good times to prepare for the bad” has always been our motto, and this prudent approach is now paying dividends. This is evidenced by the fact that we have successfully reinforced the bank’s capital, with the CET1 ratio exceeding 18% a year ahead of the schedule set out in the current 2020-2022 three-year plan. We will remain true to the promise we have made our customers: to identify their needs and offer solutions in response, always providing the utmost quality, customer service, affinity and engagement. With that promise firmly in mind, we have continued to step up our digitalisation process whilst remaining faithful to our DNA and our business model, which is built on personal relationships, close engagement, prudence and a long-term approach. Faithful, in short, to our unwavering philosophy of Shared Growth with customers, employees, shareholders and society as a whole”.

José Luis Acea, CEO of Banca March


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In 2020, the bank continued to run programmes aimed at helping Spanish companies access financing through the European Investment Bank. The initiatives in question are the now well-known EIB programmes for SME financing and Risk Sharing. In 2020, the €25bn Pan-European Guarantee Fund was added to the two existing initiatives. Banca March was the first financial institution in Spain and Europe to sign up to this programme, which is intended to mitigate the adverse effects of the Covid-19 on the Spanish business landscape by facilitating access to financing for Spanish companies.

Banca March has gone one step further in its support for family businesses and entrepreneurs, both in the Balearic Islands and in the other areas where the bank operates, encouraging and actively helping them secure access to funds from the Next Generation EU Recovery Fund aimed at promoting the digital and environmental transformation. The bank has facilitated and collaborated on projects which play a crucial role as drivers of economic activity and job creation. The types of activity involved include the following: financing investment projects to make them more attractive as applicants for funding, providing bridge loans until EU funds are received, and providing specialist advice to companies in the selection and presentation of projects that may be eligible for the funds.

SUPPORT AND ADVISORY SERVICES FOR FAMILY BUSINESSES

In Corporate Banking, the bank’s activity focuses on corporates, family businesses and entrepreneurial families, specialising particularly in alternative financing, direct lending, customised treasury solutions and risk hedging. The effectiveness of Banca March’s business model, unparalleled in the Spanish financial system, has been clearly demonstrated in the complex current climate for all companies and particularly family businesses, offering solutions that extend beyond purely banking services. Banca March’s Corporate Banking Area, through its Large Companies Units, has specialist teams working out of Madrid, the Balearics, Catalonia, the Region of Valencia, the Basque Country and Navarre. The areas without local teams in place are served by the Large Companies Expansion Unit, which provides specialist services for family businesses throughout the whole of Spain.

In the Large Companies Unit, business volume was up by 15.5%, customer numbers grew by 5%, lending was up 12% and customer funds grew by 37%.

SPECIFIC SUPPORT FOR THE TOURISM AND HOTEL SECTOR

In 2020, the bank launched the Tourism and Leisure Unit within the Corporate Banking area. The unit offers highly specialist services for the tourism and hotel sector, reinforcing the resources dedicated to this area and enhancing the bank’s customer service model and value proposition. As a reflection of its commitment to the sector, this Unit drew up a report entitled Financial challenges in the hotel sector against the backdrop of Covid-19, which identifies the key challenges facing Spanish companies and groups in the hotel sector going forward. Likewise, a project has been launched to finance improvements to energy efficiency in the hotel sector.

In the Large Companies unit grew by:

+15.5%business volume

+12%lending

+5%customer numbers

+37%customer funds


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THE SPANISH MARKET LEADER

Banca March remains at the top of the ranking of Registered Arrangers and Dealers for short-term MARF and ECP commercial paper programmes for Spanish corporate issuers The bank advised on 34 programmes issuing almost 4.8 billion euros in short-term instruments – MARF and ECP commercial paper – with a market share of 59.7% of the outstanding balance of securities issued on the MARF at the end of last year. The goal is to achieve a similar leading position in the bond market for medium-sized enterprises in 2021.

Banca March cements its position as the Spanish leader in commercial paper and ECP issuances.

€m AmountRegistered

arranger Dealer

CompanyElecnor 300Tubacex 200DS Smith Spain 300Barceló 200Gestamp 350Fluidra 75Sacyr 350Ulma 50Grupo Jorge 75IM Fortia 400Burán IM 300Finycar (Grupo Sorigué) 50Coren 50Pryconsa 100Sidenor 35TSK 150Cecotec 50Logitravel 20Gransolar 30Técnicas Reunidas 100Ormazabal 50Insur 50Vidrala 150Cementos Molins 100Urbaser 200

MARF COMMERCIAL PAPER ISSUANCES


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As well as participating in 22 syndicated financing transactions for a total of 3.3 billion euros, Banca March has also cemented its commitment to becoming one of the leading market players in sustainable financing. Banca March has signed sustainable financing agreements worth a total of 420 million euros in recent months, and its Asset Financing Solutions Unit is undertaking energy efficiency projects with hotel companies.

In 2020, Banca March was mandated to coordinate a new medium- and long-term bond programme for Técnicas Reunidas S.A. for 100 million euros. Following the programme’s launch, Banca March managed the first bond issuance by Técnicas Reunidas S.A. for a total of 29.8 million euros with a maturity of 4.1 years.

SUPPORTING GROWTH PLANS FOR FAMILY BUSINESSES

The Mergers and Acquisitions (M&A) Unit has been particularly active in supporting corporate growth for family businesses, advising on cross-border and real estate transactions.

For example, in 2020 the Banca March Mergers and Acquisitions Unit advised the family business Trablisa on the acquisition of Gunnebo Integrated Security, the Swedish multinational Gunnebo’s electronic security business in Spain and Portugal. In the real estate sector, the team advised the family group UDIN on an agreement with Hines for the development of a complex which featuring office space and potentially also commercial premises in Barcelona’s 22@ district.

€m Amount Arranger Dealer

Company

Cellnex 500

Cie Automotive 300

FCC 600

FCC Medio Ambiente 300

Abertis 1,000

Euskaltel 200

Viesgo 300

Acciona 1,000

Meliá 300

EUROPEAN COMMERCIAL PAPER (ECP) PROGRAMME


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The Unit also helps identify alternative financing options for industrial companies to help weather the current situation, such as sale & lease back transactions and seeking potential buyers for the co-generation plants managed by these companies at their own facilities.

It also provides investment diversification alternatives on behalf of wealth management and private banking customers, participating in unique transactions on rental assets (logistics warehouses, supermarkets and hotels, among others), and this segment has growth to account for a significant proportion of its portfolio of transactions underway.

M&A activity is expected to increase given the greater concentration in various sectors and strong liquidity held by investment funds, which are seeking to take positions as financial partners to add value and build compelling business plans.

SIGNIFICANT BLOCKS OF SHARES, IPOS AND CAPITAL RAISINGS

In 2020, Banca March’s Capital Markets - Equities Unit, was mandated to undertake the sale of four significant blocks of shares. As regards IPOs and capital raisings, Banca March participated as a dealer in the capital raising by the SOCIMI (REIT) Millenium Hoteles, S.A.


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Global I, which is available to a broad investor base and is the first in a series of new products designed to expand the bank’s co-investment range. The fundraising target has now been exceeded, with over 240 million euros committed by more than 560 customers. Banca March has successfully achieved its goal of expanding private equity investment opportunities to a broad investor base, designing a unique fund of funds strategy which enjoys the Group’s backing as an investor and shareholder, in response to an investment landscape which calls for a mix of traditional assets and alternative products.

INVESTING ALONGSIDE OUR CUSTOMERS

As regards Banca March’s Co-investment activity in real economy projects – through which the bank offers its customers the opportunity to co-invest in the projects in which it invests its own capital – a total of 200 million euros was invested in 2020 in four projects alongside more than 350 investors. Specifically, the fundraising targets were exceeded both for the T2 ELTIF Energy Transition Fund, created exclusively for Banca March by Tikehau Capital to offer the bank’s customers investment opportunities in private equity projects with a focus on the energy transition, and Oquendo IV, which provides financing for mid-sized Spanish companies through mezzanine financing and other flexible instruments. In 2020, the third logistics infrastructure project underway with Pavasal was also closed, and investments were undertaken in six hydroelectric assets in Portugal through a co-investment vehicle with Mirova, an affiliate of Natixis IM specialising in sustainable infrastructure, Engie, one of the world’s largest energy companies, and Crédit Agricole Assurances.

In early September last year, the Banca March Group reinforced its co-investment line by creating its private equity management arm, March PE, and announced the launch of the international private equity fund of funds March PE

INNOVATIVE PRIVATE BANKING PRODUCTS WITH COMPELLING RETURNS

The Private Banking and Wealth Management areas put in an outstanding performance. Despite the market volatility, improvements were observed across all the main activity indicators, which speaks to the outstanding technical skill of Banca March’s managers and experts. Assets under management increased by 8.9% year-on-year, investment was up by 8.7% and customer numbers in these areas grew by 7.5%.

The Banca March Group continues to spearhead innovation in private banking products, offering the sector’s most comprehensive range of attractive investment proposals for all saver and investor profiles: Co-investment, value-added discretionary portfolio management (DPM), alternative funds, private equity funds of funds, sustainable investment, thematic funds (March Asset Management) and special long-term savings products for Private Banking and Wealth Management clients, such as the Unit Linked products developed by March Vida.

Growth in net AUM inflows stood at 1.29 billion euros, of which 200 million went into real economy co-investment products and 240 million were raised by the global private equity fund of funds March PE Global I, March Private Equity’s first vehicle.


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March AM also ranks fourth in the Spanish market by total volume of assets under management in SICAVs, with a total of €2.12 billion under management in these vehicles at the end of 2020.

Among the retirement products managed by March AM, last year’s additions to the life-cycle pension plan range deserve a special mention. The portfolio distribution of these retirement products is tailored to the investor’s profile as they approach retirement, reducing volatility and exposure to higher-risk assets and increasing the weight of more conservative positions.

Following the launch of the Mediterranean Fund in 2019, Banca March has continued to develop a compelling range of products based on a trend that will be highly prominent in the years ahead: sustainability. The bank has launched two global equity funds, which measure the positive impact of the investments made in accordance with the UN’s 17 Sustainable Development Goals, in partnership with leading global asset managers in impact investing, such as CPR-Amundi. These funds garnered significant investor demand and had 65 million euros under management at the end of the year.

A LEADER IN THEMATIC FUNDS

March AM is the Group’s asset management arm and is a strategic component of the business. With 5 billion euros in AUM at 31 December 2020, March AM has maintained its leadership position in thematic funds with the Family Businesses Fund, Vini Catena and the Mediterranean Fund, which invests in companies with exposure to the oceans economy, as well as water use and treatment, and allocates 10% of management fees to projects for the recovery and conservation of marine resources. In 2020, it generated a cumulative return of 10.55%, outperforming its benchmark and ranking as one of the leading funds in its category. From launch until the end of last year, the fund chalked up a cumulative return of 18.20%.

SUCCESS ACROSS THE BOARD FOR DPM STRATEGIES

At the end of December, Banca March had over 3,900 added value Discretionary Portfolio Management (DPM) contracts in place, up 55% year on year, with DPM assets under management (AUM) of 1.21 billion euros, up 38% versus year-end 2019. Despite the enormous complexity triggered by the Covid-19 pandemic, Banca March’s DPM services registered net customer inflows every month of 2020. All model portfolios posted positive gains over the year, from 3.3% for the most defensive portfolio profile, which invests exclusively in fixed income, to 30% for the Next Generation strategy, which invests based on global mega-trends and registered a 140% increase in AUM to reach a total of 220 million euros and 4,500 investors. The alternative investment options added to the bank’s range of products in the second half of 2019, through partnerships with both K2 Advisors-Franklin Templeton (through DPM) and Banque Syz (fund of funds), had over 160 million euros under management at the end of last year, up 80% versus the previous year.

March AM maintains its leadership position in thematic funds with The Family Businesses Fund, Vini Catena and Mediterranean Fund.


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Savings insurance products also performed well, after MV Ahorro Plus grew by 6.6% to become the top safe haven for more conservative customer profiles. These stronger sales allowed the business to grow its assets under management by 7.2% versus year-end 2019 to €1.63bn.

Growth in risk insurance policies was underpinned largely by the strong technical results generated by the group’s life insurance products, for which March Vida bears the risk. This positive factor effectively offset the smaller growth in non-life products, which saw their performance hampered by the pandemic.

INSURANCE AREA

The performance of the insurance area in 2020 was largely conditioned by the Covid-19 pandemic, with lower sales growth but a significant consolidation in existing business, which allowed for overall year-on-year growth of 6.3% and total revenues of 29.9 million euros.

In thousands of euros 2020 2019 %

Risk 10,244 9,507 7.8%

Savings 12,960 12,284 5.5%

Previsión 6,748 6,379 5.8%

RETIREMENT 29,952 28,170 6.3%

The retirement planning business also performed well, with strong activity in pension plans towards the end of the year as customers sought to harness tax advantages following changes brought in in 2021. Another strong performer was PIAS Next Generation, which posted annual returns of 30%.


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In terms of sales activity, despite the challenging backdrop, the number of customers with insurance products in value-added business segments increased by 5%; the Private Banking segment performed particularly well, reporting growth of 8.1% in risk insurance, 13.4% in savings insurance and 20.7% in retirement products. The Business segment also posted a remarkable 7.2% increase in risk insurance take-up, which is particularly impressive in a business where renewals generally trended downwards due to falling revenues.

Over the course of 2020, the Insurance Area also worked on a new long-term agreement with the insurance provider Generali to roll out a comprehensive range of risk insurance products (not including health insurance), which will allow Banca March to offer its customers exhaustive advice on their risk transfer needs, providing the best products on the market with fully digital customer services. The agreement was finally signed in February 2021.

DKV health insurance A new agreement was signed in 2020 for the distribution via the Banca March branch network of health insurance by DKV, a partner which adds value in both quality and technology. This agreement will allow Banca March to offer its customers the best solutions on the market. The product is taken out digitally and post-sale services are also fully online.

The Generación X and Baby Boomer “Life Cycle” pension plans were also launched to respond to the growing demand for these solutions, which tailor their investment policy to the amount of time the policyholder has left until retirement. A third product is in the pipeline for 2021 for a younger target audience, affording coverage for all age ranges.

The restrictions on movement implemented in response to the pandemic further fuelled the bank’s digitalisation efforts for its insurance products, which progressed extremely well over the course of the year.

2020 was a big year for new product launches, including:

Cyber and identity theft insurance with Telefónica Insurance This is the first insurance product in the Spanish market offering personal coverage for cyber attacks and digital identity theft. This insurance has been developed in partnership with prestigious technology partner Telefónica, offering an eminently practical approach to cyber attacks. The product has also been made available through a multi-channel approach, combining online access with telephone services in line with the bank’s commitment to stepping up the use of new channels.

The consolidation of the Insurance Area’s existing business allowed for overall year-on-year growth of 6.3%.


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March AM also ranks fourth in the Spanish market by AUM in SICAVs, with 2.12 billion euros under management in these vehicles at the end of 2020. The three institutional SICAVs managed by March AM are traditional liquid co-investment products and one of the hallmarks of Banca March. Torrenova is Spain’s largest SICAV with 907.8 million euros in assets under management at the end of December 2020. It was created over 20 years ago as an investment instrument for the bank’s shareholders, and now 4,466 customers hold shares in the fund. Bellver (348.3 million euros in AUM and 2,604 shareholders) and Lluc (182.6 million euros in AUM and 1,357 shareholders) complete this group of products. All three products offer a unique

MARCH ASSET MANAGEMENTMarch AM, the Group’s asset management business and one of its core components, boasts a team of almost 40 professionals and an investment philosophy which combines long-term value creation and asset preservation. With assets under management of 5 billion euros as at 31 December 2020, it has maintained its leadership position in thematic funds thanks to the Family Businesses Fund, Vini Catena and Mediterranean Fund, an environmental impact fund that invests in companies with exposure to the oceans economy, as well as water use and treatment. Launched in September 2019, the fund returned 10.55% in 2020, outperforming its benchmark a year on from its launch and ranking as one of the leading funds in its category. From launch until the end of last year, the fund returned 18.20%. March AM donates 10% of the management fees generated by Mediterranean Fund to projects for the recovery and conservation of marine resources. March AM is currently working on initiatives with Oceana and Save The Med, two non-profit organisations which undertake a range of projects to conserve and protect marine ecosystems.

Mediterranean Fund generated a cumulative return of 10.55% in 2020, outperforming its benchmark and ranking as one of the leading funds in its category. From its launch in September 2019 until the end of 2020, the fund returned 18.20%.

€5,000 M assets under management as at 31 December 2020

Leadership position in thematic funds

The Family Businesses FundVini CatenaMediterranean Fund

4ºs AUM in SICAVs

TORRENOVA Spain’s largest SICAV

€907.8 M assets under management at the end of December 2020

BELLVER


LLUC



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they approach retirement, reducing volatility and exposure to higher-risk assets and increasing the weight of more conservative positions. In June 2020, March AM launched March Generación X PP, designed to provide Generation X savers – especially those born between 1970 and 1980 – with a return and risk appropriate to their needs in every stage of their lives. Five months later, in November, it created March Babyboomer PP, designed to meet the long-term saving needs of the members of the baby boomer generation, born in the 1960s.

SICAV model which is available to any of Banca March’s customers subject to a minimum investment of just one share, allowing them to benefit equally from the returns generated by these financial instruments.

In 2020, two fixed income funds outperformed: March Patrimonio Corto Plazo and FonMarch. Awarded three starts by Morningstar, March Patrimonio Corto Plazo closed the year with a cumulative return of 0.49%, securing second place in the Expansión Ranking. FonMarch was given five Morningstar stars and generated a cumulative return in 2020 of 0.11%.

All of the asset managers risk-profiled funds ranked in the first quartile of the same ranking, posting returns as follows: March Cartera Defensiva (1.51%), Conservadora (3.61%), Moderada (6.87%) and Decidida (7.16%). In equities, March International Valores Iberian Equity continues to enjoy a stellar performance, positioning it in the top five in its category year after year.

Among the retirement products managed by March AM, last year’s additions to the life-cycle pension plan range deserve a special mention. The portfolio distribution of these retirement products is tailored to the investor’s profile as


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The core tenets that have made this project a success – and a unique, unparalleled initiative in the private equity industry – are:

Commitment and shareholder support from the Banca March Group

Exclusivity

Alignment of interests

Conviction

In 2021, the same opportunity selection strategy will be pursued, building a robust, diversified, balanced portfolio, starting with strategies which offer solid results and investments with a certain sector bias.

In line with its unique commitment to co-investment, Banca March invests alongside its customers in all March Private Equity programmes, affording its customers access to prestigious opportunities which would otherwise be tough to access with the security of knowing that their interests are aligned with those of the Group.

MARCH PRIVATE EQUITY

In 2020, Banca March incorporated the private equity company March PE with a view to expanding its range of alternative investment products. Through March PE, Banca March will create a unique range of global private equity products boasting an unparalleled model underpinned by four key characteristics: shareholder support, exclusivity, complete alignment of interests, and strategic conviction.

Upon the announcement of March PE’s incorporation, Banca March launched March PE Global I, a fund of funds which invests in global private equity opportunities as traditional assets fail to provide the desired returns.

This unique solution offers access to global private equity investment opportunities for a broad range of investor profiles, serving family offices, institutional clients, private banking and wealth management customers under a single platform.

At 31 December 2020, the fundraising target had already been exceeded, with over 240 million euros committed by more than 560 customers.

Banca March met its target and raised over 240 million euros from more than 560 customers through the March PE Global I private equity strategy.

March PE, with its new fund of funds March PE Global I, has introduced an innovative, highly efficient new fee structure, under which the management fee is applied during the investment period on capital deployed rather than on capital committed, which is standard practice in the sector. This allows for complete alignment between the interests of March PE and its investors: unlike standard market practice, a large part of the management fee is conditional upon the product’s success and paid once the hurdle rate (8%) is achieved.

Banca March customers can invest in March PE Global I with a minimum investment of 100,000 euros, affording them access to a restricted asset and minimising the inherent risk of direct investment in a specific asset.


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The company also strives to optimise operations and processes to enhance service levels and increase productivity. The markets and placement area has taken on a key role as a highly-specialised business area which works closely on crucial planning and coordination with the commercial business units. The business has also upgraded its management tools, particularly in the fleets, life and health categories.

A results-driven approach, teamwork and systematic productivity are all fundamental components of the March RS corporate culture. The company is fully committed to serving its customers wherever they are, with a global footprint ensuring full market access and a local service network to offer outstanding service for customers all over the world.

It closed last year with highly satisfactory results in terms of both revenue and profit. At the group level, including Aserplan, which is 100% owned by March RS, gross income stood at over 24 million euros, up by 4.8% versus the previous year. EBITDA totalled 8.2 million euros, in line with the company’s budget and up 12.3% versus the previous year. Finally, pre-tax profit climbed 73% year on year to 7.1 million euros. These figures underscore the effectiveness of the company’s strategy, which features a policy of international partnerships and a clear focus on specialisation.

On 24 June 2020, the sole shareholder of Luis Baroja Correduría de Seguros, S.L.U. approved a merger by absorption of the company by March RS; as a result, Luis Baroja Correduría de Seguros, S.L.U. was absorbed by March RS and dissolved without going into liquidation.

Successfully attracting talent is also one of the key drivers behind the group’s strategy. March RS focuses systematically on reinforcing the various different teams to ensure its customers receive the very best service.

MARCH RISK SOLUTIONS

In 2020, March Risk Solutions (RS) brokered total insurance premiums of 242 million euros, of which 191 million were Non-life products and 51 million were Life insurance products. The company’s gross income totalled 22.4 million euros, with operating profit of 5.5 million and pre-tax profit of 6.1 million euros.

The year 2020 will be remembered for the crisis triggered by the Covid-19 pandemic, which had a significant impact on business dynamics and operations throughout the year. This situation meant that March RS had to adapt swiftly to situations of constant uncertainty and also generated a need for mechanisms to facilitate both external and internal communications. The organisation has emerged from the crisis stronger on both fronts. Before the pandemic broke out, the company was already investing heavily in technology as a key driver of efficiency and productivity, allowing it to remain closely engaged with customers at all times and ensuring that 100% of the workforce were able to continue operating efficiently right from the beginning of lockdown. The “Zero Paper Footprint” project launched in 2019 was given a new lease of life by the pandemic and the use of paper at March RS is now minimal.

March RS boasts an international footprint guaranteeing market access and a local service network to ensure its global customers receive the very best service.


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INFORME ANUAL 2020 BANCA MARCH

Although the initial impact on the financial markets weakened the company’s capital adequacy ratio, the effective emergency measures rolled out allowed it to close 2020 in an even stronger position than the previous year, improving from 151% at 31 December 2019 to 161% at 31 December 2020.

March Vida has successfully positioned itself as the supplier of long-term savings products at Banca March, particularly for customers with a conservative profile. The business unit’s goals for the year ahead are to continue to create new, innovative solutions, make further headway in the digitalisation process and improve risk management and control.

The Covid-19 pandemic had an undeniable impact in 2020. In the case of March Vida, however, Covid-19 did not cause a significant impact on volumes sold or on the company’s results. One important factor to highlight is that lockdown measures led to a substantial increase in transactions signed remotely.

March Vida successfully met the targets outlined for 2020, cementing its contribution to Banca March’s results. The total contribution to Banca March, defined as the fees paid to Banca March by March Vida plus the pre-tax profit posted by March Vida, stood at 18.9 million euros, up 10.1% year on year.

MARCH VIDA

At the end of 2020, March Vida’s portfolio stood at over 85,000 policies, with balances under management of 1.63 billion euros.

Premium income in 2020 totalled 467.3 million euros. Guaranteed savings products performed especially well, contributing 191.9 million euros, as did unit linked products, which contributed total premiums of 189.3 million euros. Retirement saving products – insured pension plans (PPA), individual systematic savings plans (PIAS) and long-term individual savings insurance plan (SIALP) – stood at 54.6 million euros and life annuities totalled 25.9 million euros.

In 2020, guaranteed savings products performed exceptionally well, contributing 191.9 million euros in premium income, as did unit linked products, at 189.3 million euros.

THE GROUP’S BUSINESS

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Inversis’ technology allows its institutional clients to provide services at the account level for their end customers, outsourcing non-core activities and processes to Inversis and enhancing their own efficiency.

Inversis also offers specialist services, such as those performed by its investment fund research and selection team and the distribution desk, as well as other value-added services.

Despite widespread offshoring triggered by the global Covid-19 public health crisis in 2020, Inversis has adapted expertly to the new landscape and continued to innovate and create value-added services for its institutional clients. The investments undertaken under the Executive Plan in previous years, especially the Data Centre and infrastructure transformation initiatives, allowed for early deployment of many of the organisational measures designed to mitigate the impact of the crisis and maintain service levels.

BANCO INVERSIS

Banco Inversis specialises in providing high added-value solutions for financial institutions, insurance companies and fintechs for their investment and asset management businesses through a service outsourcing model.

The comprehensive range of products and services offered by Inversis includes:

• Trading and order execution.

• Settlement of transactions and custody of financial assets.

• An integrated platform for the distribution of investment funds.

• More specific services, such as administrator and depositary services for investment funds and pension plans.

This extensive range of services is underpinned by a powerful, unique technology platform, which is modular, customisable and tailored to meet the needs of the institutional business, supporting the digital transformation of its end customers.


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and maintenance and technology infrastructure management for all services provided under the new platform. This agreement will also support the growth plans being rolled out by Inversis to expand its services outside the Spanish market.

As for the income statement, the Inversis Group closed 2020 with record pre-tax profit of 16.2 million euros, up 25.2% versus 2019. This increase was partly due to the significant jump in fee and commission income (14.9%) and the rise of just 3% in administrative expenses, and despite the drop in net interest income due to lower market interest rates, which impacted the sector across the board.

Inversis has continued to roll out its digital transformation and has launched business lines with new market players such as neobanks and e-money institutions.

In late 2020, Inversis signed a strategic agreement with Accenture to create a global business line allowing credit institutions – universal banks and private banks – to outsource all technology and operating processes related to the distribution of investment products. In the initial phase of this agreement, Accenture will support the transformation and development of the Inversis technology platform, positioning itself as the company’s chosen technology partner and handling app development

Grupo Inversis grew its pre-tax profit by 25.2% versus 2019, posting record


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CORPORACIÓN FINANCIERA ALBA: EQUITY INVESTMENT PORTFOLIO

Structure of the main investee companies in Alba’s portfolio(31 December 2020).

Online editionINVESTMENT PORTFOLIO

VISCOFAN13.03%

CIE AUTOMOTIVE12.73%

PARQUES REUNIDOS24.98%

INDRA10.52%

EUSKALTEL11.00%

NATURGY5.44%

ACERINOX19.35%

VERISURE6.25%

EBRO FOODS14.00%

ALVINESA16.83%

SATLINK28.07%

IN-STORE MEDIA18.89%

ALVIC7.76%

FOODS DELIVERY BRANDS3.27%

PREVING24.81%

MONBAKE3.70%

NUADI37.43%


annual report 2020 banca march the group’s business

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