Good morning, and welcome to the Linea Directa transaction webcast. Today, Jacobo Dyad, our CFO, will share with us the highlights of the transaction. We will follow-up with a Q and A session. Thank you.
Good morning, and welcome to this special webcast to provide you with more information about the price sensitive information, all relevant facts posted early today on the CNMV website. This information addresses the decision taken yesterday late in the evening by the ECB supervisory board to authorize the in kind distribution of the entire share premium of Bankinter, totaling €1,184,000,000 by delivering to its shareholders 82.6% of the share capital of its fully owned subsidiary, Linea Directa Seguradora. This transaction was announced after Banquinta's board meeting held in December 2019 and subsequently approved by the 2020 Annual General Meeting, subject to the required regulatory authorizations being obtained. On March 22, 2021, this authorization from the ECB has been obtained and the admission to trading of the Linea Directa Seguradora shares has been requested. Thus, after the short regular approval by the CNMV, we First, let me briefly go over Lina Directa's profile for those who might be less familiar with this company, which has been operating autonomously and with profitability over the last 25 years.
Undoubtedly, Linea Directa is a story of success since it was founded in 1995 as a 50% joint venture with Direct Line Group with all the milestones you can see in the graph, reinforced with the purchase of the RBS held stake in March 2009, reaching in 2018 over 3,000,000 customers, launching new long life products, etcetera. And more relevant, it has even more provisioned future as we will see now. Via Directa has been able to maintain a unique business model through all these years and with a differential pattern that assures outperforming in growth rates its domestic peers in the future, thanks to these unique characteristics. A leading direct motor insurance in Spain with recurrent growth, always outperforming the market, a highly recognized brand with its own cutting edge technology for its industry, with an excellent underwriting, risk management and cost control that brings solvency above 200%, with an enormous potential for growth and further diversification, a real highly profitable business, return on equity over 35%, that we will be able to maintain a high payout policy. And lastly, very important, with almost no reliance on Mankinter to manage their business and generate their revenues.
Here we see what Lidadeleta has achieved in growth terms for premiums and risk insured, 31% from 2010 to reach 900,000,000 in 2020. In number of customers, an increase of 1,400,000 since 2010 to 3,200,000 in 2020 and above all, its robust growth of almost 2x in profit before taxes throughout this period. This has been possible based on a proper underwriting and claims cost management reflected in the strong combined ratio kept under 90% for the last 10 years. I think it's important to emphasize once more that Linea Directa represented a great financial investment for all Bantinter shareholders, with an investment of €36,000,000 at inception and €426,000,000 in 2,009 to buy the remaining 50% from RBS, shareholders will obtain a return of €2,362,000,000 including both extraordinary dividend paid to Banquinta prior to the launch year and the cash dividends paid since 2,009 as well as the increased market value of the financial shareholding retained by Bancinta. In regard to the final transaction implication, I will point out some details on this slide.
Before the share premium is distributed amongst Banquinta shareholders, the current number of Lina Directa shares has been adjusted with the split to slightly over 1,000,000 so that each Banquinta shareholder will receive 1 Linea Directa share for each Banquinta share currently hold. The Board maintained a valuation based on the independent adviser. It has been maintained at €1,434,000,000 by Citigroup, the financial adviser, as of December 2020. Thus, the reference price of the Lilia Direct and New Shares will be €1.318 per share based on this valuation and the total number of shares. The Board of Directors of Banquinte will approve as per Article 41 of the corporate bylaws, an extraordinary noncash dividend to be distributed to all shareholders against the share premium totaling €1,184,000,000 in the form of 82.6 percent of the Linea Directa shares.
Out of the new Linea Directa shares, Bankinter will return 17.4% as a financial investment in the newly listed Linea Directa. Lastly, before shares are delivered to shareholders, an extraordinary €120,000,000 dividend will be approved and distributed from Lidadecata to Banquinta, solely to bring the company's solvency to ratio just above 210%, in line with its European peers in these times. On this slide, we summarize the accounting effects of the transaction in Banquinto's P and L account and shareholders' equity. Shareholders' equity will drop by €1,200,000,000 owing to the share premium amortization to fund the extraordinary dividend to be paid in shares. Then due to the revaluation of the 17.4 percent shareholding in Eliradecta, the P and L account of Anquinter in 2Q 'twenty one will be positively impacted by €1,000,000,000 approximately will be fully returned as a reserve in Banquinta balance sheet.
In regard to the impact of the group's capital ratio, here's a breakdown of the various impacts on CET1 ratios of December 2020. Starting with our 12.29 percent, first, we have a positive 35 basis point impact from the initial dividend from Ligandirteca. Then we have a negative 3.49 basis points impact from the amortized share premium. And at the same time the value adjustment of the shareholding in Linea Directa plus reduction in equity deductions that account for a positive 3.50 basis points. Lastly, both the new 17.4% shareholdings in risk weighted assets of minus 24% sorry, 24 basis points and other small effects such as taxes brings a negative 5 basis points to a final pro form a CET1 ratio of 12.37%, up by 8 basis points.
We think that the New Banquintaro Group without Linea Directa has never been in a better position in terms of earnings, profitability, efficiency, capital adequacy and even diversified revenues has to recover the pre COVID and linear director levels in a short period of time. We can do this right now. The recently Now we will brief you we will briefly review our strategic priorities and efforts in our different banking businesses to continue to be a differential proposition for growth, profitability and value creation for our shareholders. This is a new era for Vankinter without Linea Directa. However, we will remain with our DNA pretty similar to what we've seen in the past.
Banquinta's group strategic priority haven't changed much. There are 6 showed in this slide, always focused on long term creation of shareholder value with historic sustained and proved track record on balance sheet and customer activity growth. Even after the spin off of Linea Directa, we will maintain a good business diversification and even geographical in 4 EU countries. We are best in class asset quality coming from an historic, prudent and recognized risk management and last but not least, a recurrent and unparalleled operating efficiency, thanks to our mantra of cost always growing below incomes. On diversification of revenues, here we can see the contribution by business segments compared with that in 2015 and how the contribution for our new banking operation has improved in recent years to the current well diversified banking revenues that generate 99% of the group's earnings in 2020.
We can see the contribution to revenues from the various banking businesses, which now altogether account for more than 22% contribution from Linea Directa back in 2015. We have been able to maintain a switch sorry, and switch contribution from corporate and commercial banking. They together represent 65% of total income. Consumer finance now represents 15%, last year somehow impacted by the new pricing in revolving credit cards but well ahead of that in 2015. Portugal represents today 8% and growing every year.
Investment Banking launched only in 2016 now represent 6% of revenues and will remain as a 3rd contributor on the future. The recently acquired Evobanko and Avantcar business in Ireland represent now altogether 4% of total group income and is expected to grow in contribution in the medium term. All in all, the investments in banking business represent more than 33% of total income. Sources of income doubled in the period and also are relevant to mention that 30% of the corporate banking revenue is now coming from international trade business rather than the traditional corporate lending. As I have said before, we think that Banquinta has never been in a better position in terms of income, earnings, profitability, efficiency and diversified revenues as to perform the awaited LDA spin off.
Awaited LDA spin off. Here you can see a view of our operating income with a second to none performance in Spain of a 7% cumulative annual growth rate over the past 10 year. This is basically 2x what we had in 2010. Let's have a quick look at our priorities in terms of customer segment business lines and geographies. In our traditional customer segments and focus, nothing has changed except the new additions of customer finance and Evobanko.
We will continue to focus our efforts, capital allocation and investments in private banking, now followed by a large and very promising personal banking as well as our traditional corporate and enterprise banking well diversified and weighted towards large corporates as always has been. Consumer Finance Business, done through our 100% subsidiary Banquintel Consumer Finance, is a promising business and growth engine once the credit quality conditions are restored, hopefully soon, and with a much better portfolio geographically with over €200,000,000 in Portugal and close to €500,000,000 in Ireland and by products with majority of their loan book in personal loans and mortgages rather than credit cards. Evobanko is in the middle of a management restructuring to become a profitable unit in the midterm, working on efficiency and to use more of Vanquinta's expertise in consumer finance, asset management and mortgage lending. Out of our 8 priority business lines, most of them are also not new, and we have been investing in all of them over the last years. Mortgage lending, now with yearly total production over €5,000,000,000 for the group, these levels are higher than the ones in 2008 and pre crisis levels.
Insurance business, not only Nida Directa has been our sole provider of insurance revenues. Our JV with MAPFRE for life insurance products come from the 1990s and with a very successful track record complemented with our Portugal acquisition 4 years ago. Even more, now we will be free to develop additional new non life insurance agreement with any other type of partner in insurance. In corporate banking, we have promising business lines and growth trends in international trade business like supply chain financing for large customers with double digit growth rates or in investment banking with a strong dedicated team and a promising pipeline. On our other important area of focus that is affluent banking, Private banking and asset management are investments done over the last years are bearing its fruits.
And finally, geographically, where we are very pleased with all three investments done over the last 5 years: Luxembourg, Portugal and last year, Ireland, all of them with a promising future our current 11% contribution to the group's income. Let me finalize for some internal commitments on targets for 2023 and second, some final conclusions. On the targets here, you see the most relevant, some of them already disclosed by our CEO in some interviews. Our aim is to recap the pre COVID and preliminary data spin off level of profitability by 2023 in net profit, return on equity efficiency and capital ratio. And as a conclusion or final remarks, I would mention that Banquintor, in addition to realize a great financial investments, it will continue with its robust and diversified banking operation and its exceptional growth trends that should make possible to recap group's profitability prior to the spin off in 2019 by 2023.
Banquinta shareholders will finally realize our successful investment in the insurance business with Linea Directa. And from now on, we'll enjoy the option of choosing to invest in the banking business of the direct insurance business in Spain. And finally, Linea Directa has been able to achieve a relevant business size, a strong solvency level and an unparalleled profitability. After the transaction, it will become an independent company, quote, ended the stock market to maintain the leadership in direct insurance in Spain, thanks to its outperformance in growth over its peers and with compromising future ahead. It's been a short presentation.
Anyway, we will we are open and keen to answer any questions that you might have. Thank you very much.
Thank you, Jacobo. As usual, we have received a few questions. Let's start with the more technical questions regarding the transaction, some questions regarding the profit, the realized gains that the transaction will produce, around €1,000,000,000 you mentioned. How is this going to be accounted for?
Okay. The unrealized gains will be accounted in the interrupted activity where we have seen the Line Director results in the past quarters. In that line, right under the banking activity results, you will see these extraordinary results.
Okay. On the same topic, are we going to take any profit on these gains, any dividends?
No, no. We all the unrealized gains out of these transactions will be fully returned in equity.
On future incomes or contribution to income coming from LDA, how are we going to account those
incomes? Future income from LDA will be represented by the dividends that Linea Directa will distribute as we account for the 17% share of Lirna Directa, we will receive the dividends, and those dividends will be recorded in the line dividends of our P and L.
What is the net impact on book value of the transaction?
In book value, there is a reduction of the book value of around €270,000,000
Okay. One more question on the transaction. We get in are we do we have any period where we cannot sell LDA shares, the 17% we are keeping?
No. We don't have any restriction on that. But for the time being, there's no interest in selling this stake.
Okay. Two more questions on Linea Directa. Do we have any breakdown of the different combined ratios across the different segments, business segments for home, health? Not at
this moment. I will it will be announced today a new Capital Markets Day for Lira Directa, which will be on April 6, 2021. And that it would be a great day to ask any type of questions around Linea Directa and its future ahead.
Okay. Including the we are getting also questions on the payout expected for Linea Direct, I guess, this 6th of Yes,
of course. That will be a comment. 6th of February is the best time for that. I guess they will cover any type of topic, including dividends.
Excellent. We move now on questions about the bank and the strategy. We have mentioned on the last slide the targets that we have for 2023. Can we elaborate on the assumptions and also the drivers for those targets?
Yes. As we've mentioned, we have a full commitment of achieving by 2023 the same levels that we had in 2019, which was a period without pandemia and a period with full Linea Directa contribution. As we mentioned in the presentation, we have different business lines. We have different segments of clients and we have different geographies that will contribute to this commitment or to this target. We have, of course, the new businesses from new income from Evo, income from Ireland, income from Portugal and income from Luxembourg that will bring new incomes in terms of net interest income and in terms of fees.
We have contribution from Spain, of course, because Spain is growing quite well, and we do expect to recoup levels of 2019 in Spain. And we also do expect a good efficiency ratio and good control on that jaws. Just bear in mind that we have a full commitment of positive jaws year after year. In addition to that, we also expect some sort of normalization of cost of risk that will drive situation to a more normalized figure around 35 basis points in cost of risk by 2023. Overall, we expect to reach those EUR 550,000,000 of net income by that time.
And I think that this is an ambitious program, but realistic program because all these new business lines that you have right in front of you right now are business lines that still have plenty of opportunity for growth. As you know, insurance, there is a new open window for doing much more insurance since we can reach new deals, new partnerships with third parties. And of course, we have room for deliver new type of products in the bank. Consumer Finance, we are in a good period to recover levels that we used to see in the past, thanks to the recovery of the economic. We have investment banking, which is a business that is growing pretty fast and it's supporting income even in private banking, personal banking, but also in corporate banking and medium sized companies.
We have assets under management. This is basically our focus on our private banking and personal activity, and it's been demonstrated our capabilities to do so. And of course, businesses more traditional like brokerage of mortgages or transactional business where we have plenty of room, and I'm sure that we will exceed your expectations.
Okay. We are also getting questions whether we have any appetite for M and A.
As of today, we do not have any additional appetite of new corporate transactions. I think the last transaction of Evobanko and Avan Money or in Portugal, I mean, are quite recent. And for the time being, we are still in a good process to consolidate those recent acquisitions.
Okay. Regarding our capital ratios and targets, what is the dividend policy that we are assuming there?
In the capital ratios that we are sharing with you and we'll share with you in the following quarters, we are assuming a 50% payout, which is the dividend policy that we used to have pre pandemia.
Okay. Probably you already mentioned this, but just to make it clear. Can you please confirm that the €1,000,000,000 profit is net of taxes?
Yes. Non cash item. Non cash item. It's a non cash item, yes. Okay.
It goes straight into equity. Yes, yes. Also, can you confirm the assumptions for the cost of risk in 2023 and provisions, not only the cost of risk, both?
Yes. By 2023, we expect a normalized situation in provisions and other provisions. And as I did mention, normalized situation may be around 35, 40 basis points of cost of risk by 2023. As you can imagine, it's still very early to find out when will be a normalized situation, but we believe we strongly believe by 2023, this situation should be normalized by then.
Okay. Regarding the incomes, the future incomes from Linea Directa, we are getting a question where you can repeat how are we going to account for those incomes you already mentioned, the dividend income. And obviously, the participation will be accounted as other comprehensive income with impacting capital ratios. Probably last few questions. Any updates on asset quality moving away from the transaction today?
We will have our results presentation pretty soon. And I guess, I think it's exactly in one more or less in 4 weeks. Therefore, I think we can cover that topic in the next result presentation. I think today is dedicated to the Linea Directa transaction.
Thank you. Okay. That was all from us. Obviously, from any further questions you might have, please contact our Investor Relations team. Thank you, Jacobo.
Thank you, everyone, for joining today.
Thank you very much. Have a nice day, and keep