The foundations for sustainable growth

One of Bankinter's strategic objectives is to optimise capital as a foundation for long-term sustainable growth and value creation for shareholders. Its management policy, business model and prudent risk profile ensure that it operates with capital levels above those required by regulators and supervisors. These qualities also contribute to shareholders receiving solid remuneration that can have continuity over time.

Since the entry into force of the new solvency regulations, known as Basel III, in January 2014, Bankinter has upheld one of the highest quality capital ratios of all Spanish banks. The strength of its solvency level was made clear in the latest stress test performed by the European Central Bank (ECB) and the European Banking Authority (EBA). This proof of hard work, done in 2014, attributed the best results of all listed Spanish banks to Bankinter.

During 2015, Bankinter has continued to actively manage its equity in order to strengthen its leadership position in terms of solvency in the Spanish banking sector and to ensure the maximum quality of its capital.

Bankinter's capital base was strengthened throughout 2015, with total capital of 3467 million at year end, a 3.2% year-on-year increase, and Common Equity Tier 1 capital (CET1) of 3207 million, 5.1% more than in 2014. The total capital ratio was 12.7% and the CET1 ratio reached 11.8%.

The maintenance of the bank's equity quality merits mention. The proportion of CET1, the highest quality capital, over all equity was 92.5% in 2015.

The main variations in Bankinter's CET1 ratio over the course of the fiscal year come from:

• The organic generation of results, with a year-on-year improvement.
• The early redemption of an issue of preference shares.
• Growth of assets weighted by credit risk and counterpart, as a consequence of the positive evolution of the business. The assets weighted by market and operational risk also grew due to increased activity.
  

In November 2015 the ECB notified companies the minimum capital requirements with which they must operate starting on January 2016, as a consequence of the supervisory review and evaluation process (SREP). In the comparative analysis of requirements demanded by the regulator, Bankinter was shown to have a much lower risk profile than the sector average.

According to the supervisor, Bankinter should have a minimum CET1 capital ratio of 8.75%, which includes 4.5% for Pillar 1 and 4.25% for Pilar 2 requirements, including the capital conservation buffer. It is the smallest minimum capital ratio of all Spanish banks required by the ECB after the supervisory review.

The aims of the 2015 supervisory review included:

• Evaluate the effectiveness and completeness of strategies and processes to manage the internal capital.
• Assess the allocation and distribution of internal capital available to cover the risk nature and level of each company.
• Analyse the strategies' robustness, policies, processes and technological systems in place at companies to identify, measure and monitor the risks inherent to their business.

This minimum 8.75% level required for CET1 compares to the CET1 ratio the company had at the close of 2015, 11.77%, representing 302 basis points above that which is required by the European institution for 2016, situating the bank among the companies with the greatest capital clearance over the CET1 ratio. The bank's margin has enabled it to distribute results with no limitations.

Considering the complete application of the European solvency regulations, known as ‘fully loaded’, Bankinter's CET1 ratio was 11.6% at year end. The difference between the progressive application and the complete application of the standard by Bankinter is immaterial and, therefore, the company has no need to extend its application or take any additional actions to adjust to regulatory requirements.