Bankinter passes the most adverse scenario of the bank stress tests with twice the minimum capital required.

Bankinter has passed the stress tests to which the ECB and the European Banking Authority (EBA) have subjected the continent's banks, with flying colours. The results published today by both bodies place Bankinter among Europe's most solvent financial institutions and show that even in a hypothetical very adverse macroeconomic scenario, at the end of the period it would have a comfortable capital ratio (CET1) of 10.99%, compared with the 5.5% required by the regulators as the minimum capital to pass these tests. These are the best results of any listed Spanish bank.

This scenario, one of the most severe ever used in a stress test, assumes a fall of 1% in GDP in 2015, an unemployment rate of 27.1% in 2016 and a fall of more than 11% in house prices in the period 2014-2016. Even in this extreme and highly unlikely scenario, according to the analysis Bankinter would have surplus capital of €1,353 million.

In a more favourable macroeconomic environment, the bank would have a CET1 of 12.85% at the end of 2016, 485 basis points above the minimum capital required by the ECB for this base scenario. In the three-year period analysed, Bankinter reaches the lowest levels of CET1 in the base scenario in 2014 and in the adverse scenario in 2015, with levels of 11.63% and 10.80% respectively.

This stress test is crucial for establishing each institution's financial resistance, the possible impact on capital ratios and whether or not additional equity is required. The information obtained is of great value in facilitating differentiation and comparison among institutions, distinguishing among institutions with greater or lesser solvency.

Surplus Provisions.

The Comprehensive Assessment carried out by the ECB includes an exhaustive review of the quality of each bank's assets (Asset Quality Review of AQR). This is a technically very rigorous analysis involving independent parties who assure the uniformity and quality of the exercise, putting all participating institutions on the same level of transparency as a starting point for the stress tests.

According to the results of the AQR, in which the portfolio of loans to business and property developers was reviewed on an individualised basis over a period of several months, Bankinter will not have to set aside any further provisions from 2014 results, and is one of the few Spanish financial institutions in that situation. Nor have the results of this test necessitated any significant reclassification between performing and non-performing loan portfolios, showing that the provisions made by Bankinter in the past few years have been appropriate and that the published financial information gives a true and fair view of the institution's financial position.

The effect of the AQR exercise on the bank's levels of capital involved only an adjustment of 37 basis points (or €83 million) to the CET1 capital ratio with which Bankinter ended 2013. This adjustment arises entirely from the application of the collective provision model to the performing loan portfolio, this being the highly conservative prudential model common to all institutions.

Bankinter considers that the results of these analytical and stress tests conducted by the ECB and the EBA confirm that its published financial information gives a true and fair view of its financial situation. It also demonstrates the high quality of the assets in its portfolio, the appropriateness of its level of provisioning, the ability of its results to withstand adverse environments and its high degree of solvency. All this is the result of a long track record of good risk management, astute business strategy and, in short, a highly responsible and rigorous approach to banking practice.