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S&P raises Bankinter’s credit rating outlook

Standard & Poor's credit rating agency (S&P) today confirmed Bankinter's short- and long-term rating at 'BB/B', raising its outlook on the bank from 'negative' to 'stable'.

According to the US agency, which foresees a likely medium-term increase in the rating, this decision is based on Bankinter's ability to generate recurring profits in spite of the adverse economic situation in Spain and on the efforts made to strengthen its capital base. In making its decision, S&P also took into account the quality of Bankinter’s assets compared with those of other Spanish banks.

Despite the adverse environment for the financial sector and the Spanish economy, at the end of the first quarter of 2013 Bankinter’s non-performing loan rate stood at 4.5%, less than half that of the sector as a whole, and its capital ratio was 10.8%, confirming it as one of the most solid and solvent banks in Spain. In this regard, S&P considers that the low level of non-performing loans, along with the reduced future provisioning requirements following the special extra additions required of the financial sector in 2012, will have a positive impact on Bankinter's recurring profits and on its capacity to generate capital.

In its report, the rating agency also praises Bankinter's changes to its business model, which have reduced its high degree of dependence on low-margin mortgage lending, focusing instead on growth in business lending and on the private banking customer segment. S&P also highlights the bank's efforts to alter the financing mix, reducing reliance on wholesale markets and giving more weight to retail financing. This trend can be seen in the changing ratio of deposits to lending, which ended Q1 2013 at 69.1%, compared with 44.5% four years ago. According to S&P, the use of ECB credit lines gives Bankinter time to move forward with this process and achieve an appropriate financing and liquidity structure.

S&P says that this combination of factors offsets the risks of deterioration in the Spanish economy in general and the financial sector in particular.