Capital Markets

The Capital Markets area manages the trading and distribution of cash products and it is also responsible for the management of the Bank's balance sheet. The environment in which it carried on its activity in 2016 was, on the whole, favourable. In Spain, the Treasury had no problems in meeting its funding needs for the year. In Europe, maintenance of the European Central Bank's monetary policy actions facilitated access to the market. As a result of these actions and of the low inflation outlook, interest rates in the eurozone remained at low levels, although a certain increase at the longest maturities was seen after the summer, as macroeconomic data pointed to a more solid recovery. In the United States, the markets were marked by the elections and the Federal Reserve's increase in the price of money, which caused medium and long-term dollar interest rates to noticeably rise.

In this landscape, the trading area was active in all its businesses, including currency, equities and, especially, fixed income markets, which benefited from the Bank's status as a market maker in government debt and bills of exchange and a co-leader in syndicated issues of Spanish Treasuries.

Notable demand

The Bank's success in the Private Banking and Personal Banking segments, together with low interest rates, generated notable demand for the products designed by the distribution area. Also noteworthy was the work done in this area for access by our customers to foreign exchange and fixed income markets.

The improvement of Bankinter's liquidity position, in terms of the Bank's balance sheet management, continued in 2016 supported by an extraordinary year of inflows of resources from the network. This fact, along with the application for long-term funds from the European Central Bank under its TLTRO II programme of financing transactions, made it unnecessary to issue long-term debt. Further, all short-term debt issues (promissory notes) were redeemed and there were no securities of this kind sold in the wholesale market at year end.

The only public issue was for 200 million euros in contingent Additional Tier 1 capital (AT1), to be used to finance the purchase of Barclay's retail business in Portugal. The issue was paid on 10 May, and it was over-subscribed at five times the amount to be placed.

Moreover, wholesale finance maturities are distributed over time in a manner so as to minimise refinancing difficulties.

The bank's interest rate risk was also monitored and managed, and it was maintained at acceptable levels. Indeed, the positioning of the fixed income ALCO portfolio and the balance sheet hedges mitigated the adverse effect of the Euribor interest rates, to which the majority of the bank's investment is benchmarked.

The bank's policy was to cover all structural foreign currency positions. In this regard, the Bankinter income statement was not affected by fluctuations in the main currencies in 2016.