Shareholders’ equity

Bankinter’s management policy, its business model and prudent risk profile allow it to operate with higher levels of capital, that are high quality and also well above those required by regulators and supervisors. It has been credited in this way year after year, which reinforces the bank’s solvency profile and enables shareholders to receive steady and sustainable remuneration over time.

During 2016, Bankinter maintained the active management of its shareholders’ equity, in order to strengthen its leading position in terms of solvency in the Spanish banking sector and ensure the highest quality of its capital. Its capital base strengthened and by the end of the year reached a total capital of 3,872 million euros, 11.7% more than the previous year. Common Equity Tier 1 (CET1) rose to 3,622 million euros, 12.95% more than in 2015, and represented a 93.6% increase of total shareholders’ equity. The total capital ratio stood at 12.59%; and the CET1 ratio reached 11.77%.

The main changes in Bankinter’s capital ratio throughout the year were derived from the following factors:

• The organic generation of results, that improved for yet another year compared to the previous year.
• The growth in credit and counterparty risk-weighted assets, a result of the positive performance of ordinary business. Market and operational risk-weighted assets also increased due to the bank’s increased activity.
• The incorporation of Barclays in retail business in Portugal. The impact came from capital consumption of the acquired business, which is mainly funded by the placement of an issue of 200 million euros in Additional Tier 1 Capital instruments (Additional Tier 1 - AT1) and the negative goodwill (badwill) generated in the operation.

Ample compliance

In late 2016 the Single Supervisory Mechanism integrated into the European Central Bank, informed banks about the outcome of the Supervisory Review and Evaluation Process (SREP) and as a result, established the minimum capital requirements with which they must operate from January 2017. According to the European supervisor, Bankinter must have a minimum CET 1 capital ratio in phased-in terms (i.e. taking into account current regulatory requirements) of 6.5%. This ratio is made up of 4.5% of the capital required by the so-called Pillar 1 of the rules (which sets the minimum threshold for all banks), 0.75% of Pillar 2 (the result of the specific supervisor judgement for each bank’s risk profile) and a capital conservation buffer of 1.25%.

The ratio required from Bankinter is the smallest of Spanish banks. In addition, the company has one of the highest quality CET 1 levels of Spanish banks (11.77% in 2016), so it amply complies (about six points difference) with regulatory requirements.

If we make the comparison in terms of total capital, which includes minimum level of shareholders’ equity of 8% (CET1 and lower quality capital), the conclusion is equally favourable. The supervisor’s requirement is 10% phased-in, while Bankinter recorded a ratio of12.59% at the end of 2016.

Considering the full implementation of the European solvency rules in 2019, which is known as fully loaded, at year-end the Bankinter CET1 ratio was 11.2%.

Freedom in dividend payments

Ample compliance with capital levels required by the supervisor allows Bankinter to consolidate its strong position in terms of solvency and quality of its assets, which is higher than that of comparable Spanish and European banks. In addition, as a result, the bank has leeway in decisions regarding paying dividends, variable remuneration or hybrid instrument coupons such as Additional Tier 1 (AT1) emissions.