Structural and market risks

Central banks are starting the process of lowering interest rates

In 2024, the risks associated with high inflation abated, leading to a shift in the monetary policy of central banks, with interest rate cuts in Europe and the United States. In the case of the European Central Bank, the official interest rates closed at 3% in 2024 from its maximum of 4% during the period, expectations still set at seeing the same trend in 2025.

With regard to equity markets, the investment concentration process continues to increase in certain companies, many of them operating in the US technology industry, which resulted in an increase in the risk of a potential correction in markets, given the high valuation accumulated in these stocks.

Furthermore, geopolitical risk continued the upward trend seen in recent years as the sources of tension increased. Maintaining high standards of prudence will continue to be essential.

Structural interest rate risk

Bankinter actively manages its structural interest rate risk (defined as exposure to changes in market interest rates resulting from the different time structures of maturities and repricing of items on the global balance sheet) to protect the bank's net interest margin and preserve its economic value.

The exposure of net interest income to different scenarios of interest rate changes is assessed monthly using dynamic simulation measures. With a more long-term outlook, the Bank also analyses the sensitivity of economic value to movements in interest rates.

Net interest margin exposure to market interest rate risk associated with changes of ±100 parallel basis points is +2.7% for rising rates and -3.5% for falling rates, both for a 12-month horizon. The sensitivity of economic value to parallel shifts of ±100 basis points stood at +2.5%/-2.7%, respectively, of Shareholders’ Equity at year-end 2024.

Structural liquidity risk

This risk is associated with the bank's ability to meet its acquired payment obligations and finance its investment activity. The bank actively monitors liquidity and its projections, as well as the actions to be taken in normal or exceptional situations, whether caused by internal reasons or by market behaviour.

The instruments used to control liquidity risk include monitoring changes in the liquidity gap or liquidity plane and looking at specific information and analysis of balances resulting from trading operations, wholesale maturities, interbank assets and liabilities, and other sources of funding. These analyses are carried out under normal conditions and simulating different scenarios of liquidity needs that could arise from different business conditions or variations in the markets. Bankinter’s liquidity management includes monitoring of short term (the liquidity coverage ratio or LCR) and long-term (net stable funding ratio or NSFR) regulatory ratios.

In 2024, customer funds increased by 3.4 billion euros, driven by all business areas. As a result, the average of retail deposits continued to be considerably higher than customer credit, with the ratio of customer funds to credit standing at 105.6%. The liquidity position at the end of 2024 allowed reaching an LCR level of 199.61%, well above both internal and regulatory limits.

The NSFR liquidity ratio (Net Stable Funding Ratio), which measures the proportion of long-term assets that are covered with stable financing, closed the year at 142.7%, exceeding the ratio of 141.0% in the previous year. The Bank's financing structure, with a significant and increasing weight of customer deposits and wholesale funding focused on the medium/long term, has driven a steady increase in this indicator.

Regarding wholesale funding, a senior issue of 500 million euros matured in March 2024. In March, subordinated debentures worth 200 million euros were issued and in September a senior bond worth 750 million was issued. During the year, 1.3 billion euros matured from the liquidity auction of the European Central Bank's TLTRO (Targeted Long Term Refinancing Operations) programme.

Market risk

Bankinter measures market risk (the possibility of losses as a result of changes in the market prices of on- and off-balance sheet trading book positions) using the historical value at risk (VaR) methodology with data for one year and a 95% confidence interval.

An asset portfolio's VaR is the estimated maximum potential loss that could be incurred for a specific time horizon with a particular confidence interval. Given the stable profile in terms of positions and volatility, no changes have been made to the VaR limits compared to previous periods.

The following table sets out the VaR values of trading positions at the close of 2024.

On the other hand, the Value at Risk of the subsidiary Bankinter Luxembourg is monitored monthly for the positions in its financial assets at fair value, through the historical simulation methodology. The VaR of this portfolio at the end of the year was 0.08 million euros.