Bankinter; Results A Miss But Key Credit Metrics Remain Solid, If Uninspiring

Bankinter (BKT SQ) 4Q23 results earlier included a miss on profits as costs and loan losses ramped up. Equity down >5% in European trading now but from a credit perspective:

• Loan losses stepped up to 39bp in 4Q23 (3Q23: 34bp) and guidance for FY24 is 35-40bp, so pretty flat. Non-performers were slightly improved at 211bp (from 219bp at Sep-23). So, whilst there’s a clear cost overrun and revenue undershoot that’s disturbed the equity value, key credit metrics aren’t much worse.
• In capital terms, CET1 (fully loaded) is 12.30% (from 12.48% at Sep-23) and total capital is 35bp lower at 16.09% both impacted by a small Portuguese acquisition. Whilst these are above minimum requirements, the Euro average was over 14% (CET1 fully loaded at Sep-23) but in Spain the figure was just 12.6%. In short, BKT is roughly in line with peers but hardly “overcapitalised” in the way, for example, SEB in Sweden appears.

Whilst the revenue picture is, largely, what’s caught the attention of equity investors, there’s little to move the credit meaningfully here.