*
Chairman of Bankinter also warns of potential higher
provisions
*
CEO says bank is prepared to withstand adverse economic
shocks
*
Bankinter has comfortable solvency, liquidity-CEO says
(Adds quotes from Bankinter's CEO)
By Jesús Aguado
MADRID, March 23 (Reuters) - Spain's Bankinter warned on Thursday that banks faced a range of negative side
effects of higher interest rates in the medium term, such as an
increased cost of credit and liquidity restrictions.
"We must be aware that, while higher interest rates normally
have a clearly positive effect on banks' profit and loss
accounts in the short term, in the medium term they raise the
cost of liabilities and restrict liquidity, which is already
happening," Chairman Pedro Guerrero told shareholders at the
bank's annual meeting.
The ECB has increased the rate it pays on bank deposits by a
record-breaking 350 basis points to 3% since July.
Guerrero said that the persistence of inflation and an
eventual worsening of the labour market, together with the rise
in interest rates, "may lead to a reduction in debtors' ability
to pay", which could lead to higher loan loss provisions.
The collapse of U.S. lender Silicon Valley Bank and UBS
group's state-backed takeover of Credit Suisse last
weekend have increased volatility and hit banking shares.
Since the beginning of the market turmoil on March 9, shares
in Bankinter, the country's fifth-biggest bank by market value,
have fallen 20%. On Thursday, the shares were down 1.6%.
Bankinter CEO Maria Dolores Dancausa said earlier that the
bank had sound liquidity and capital levels to withstand adverse
macroeconomic shocks, as had been demonstrated in all the stress
tests to which it had been subjected.
In 2022, the bank also finished with a coverage liquidity
ratio of 193.5%, well above the average of 140% in the global
banking sector, according to data from the Swiss-based Basel
Committee on Banking Supervision. A higher liquidity ratio shows
a bank has better coverage of outstanding debts.
Bankinter also finished with a fully-loaded core tier-1
capital ratio, the strictest measure of solvency, of 11.90%,
above the 7.726% ratio required by the ECB.
(Reporting by Jesús Aguado; additional reporting by Emma
Pinedo; editing by Andrei Khalip and Emelia Sithole-Matarise)
