At 0901 GMT, shares in Bankinter were down 5.9%, while Spain's blue-chip index fell 1%. Other Spanish lenders, such as Caixabank (CABK.MC), and Sabadell (SABE.MC) fell around 3%.
Spanish banks mainly lend to retail clients and have benefited from passing on the higher costs of loans tied to variable interest rates to customers, while keeping a lid on the rates they pay to savers.
However, central bankers have been warning that deposit costs would gradually pick up and hit margins.
Bankinter is one of the first euro zone banks to report fourth-quarter earnings and investors are watching closely to see if the boost to lenders from higher rates has peaked.
"In 2024 we do expect NII (net interest income) to keep stable," said Jacobo Diaz, chief financial officer at Bankinter, adding he was not expecting aggressive rate cuts from the European Central Bank (ECB) in 2024.
In 2023, Bankinter's NII rose 44%, at the upper end of its full-year guidance for an increase of between 40% to 45%.
Bankinter's customer spreads fell by 2 basis points against the previous quarter to 3.01% as deposit costs rose 28 bps compared to a rise of 26 bps in loan yields.
The lender's net interest income (NII), earnings on loans minus deposit costs, rose 22% year-on-year in the fourth quarter to 575 million euros ($626.58 million), below the 584 million euros analysts expected.
NII rose just 1% from the previous quarter as the Euribor 12-month benchmark rate used by most Spanish banks to set the pricing of mortgage loans, had already started falling as the market anticipated rate cuts from the ECB later in 2024.
NII was also affected in the quarter by the ECB's cut to the interest rate it pays to banks on their minimum reserves.
This helped Bankinter offset subdued new mortgage lending, which fell 14% year-on-year to 5.8 billion euros.
In the quarter, the lender reported a rise of 23% in net profit to 160 million euros, less than the 190 million euros expected by analysts polled by Reuters. For 2023, it booked a net profit of 845 million euros, a rise of 51% against 2022, below analysts' forecasts of 875 million euros.
($1 = 0.9177 euros)
