Good morning, everyone, and welcome to the Q3 2018 Results Presentation of BBVA. I am Gloria Galcedo, Head of Investor Relations, and here with me today is Carlos Torres Villa, Chief Executive Officer of the group and Jaime Sande Tejada, BBVA Group CFO. As usual, Carlos will begin with the presentation of Group results and then Jaime will review the business areas. We will move straight to the live Q and A session after all. And as always, we do appreciate all participants to try to make the calls from the landlines and avoid using the speakerphone.
And now I'll hand over the call to Carlos.
Thank you. Thank you, Gloria. Good morning, everyone. Welcome to the presentation of BBVA's 3rd quarter results. Once again, we have a Strong quarter, strong results this quarter.
It's one in which we have undoubtedly faced Difficulties in Turkey and Argentina because of the events mostly in August, but also a quarter in which we have seen the strength of our diversified portfolio. Our net attributable profit has been €1674,000,000 in the quarter and that represents An increase of 46% versus the Q3 of last year. We have 2 significant elements included in our results this quarter. Those are the capital gain from the sale of BBVA Chile, which we closed in July and that amounts to EUR 633,000,000 capital gain. And the negative impact from the hyperinflation adjustment in Argentina, Which was €190,000,000 negative impact that is.
On capital, our fully loaded core equity Tier 1 Ratio decreased by 6 basis points this quarter, impacted by market volatility, but stands at a solid 11 point 34%, well above our target. Key highlights in the quarter are the strong growth in core revenues with NII plus fees growing almost 12% versus the Q3 of 2017 despite the sale of Chile, which Meant a drop in this magnitude. Secondly, the continued improvement in efficiency on the back of excellent evolution of costs, Our efficiency ratio improves by more than 50 basis points in the year to 49.6 percent with positive jaws in all of our businesses. We have accelerated our transformation. The trend in digital sales and customers is once again an outstanding trend with digital sales Amounting to 39.5 percent of total units sold year to date, that Number was 25% a year ago.
And this in terms of value would be a 31% ratio. This 39 point 5 units is 31% in terms of value. Also the number of mobile active customers exceeded 21,000,000 with yearly growth rates In this number of 37%. Risk indicators continue to be solid with an NPL ratio of 4.1%, Dropping 46 bps versus the Q3 of last year. We have an increased coverage ratio of 73% And cost of risk remains low at 90 basis points, down 4 bps versus 1 year ago.
I already mentioned the strength of capital position, 11.34 percent despite the drop of 6 bps in the quarter. And then finally, We maintain our focus on return and on creating value for the shareholder. Return on equity in the quarter was 12.2% up to September and return on tangible equity 14.8%. And if we look At the evolution of our tangible book value per share that increased in the quarter despite quite adverse market movements. And if we look at the year to date, the tangible book value per share has increased by 7.2%, Including the dividends that we have paid to our shareholders.
As mentioned, the results were strong with net interest income and fees and commissions Growing at a rate of around 12% combined in constant euros. NTI contribution on the other hand continues to be lower as in prior quarters. The other income line is negative because this is where the hyperinflation adjustment in Argentina is included. But in aggregate, we have a gross income growing 4.8%, while costs once again are contained increasing 3.3%, Which is one more quarter well below the growth in revenues, also well below the inflation rate in our footprint. As a result, pre provision profit was €2,700,000,000 growing at a rate of 6.4%.
We have a quarter in which impairments have increased driven by Turkey. They have increased by 16.5%. And the bottom line net attributable profit, as I mentioned before, grew 46% versus the same quarter of last year in current euros We're 71% in constant euros. Excluding the corporate operations, that would have meant a decrease of 9% in current euros because of the impact The Argentina adjustment, but an increase of 8.3% in constant euros. In the 1st 9 months accumulated, the profit amounts to €4,323,000,000 That's a growth of 25% or 43% in constant euros.
And if we exclude the corporate operations, the growth of 7% In current euros, 22% in constant euros with similar trends in terms of core revenue growth around double digit and growing in all geographies. NTI, on the other hand, has been significantly lower this year than prior year impacted by market evolution. Also, we had less sales of ALCO portfolio on the sale of CNCB in 2017, which affects The comparison, I would highlight the jaws that are very positive, 4.3% versus 2.7%. And finally, the impairments and provisions this year are lower. And those are important levers for earnings as well, for earnings growth.
So if we look at the breakdown of revenues, net interest income growth, 13.3%, €4,500,000,000 They're up it's up 6% in the quarter. Here, we benefit from the positive impact of The CPI linkers in Turkey. We also have a positive evolution of the net fees and commissions growing 6.8% and that's driven by Spain, by Turkey, and that's despite the seasonality that we have always in the Q3. Net trading income on the other hand was lower in the quarter due to the lower sales of ALCO portfolio holdings. Also, we had a bad quarter in results of Global Markets because of the adverse market movements in our positions.
Total revenues, which are highly impacted by the hyperinflation adjustment, as I said, the main impact is in the other income line, 1% almost 1% in the quarter. So in summary, strong core revenues in the quarter, they're partially offset by the lower NTI and by the hyperinflation adjustment. Moving down to efficiency. 1 more quarter, we'll maintain a very positive and widening jaws. I really love this picture, which I have been showing now for some time and in which you can see that our core revenues grew by 10% in the 1st 9 months versus the 1st 9 months of last year.
And our costs were growing at 2.7%, well below the inflation, which is 5.5% In the last 12 months, so our efficiency continues to improve and that was the case as well a year earlier. So we have quite a sustained trend here of showing commitment to efficiency, stands now at 49.6% With an improvement year to date of 52 bps and if we track the efficiency without the hyperinflation adjustment, The improvement is more than 100 bps. So in the context of our transformation, this is clearly one of our priorities and our track record, I think, shows How well we're delivering and how high, it really stands as a priority for all of us across the group. In fact, the improvement in efficiency is Common to all business areas. As you can see here, costs are growing below core revenues everywhere.
I would highlight Spain, Once again, we see operating expenses dropping by more than 4% versus a year ago, 4.4%. Mexico with costs growing at 3.7%, clearly below the inflation rate. In Turkey, in which we have, of course, Strong depreciation and high inflation. We're also containing the growth of costs. Those are some of the highlights.
But in summary, We have maintained our focus everywhere. We will continue along this path. We have many initiatives to continue the initiatives really to transform our production model In all areas, in the areas that are dedicated to sales, the areas that are dedicated to operations as well as in the support areas Across all countries, so what we're doing is we're leveraging technology to streamline our processes. One example of that on the sales side is how we continue to digitalize our business with impact on efficiency and also On sales themselves, I mentioned earlier more than 39% of all units sold in the year to September were digitally sold. That is up from 25% a year ago and up from 15% 2 years ago.
And the weight is the weight of digital sales or total sales is 31% if we measure them by their economic value. That's what's labeled PRV in the chart. And as you can see that was below 12% 2 years ago. The growth in digital sales, it's It's really an exponential dynamic as we promote actively that all of our products are available In a DIY way, so do it yourself self-service for purchase through digital channels. As you can see on the right side, this is true for Many product categories.
So digital sales are very relevant and they're growing in importance across various products Such as consumer loans or SME loans, also deposits or insurance. The strong growth It's consistent across markets, as you can see, with digital sales representing 34% of the value sold in Spain, 25% of the value sold in U. S. A, 27% in Mexico or 45% in Turkey or 17% in South America. And just 2 years ago, these numbers were around 10% or lower, except in Turkey.
So very strong growth and importance in the weight of digital. Some examples at how this availability of the product to be purchased, the IUI, And the improved experience drive the growth of digital sales. Every quarter I show some examples drawn from our various geographies. This time, I'm showing, for example, the digitization of our Global FX business. This has allowed Availability 20 fourseven for not only enterprise clients, but also for the retail clients.
So they have the possibility of doing FX trades Anytime through the app, through the web, the net cash channel. This has meant an increase of 60% of trades In hours in which the branch network is closed and more than 50% of retail and more than 30% of enterprise clients that hadn't worked with us in FX before are doing it now after this DIY implementation. And as you can see the impact of that is that while the traditional channels have grown because it has been a good year in terms of the FX business, They have grown 23%. The booster has really been on the digital side, where revenues increased 70%. So DIY also helped us to acquire new customers for the FX platforms I'm growing the open market, so the users of the FX digital platforms have multiplied.
As you can see on the right in Turkey by 1 point Four times Peru, 10 times almost Colombia, 3 times almost. So these are Some of the examples of how that impacts. And additional example would be how digital drives Engagement, not only sales. And this is an example drawn from our business in Spain. So we see how clients that embrace digital show a faster engagement and higher revenue growth.
So customers that were showing Similar trends prior to becoming digital. We see how they drift apart in just a few months afterwards With the gross margin of those that digitize growing 22% on average, while the non digitized decreased 5%. And this is across various client segments. So it's controlling also for differences in the profile of the customers that digitize and that do not digitize. The difference comes actually from higher engagement and willingness to purchase more products from digital customers.
So as you can see on the right, 4.7 products for the digital customer versus 3.4 Not only does digital drive total sales, it also helps to increase the contribution from higher value sales measured by PRV, and we do that with lower efforts from our commercial networks As the digital sales are performed DIY by our customers, for example, here we can see in the case of Mexico, the value of sales has increased by 32% here with digital sales growing by 282%, whereas traditional levers account only for 20 percent of the growth with 7% growth of those levers. And in order to achieve this growth, if you look below the glass On the efficiency, in order to achieve this growth through traditional channels, we estimate that we would have needed to increase the number of reps by 26% during this period, but in fact, we only increased them by 4%. So that's a savings of more than 1,000 additional sales representatives. And as you can see, the total number of FTEs to support this growing business has in fact decreased by 3%. We're also putting new solutions we We continue to put new solutions in the hands of our customers every quarter, and we're doing that at an ever faster pace to achieve a fast cycle.
We have embraced Agile, at BBVA with Agile methodologies and that's growing by the week. With Agile, some examples of the impact, we're accelerating our pace of delivery With faster time to market, the features, for example, per developer per month have multiplied by almost by 7 in 2 years in Spain. We're also increasing the reusability of the components that are developed in any one of our markets by our teams. So we are ensuring that reutilization of those components from one country to another through a co creation model of global and local teams that develop for each other as well as leveraging our global software development platform that we have talked about in the past as well. An example of how this works is precisely the FX DIY program I was talking about earlier, for which various countries Benefited from each other's work and development, significantly accelerating time to market.
So for example, After the first implementation in Mexico, in Peru, we compressed times by 20 they were down 25% and in Colombia 50%. And we believe that this model of developing the best solutions for clients at a global scale with reutilization We'll differentiate us increasingly from local competitors in each one of our markets. Underpinning The growth of digital business, of course, is the continued digitization of our customer base. Digital customers are up 23% versus a year ago to 26,000,000 clients, 49% penetration, very close to the 50% tipping point we will be crossing soon. Our mobile active customers grew 37% with a 41% penetration, so continued Sustained high growth rates near 40%, and we'll reach the tipping point there sometime next year.
And if we look at comparison with peers, it is hard to come by with Consistent data among competitors because different banks use different definitions of what is digital or mobile customer. So that is possible When we have some industry benchmarking exercises like the one published by Comscore on Mobile Financial Services in the U. S, Well, in that one, BBVA Compass ranked number 1 in mobile banking penetration in the U. S. Market and that confirms our view that we are leading digitalization of customers in our footprint.
Another example is the global mobile banking app ranking recently published by Forrester Research. And in this global ranking, our mobile banking app in Spain came on top of the ranking as the world's number 1, And that is for the 2nd consecutive year. And this year, we're also very happy that our app in Turkey was number 2 in this Worldwide Ranking by Forrester. So having 2 of BBVA's banking apps as number 1 and number 2 in the world It's truly remarkable, and that's something we feel very proud, quite an achievement. So we see as the world is embracing digital, You can see how we continue to push to digital as strong as ever, and that has a noticeable impact on growth, also on costs and finally on the appreciation of our customers and that will itself drive further business.
Going back now to risk indicators. This quarter, we have seen higher impairments. They're up 16.5% versus last year, 36% up in the quarter. I mentioned earlier, driven mostly by Turkey, both by the macro updates in Turkey as well as by provisioning For large tickets, this has resulted in a slight increase in the group's cost of risk from $82,000,000 to $90,000,000 as you can see on the bottom. And then we have a positive evolution of NPLs, significant reduction this quarter, in fact, down €2,000,000,000 in 1 quarter.
We're down €3,200,000,000 over the last 12 months. Our NPL ratio is down as a Consequence from 4.4% to 4.1%, good coverage 73%. So overall, we maintain good risk indicators and good Asset Quality. On capital, we also have a solid position. We have proven to be quite resilient even in adverse market environment.
We remain well above our target with a ratio of 11.34%, and that includes all of the impacts associated with the sale of Chile that was closed in July 6. In the quarter, we have positive impact of results, 35 bps. We reserved 13 for dividend payments and 81 coupon payments. We have a negative impact of 11 Because of the increase in risk weighted assets in constant euro terms, that's mainly driven by activity in the U. S.
And in South America, also in Mexico, where we have Increased risk weighted asset weights because of the change in mix. And we have other impacts that are quite significant this quarter, and the impact in 17 basis points. This bucket includes some market related impacts such as the FX impact from Turkish And Argentine peso depreciation, the Turkish lira was down 23% this quarter, the peso 29% this quarter. Our hedging policy mitigates the impact of that. You know our sensitivity to every 10% depreciation of the Lira remains low at Around 2 bps and 1 bp in the case of Argentine peso, but nonetheless, 23% 29% Have meant a drop in our ratio.
Also, we have included there the mark to market of our available for sale portfolios. All in all, the ratio has decreased by 6 bps during the quarter. Once again, I always remind you of the high quality of our capital. We remain as a bank with the highest density and also the highest fully loaded leverage ratio of our European peer group. We also have covered the AT1 and Tier 2 buckets On a fully loaded and also on a phased in basis, of course.
And we have recently in September 18, Successfully issued €1,000,000,000 of AT1s with a coupon of 5.7eight percent and the impacts of that Issuance have not yet been included in the ratios. We will do that in coming quarters as we receive the regulatory authorizations. To close off this section and the quarterly overview, our return metrics, our tangible book value per share increased 7.2% in the 1st 9 months of the year, Including dividends, despite market conditions, which took their toll on some of our assets. Profitability ratios increased and they improved in the year. ROE in the 9 months was 12.2%.
That would have been 10.8% without the profits from Chile And return on tangible equity, 14.8 percent or 13.1% without the corporate operation of Chile. Let me turn it now to Jaime for an overview of the business areas.
Thank you, Carlos, and good morning, everyone. Let me start again with Spain. In terms of macro, Spain will continue to grow above the euro zone and above its potential growth with an expected GDP growth rate of 2.6% for 2018 and 2.4% for 2019. Net attributable profit in the 1st 9 months grew by over 10% year on year, and that's despite trading income decreasing by 19% on lower portfolio sales. The main P and L drivers continue to be core revenue growth, cost reductions and lower impairments and provisions.
Core revenue grew by 1.3%, consolidating the positive growth trend initiated at the end of last year, And that is thanks to the excellent performance of fee income that grew over 8%, coming mainly from Asset Management and Retail Banking Services. This outstanding evolution makes us believe that we can beat our mid single digit growth guidance for the year. Costs continue to surprise. They're down by over 4% year on year, further improving the efficiency ratio to 54.4%. Impairments decreased by 35% year on year as asset quality metrics continue to improve.
NPLs decreased by more than €500,000,000 in the quarter and cost of risk stands at 22 basis points as of September. We expect 2018 cost of risk to remain below 30 bps. Provisions and other gains and losses also decreased by almost 30% year on year, Many explained by lower restructuring charges. Regarding NII, it's down by €43,000,000 year on year in the 1st 9 months, explained by the lower contribution from the TLTRO. Last year, we accrued €36,000,000 per quarter, while this year we're only accruing 24.
The underlying business remains stable versus last year in a worse than expected environment We subdued loan growth and where interest rate hikes have been postponed, but also with lower wholesale funding costs than expected. As of September, loans continue to go down by 1.5%, given lower growth, especially in the corporate and CIB portfolios And then the ongoing deleverage in public sector loans. In the case of retail, the continued deleverage in residential mortgages has been fully offset by Growth in the most profitable segments, both consumers and very small businesses. This better mix has allowed customer spread to remain flat. In summary, we continue to increase the profitability of the Spanish business despite the rate environment.
Turning now to real estate. Our exposure to the real estate sector has increased by 7% in this quarter alone, Mainly thanks to the sale in July of our developed loan portfolio called Sintra that we've already commented before this summer. And as we also have shared through our relevant event, the transfer of the real estate business in Spain to Cerberus has been closed October 10, Selling 80% of the share capital of Divarian, so not impacting yet the evolution in Q3. Regarding the P and L, year to date net losses amount to $60,000,000 and that's almost an 80% reduction versus last year. And we remain committed to our guidance of $100,000,000 net losses for 2018, which compares with the $500,000,000 that we lost last year.
This will clearly help to boost BBVA's profitability in Spain. Let's move now to the U. S. We continue to have a good macro expectation for the Sandbult. GDP will grow by 3.7% in 2018 and by 3.8% next year, Well above the U.
S. As a whole. In the 1st 9 months, net attributable in the U. S. Is up by 43% versus last year, With NII being the main P and L driver, growing by 12%, in line with our double digit growth guidance supported by higher volumes A more profitable loan mix and higher customer spreads.
Loan growth accelerates to over 6% versus a year ago With an improving trend across the most profitable portfolios, it is worth mentioning the impressive growth in the consumer loan book That also includes credit cards, mainly boosted by digital loans. For 2018, we continue to expect loan growth at mid single digits with a clear focus on improving the loan mix. The customer spread continues to increase positively impacted by the rate environment, A more profitable lending mix and a successful strategy to contain the increase in the cost of REIT deposit, which is becoming more challenging as competition intensifies. Expenses are up by 6% versus last year due to a higher marketing activity in order to And our consumer lending business. Operating jaws though remain positive with efficiency improving 150 basis points in the last 9 months.
Impairments are down by 25% versus last year. Remember that 2017 numbers included a one off provision for both hurricanes Harvey and Irma. While in the first half of twenty eighteen, we've recovered some of these provisions and we had also positive IFRS 9 macro adjustments. This means that Q3 provisioning level might be considered as a more normalized one as it was not impacted by any one off. Year to date cost of risk stands at 33 basis points and remains below our low 40s guidance for year end.
And the Trade Agreement with the U. S. And Canada Research maintains its GDP growth estimates of 2% For 2018, a similar rate to the one expected this year. Once again, bank commerce continues to surprise positively With sustained growth in OP and L lines, in the 1st 9 months, net attributable profit increased by 22% expense control and a significantly lower impairment. NII continues to grow at around 8%, in line with our guidance and above activity Supported by the contribution of the securities portfolio.
Loans are up by 6.5% versus last year With quite a balanced growth between retail and commercial portfolios, mortgages and consumer loans benefited in the quarter from the increasing consumer confidence, While commercial loan growth rates decreased after a very strong second quarter, customer The spreads decreased after higher deposit cost and a larger time deposit weight in our funding profile. The strong growth in fee and commission income continues growing over 7% year on year and that's above our guidance, Mostly driven by Investment Banking, Mutual Funds and Electronic Banking fees. Our cost controls efforts further improved operating jaws With gross revenue growing at 8% year on year, while our costs are growing below 4%, and as Carlos said, well below inflation. Despite the best in class, we continue to improve our cost to income ratio, which is down to 32.9%. Impairments decreased over 10% year on year, explained by better retail NPL dynamics.
Year to date cost of risk stands at 282 basis points. That's 11 basis points below June levels, which makes us improve again Our 2018 cost of risk guidance to around 300 basis points versus 320 previously. These solid results show again BBVA's leadership position in Mexico, both in terms of market share and profitability. Let's focus now in Turkey. After a significant tightening in monetary and fiscal policies, the rebalancing of the economies are already underway.
BBVA Research expects GDP growth to moderate around the 3% level in 2018 and around 1% next year. We expect current account deficit to adjust rapidly, while inflation will gradually decrease over next year. In the current volatile environment, Guaranty continues to show its resiliency with net attributable profit growing over 18% versus last year in constant terms, thanks to strong revenue growth and the focus on cost control. NII is up by 26% versus last year, supported by a higher contribution from the CPI linkers and lending growth, especially in the TL portfolios that are more than offsetting the contraction in the Turkish lira customer spreads And lower foreign currency loan volumes. CPI linkers contributions increased by €160,000,000 versus last year As a consequence of the higher inflation reference rate use, TL loan growth has decelerated to 9% year to date Due to the slowdown in the economy and the increase in interest rates, we now expect Turkish lira loans to grow at single digits by year end.
The foreign currency portfolio will continue to deleverage, already down 12% year to date. Customer spread TLs contracted 116 basis points in Q3, mainly explained by the significant increase in the cost of funding Due to the higher rates in the system and the 19% increase in TL deposit volumes year to date in addition to lower loan demand. For the full year, we continue to expect the NII, including the linkers, to grow at double digits. And although TL spreads will continue to go down in Q4, it will be offset by higher CPI linkeders income As the reference rate for the whole year is expected to be around 23%. Net fees continue to grow Over 30% with strong performance across the board.
Good evolution of expenses growing 11%, well below inflation, absorbing the negative impact of the depreciation of the Turkish lira on U. S. Dollar denominated expenses. Guaranty continues implemented its new service model at the branch level, now in over 800 branches, improving efficiency, customer Experience and employee satisfaction. Operating income increased by almost 40% versus last year, Showing Guaranty's ability to generate pre provision profit.
This pre provision profit has allowed impairments to increase by over 150% versus last year, driven by The negative macro and additional provisions on some large tickets, mostly U. S. Dollar denominated without deteriorating the bottom line. The NPL ratio stands at 5.2%, increasing 68 bps versus June. Cost of risk year to date is up to 172 basis points versus 123 in June.
And although it's difficult to provide a forecast In the current environment, cost of risk by year end should be around 200 basis points, while large ticket items might increase the number By between 30 and 40 basis points. And finally, South America. The macro continues to evolve unevenly across the region. On the one hand, we have growth in Colombia and Peru that will continue strong of minus 2.4 percent expected for 2018. September numbers in South America are impacted by the sale of BBVA Chile in Q3.
And as Carlos already mentioned, the pre inflation accounting in Argentina, which impacts all P and L lines and makes comparisons difficult. Let me provide some more color on the evolution in the 3 main countries in the region. In Colombia, net attributable as of September grows by over 40% versus last year. Supported by strong NII growth and lower impairments, NII is up by almost 10% versus last year and above loan growth. Loans increased by over 6% year on year with growth biased to retail portfolios, while customer spreads also increased by 33 basis points versus last year, thanks to lower deposit costs.
Provision decreased by 23% As last year, we included a provision for a large ticket. In Peru, net attributable is up by 5.7%, supported by NII, Growing above 8%, also above activity, thanks to lower funding cost and demand deposit volumes growing at double digits. Lending growth stands at 3%. And as in the case of Colombia, retail segments continue to be the main driver, Growing at 14% year on year, especially in consumer loans that are growing at 27%, where we are gaining close to 2 full percentage points in market share over the last 12 months. And finally, Argentina.
In Argentina, in payroll inflation accounting has reduced year to date results by 119,000,000 To near 0, NII benefits from higher rates and better customer spreads and our positions in short term government bonds. The NPL ratio remains at very low levels at 1.1% and much better than peers. And now back to Carlos for some final remarks.
Thank you, Jaime. My final remarks briefly are just to reiterate The solid set of results that we are presenting today for the Q3 supported as you have seen by core revenues. Secondly, we are seeing how digital leads to growth and how digital leads to efficiency gains. We maintain our solid and resilient capital position above target, and we are delivering on profitability and tangible book value growth despite the difficult market environment. Thank you very much for listening.
Now we turn to Q and A. Gloria?
Thank you, Carlos. We are ready to move into the live Q and A session. As always, I would like to ask you to limit yourself to 2 questions per caller, so we can attend as many participants as possible. So first question, please.
Our first question today comes Jose Abad calling from Goldman Sachs. Jose, please go ahead.
Yes. Hello. Good morning. First of all, congratulations Carlos for your new appointment. I guess this will be the So I think my first two questions from my side.
The first one on Turkey. I mean, a bit on credit Quality, obviously. I mean, if you could give us some color on how Stage 2 loans have evolved in the quarter and maybe your Congratulations for Stage 2 and Stage 3 into Q4 and maybe 2019 as well. My second question is on Spain. We had this agreement between PESOI and Podemos on October 11.
One of the proposals The agreements they reached is actually a 5% reduction in the exemption for dividends and profits generated in foreign subsidiaries. So So I was wondering how is this going to impact you? And maybe if I can, our third question is, when will you be in a position actually to disclose your Digital P and L and balance sheet as opposed to your non digital P and L and balance sheet, so we can actually move the discussion from the pure descriptive space
Thank you, Jose. I think on cost of Risk and NPL Dynamics in Turkey. Jaime has given quite a bit of detail, but I'll turn it over to him after. On the tax, really, this is one area where there has been a lot of talk. What we have seen so far, it's not Much detail.
And yes, what has transpired is this idea that we might need to be paying A tax of 5% on the dividends that have already paid tax in our subsidiaries. We are lacking details. If that was to be the case, then depending on what our payout policy is from our subsidiaries to BBVA back here in Spain, We will need to be paying tax or incorporating a tax base, I should say, Those dividends and then 5%, sorry, of those dividends, the other 95% would be exempt. In any event, this would represent not a material amount for the size of the group. Regarding the digital P and L, we don't like to talk about the digital P and L and digital balance sheet because we do consider our business as one.
This is very important. Digital is really a booster to the business. So in fact, the impact of digital on the business you're seeing every quarter, you're seeing it You're seeing in that nice chart I like where you see growth of revenues of 10% or more core revenues And costs growing less than 3%, 2.7%. And this has been sustained quarter after quarter for 3 years now and we will continue showing that. And I think that's the best way to see where digital shows up in the P and L.
That notwithstanding, we will try in the future to go beyond the examples that We're sharing every 3 months to provide a more comprehensive set of metrics, so you can track that impact. But again, it will not be a digital P and L separated from the entire P and L of the bank. Jaime, do you want to comment on Turkey NPLs? Yes, sure.
NPLs in Turkey in current terms are more or less flat. They stand at around €2,800,000,000 And that's mainly a Stage 3 loans. In constant terms, which is probably a better guidance of a better reflection of the evolution The underlying credit risk, they are up in the quarter by almost 20% from 2,300,000,000 To 2.8. What we've done as we've guided that we were going to do is to increase provisioning over the second half of the year. In the case in this quarter, Cost of risk has almost doubled to 2.79 basis points.
That generates that cumulative cost of risk of 172 basis points. This number includes a macro adjustment of €125,000,000 on top of the €20,000,000 that we did in the second quarter. In local terms, the Stage 2 loans remained more or less flat. So it hasn't changed this quarter.
Thank you, Jose. Next question, please.
Our next question is from Alvaro Serrano calling from Morgan Stanley. Alvaro, please go ahead.
First of all, on Turkey, on the visibility you have in Turkey at the moment. First of all, if you could comment on the contribution of CPI Link, as you mentioned, 23% expected inflation by year end. But just if you can walk us through what the contribution in the Q3 was versus Q2, just to understand what the underlying And I dynamics there and how resilient the business is. And also just a follow-up on the provisioning. I think you were guiding to around 200 basis points.
With the large tickets, you're now saying 230 to 240, I've understood. If you can give us any color on the visibility of the business if on your monthly checks or your weekly checks, how's asset And then on the other questions on Mexico, numbers seemed better than expected. If you can comment on overall loan growth and now that the change of This is taking place. How do you think things are going to evolve going forward? And in particular, if you think things like the cancellation of the airports In Mexico, you're going to have how do you think that might impact confidence and the way you look at the growth in Mexico?
Thank you.
So starting with that one and then I'll turn it over to Jaime for some more details. But starting with the Mexico question, we're seeing quite strong growth in Mexico and as you have seen Very strong results, one more quarter. So here we have gone through periods of lots of uncertainty over the last year and a half. In the period leading to the elections with all the discussion around NAFTA immigration, the wall and the uncertainty of the election itself, Most of those have been cleared one way or the other and mostly on the positive side with We're still expecting for the U. S.-Canada Mexico agreement to be passed, but that's going in the It's a good agreement and provides certainty.
Also, the relations among The various parties there are going in the right direction. And yes, we have some decisions like the one yesterday on the airport That might have some impact, but overall, we continue to see quite strong loan growth, high single digits as you have seen. It's 6% growth year to date. And what we expect is that strength to continue as the new government takes office, which hasn't happened yet. Regarding Turkey, Jaime can provide more details, but basically the linkers it's very important to understand Those are a hedge.
So certainly, the rising rates in Turkey, which is absolutely what's needed for that economy, so we're happy to see since our last call Actually turning it around also on the fiscal side, which is a strong position that they have in terms of debt, but to incorporate some savings there. And really slowing down. The slowdown is very evident in loan production, which is quite low over the month of September, October as well. So we will be seeing loan volumes tapering off completely in Turkey, which is exactly what's needed, as I'm saying. But with the rising rates with not new production, certainly our NIMs are compressing and they're compressing fast and we will see that In the Q4, it will be very tough on the customer spread side, but the linkers are precisely the hedge for that and that's why we have them.
So in the Q3, we had a significant increase in the contribution that Jaime laid out. In the Q4, we'll see that. Probably the linkers are going to contribute double the amount in euro or in lira, I should say, that they have contributed in the 3rd quarter. That's roughly the number If you do the math of going from the inflation that's now in the numbers, which is roughly 14% year to date to the 23% that we expect to finish the year off. So that will compensate maybe not completely, but it will compensate quite a lot of the impact of the NIM compression.
And on the cost of risk, I shouldn't say much more. I think the macro adjustment that Jaime referred to twice already for the Q3 and the one that we will have in the Q4 is the IFRS Microenvironment in Turkey, and we have seen that in the Q3. We will see that more in the Q4. So we're provisioning for that deteriorated environment now. That's what IFRS 9 requires and that's what why the cost of risk has gone up and will continue to go up.
No. It will be 200, will be 230, will be 240, we don't know. It really depends on the large ticket items beyond the 200. So Jaime, I don't know if you want to add anything.
Maybe just the numbers because you said it all. The CPI contribution in this 3rd quarter, Alvaro, was €245,000,000 That's €139,000,000 more than what we obtained in the 2nd quarter. Regarding cost of risk, the only thing to add is that we're not seeing deterioration in the retail portfolios. And all provision increases are in the large ticket foreign currency book.
Thank you, Alvaro. Next question, please.
Our next question today comes from Sophie Petersons calling from JPMorgan. Sophie, please go ahead.
Yes. Hi. Here is Sophie from JPMorgan. So just going back to Turkey, Could you just remind us what the book value and minority interests or the value of your minority interests in Turkey are at the moment? And could you also just I'm sure that you don't have any intra group credit lines or other kind of credit support lines That will be my first question.
My second question would be if you could also remind us U. S. And Mexico and Argentina. I recognize that you gave a couple already earlier on, but if you can give for all these countries. And just lastly, how should we think about TRIM?
Have you taken the TRIM impact already?
So on Turkey, as you know, we not only in Turkey, but everywhere, we follow multiple point of entry strategy. So the exposure that BBVA has to any one of our subsidiaries is limited to the book value of our equity. And I can confirm to your question that there's no intra group lending to Turkey or to any one of the other subsidiaries for that matter. The book value stands at €3,500,000,000 in September. So that's quite a drop About minority holdings, our minority interest would be €2,900,000,000 Yes.
And just to finish off, maybe it's interesting that you know that the risk weighted assets that we incorporate in the group numbers For the guarantee 100 percent of guarantee, which is what we consolidate, amount to €52,800,000,000 I think those are the basic numbers for Turkey. On TRIM, we have only received the Qualitative results so far. So there hasn't been any impact because we're still waiting for the letters. But from what we have received so far, we don't expect any material impact coming from TRIM. And do you want to comment on the sensitivities to interest rates?
Yes. Sensitivities remain quite stable versus last quarter. In Spain, activating management levers, we continue to believe that for every 100 basis points increase In rates, our NII will grow roughly 15%. In the case of the U. S, it's down below 6% Currently, it stands at 5.6%.
Mexico is positive, 3.5% for every 100 basis points increase. In general, in South America, it's around 2 percentage points for every 100 basis points increase in the curve. And Turkey, it's more or less flat. We have a negative sensitivity to Turkey's lira rate rises of about So 1% and it's positive also of around 1% for the U. S.
Dollar. So overall, pretty much neutral. This is, of course, 12 months forward view, Okay. As always.
Thank you, Sophie. Next question, please.
Andrea Unzueta from Credit Suisse is our next question. Andrea, please go ahead.
Hi, good morning. I have Two questions. The first one is on Mexico. If you could give us more color on how you expect NII to develop, your loan book is growing by 6%, but the sector is growing at 11%. You seem to be more active on corporate loans, which are according to the regulators data, The ones where pricing is becoming more of an issue.
I know interest rates are going up as well. And so If you could give us your expectations for the line into 2019? And my second question is on costs in Spain. I mean, you're declining by 4% year on year, but how should we see that line Going forward, is Q3 the new level? Should we see more declines?
That's it. Thanks.
Thank you, Andrea. So In Mexico, regarding growth and comparison with competitors, I think you should look at the whole picture, Meaning not only the growth of the loan book, but also the cost of risk. So we have purposefully shied away from The riskier segments on credit cards and consumer side, for example, that shows up in better risk metrics, Probably also shows up in less growth, but we're very happy with our 6% growth year to date. And in terms of NII, going forward, we're expecting high single digits For this year, we're not providing guidance for 'nineteen yet. Cost in Spain, We're expecting to continue this 4% ish down in 2018.
So we should see similar numbers, I think, I hope in the Q4, surely, we are working hard on maintaining our cost discipline. And again, we're not providing guidance for 'nineteen yet. But I would just give the general comment that I gave already in the presentation that we will strive to be more efficient Everywhere and if there's one place where that continues to be very important is in Spain, where the top line still Hard to grow it with the negative interest rates.
Thank you, Andrea. Next question, please.
Our next question is from Carlos Catina calling from Societe Generale. Carlos, your line is open.
Hello. Thank you very much for the presentation.
A quick one on cost in Turkey, which obviously Doing
very well in containing cost and inflation pressures. Could you elaborate a little bit on the measures you've been taking to contain cost growth And the other one is NII in Spain. In the past, you discussed flat NII for Second half twenty eighteen on the back of some rate hikes and this hasn't materialized and that seems to be So not asking for your outlook for the whole 2019, but the evolution of NII over the coming quarters. In the absence of rate hikes, should we continue to expect more declines in the top line? Or how do you position yourself?
Yes. Thank
you.
So on cost cutting in Turkey and cost containment, I should say, it's been a variety of things. One of the things, for example, just to give you a glimpse is the Guarantee Pluse program where we have completely redefined the roles of the branch and really going from separated figures of sellers and tellers to the seller teller. And this Guaranty Plus project, which was Started implementation late last year, has been rolled out to all branches, Has had a significant impact on productivity, allowing us to have more sales with less People, put it simply. Other ideas like improving our back end processes and driving digitization Continue also to support that. So it's those types of things that are driving efficiencies, really rethinking Our sales processes, our operations processes and our support area processes.
On NII, Jaime, do you want to comment on that one?
Yes, sure. Carlos, it's been quite difficult to understand you. So I'll try to guess a little bit what the question was. On NII in Spain, it's quite flat versus Q2. It's flat the average volumes.
Your flat the customer spreads. And on a year on year basis, the main explanation Is the lower accrual coming from the TLTRO? The underlying dynamics, it's complicated to grow the loan portfolio. The deleveraging of the mortgage book continues True at lower rates than last year, 3.7% versus 5.3% in 2017, sorry. And the public sector book continues to deleverage.
What I think is important is the significant change in mix that Spain is achieving, Thanks to very good behavior of both consumer loans and Very small businesses portfolios. The 12 month driver Has started to slowly inch up. We are not at the minimum levels that we've had 2, 3 months ago. Let's hope that this is the beginning of something that I think should materialize In a more tangible fashion, probably in the second half of twenty nineteen.
Thank you, Carlos. Next question please.
Our next question today comes from Stefan Nedialkov calling from Citigroup. Stefan, please go ahead.
Hi, guys. Good morning. It's Stefan from Citi. A couple of questions on my end. When it comes to Mexico, the AMLO referendum And the decision on the airport, that is sending a message about investment.
And given your strategy in growing Corporate lending more in Mexico. How do you see the interaction between the new AMLO administration from the 1st December and corporate loan growth going forward? In addition, do you expect any regulatory caps on rates on the consumer side of things in Mexico going forward? My second question is on digital. And specifically, when I look at the U.
S, costs It seems to be having a step up. It was in the Q4 of last year and this year it's in the Q3. Could you give us some color on what's causing the step up? Is it your investment in Compass on the digital side Or simple. And a broader request beyond that, if you could at some point start disclosing Investor.
Investment in digital versus realized cost saves. And that goes back to Jose's request. It would really help us understand how you're progressing on the digital front and how that actually affects the bottom line. Thank you.
Thank you, Stefan. I think on Mexico, I already commented as much as I could comment. So We have had a string of uncertainties over the last 2 years. Those have been resolved mostly To the positive side, and that's why sentiment has also been improving towards Mexico on the market versus what had been the case quarters past. Now we have this news from yesterday, and I think it's really early to say what impact this might have on confidence.
We hope it doesn't have a negative impact. We will need to see. And we We don't have any indication or news that there might be any regulatory action of the one that you suggest, regulatory caps, etcetera. On digital and the U. S.
Costs, it is true that we have had An increase of 6% in the U. S. Expenses that has been due to higher commercial activity. So it's really investing in the growth. So we have, as you know, a franchise that we want to grow Because we have less than the critical size that we would like to have in the U.
S, primarily in the footprint where we're We're not talking out of footprint investments, but we are growing our headcount. We're also investing in marketing to expand our business, our consumer lending business, for example. But also in the U. S, Where we do see that trend, which is wanted. So we are investing in growing the business.
We're seeing positive jaws with revenues growing 9 10% and the expenses, as I say, 3%. Regarding the digital equation, I agree. And as I said earlier, we will We'll strive to provide better metrics and a more comprehensive picture for everyone to understand The positive impact that what we're doing has on the business. I would say, however, that it's not That we are investing in digital additional amounts versus what would be the run rate. What we're doing is really redirecting our resources in a Dynamic way to different things.
So I would say that the total cash out hasn't increased Because of digital, what we have done really is dedicate resources to things that have impact. And those things are mostly Bring our products to DIY, working on better advice based products, leveraging data. It's really smart interactions. So those are the things that drive more engagement, more sales and better satisfaction. And I think we have shared in some meetings the mechanisms through which we do the dynamic Allocation of resources every quarter to ensure that we are dedicating the cash out to the things that matter strategically and financially.
And That's the best summary I can give you now, but we will, as I say, strive to provide better metrics
Carlos, let me clarify one thing because Stefan as well as Andrea has mentioned it. And I already shared this in the speech. The Balance growth that we've achieved in Mexico over the last year is quite astonishing. The retail portfolios have grown by 6%, exactly the same rate as the commercial portfolios, 6.0%. So it is not true that we're growing faster than the commercial portfolios.
That was true in the Q2, but that has been significantly Corrected in Q3.
Thank you. Thank you, Stefan. Next question, please.
We now have a question from Martin Romero calling from Bank of America Merrill Lynch. Martin, your line is open.
Hi, Good morning. Thank you very much. Following quickly on the U. S, are you not worried that we may be a bit late cycle and you're pushing for growth in consumer lending? Your cost of risk is already at 52 basis points.
Where do you see the structural cost of risk going forward given the mix of your portfolio? And then two quick questions, one on taxes. The tax rate in Spain was very low this quarter. I don't know if there's anything extraordinary. And at the same time, it looks like at the corporate center, the tax credits have been increasing.
So it would be great to have a little bit of visibility On taxes going forward? And lastly, on capital, do you think we could see the threat
Well, on SREP, we're waiting for the exercise to conclude. So We couldn't comment on that until we get some feedback. Certainly, we have conducted our stress tests. And last time around, we came very strong. And given that, that has quite an impact, given also how well we have Withstood what has happened this quarter, I think is the best indication of the resilience of our diversified business model.
So even with very, very vertical line depreciation in 2 of our markets, our capital has sustained very well. So all of that, I think, gives us confidence that we are where we should be, very strong position in capital and that the requirements Shouldn't change. But again, we will see what happens when the SREP feedback comes. U. S, are we in late cycle?
I think that's a great question. We're absolutely looking at when the cycle indicators that might point to the cycle turning. We don't think there's a probability of recession in the next 24 months, But we're certainly looking at those indicators. We're focusing our growth in the consumer side. It's On the less risky segment.
So we're focusing mostly in footprint and mostly in quite Hi, FICO scores. We're tracking, of course, the risk metrics on all vintages as we originate, and we adjust our policy accordingly. And in the big scheme of things, we're not talking about a portfolio that has a size that will have a significant impact On the overall cost of risk, which as you point out in the U. S. Has been quite low.
Jaime commented, we had some extraordinary write backs and positive recoveries this year, which will not repeat. So I'll probably be in the low 40s cost of risk. And then, Of course, if and when the cycle turns that would change to be higher. And then there were some questions that I wouldn't know on tax rates On corporate and tax rate, Jaime?
Yes. On tax rate, first of all, the overall tax rate is exactly the same as it's been over the last two quarters. It stands at 27.2%. What we've had this quarter are some changes between Spain Banking activities and the real estate portfolio, but overall they are more or less the same in Spain. And then as you know, the corporate center is always used to adjust the group global tax rate.
And as a result of the In penetration adjustment in Argentina, we've had also to adjust the relative rates in South America, mainly because of Argentina And the Corporate Center. That's those are the only changes.
Thank you, Marta, for your questions. Next question, please.
Our next question today is from Ignacio Larguis calling from Deutsche Bank. Ignacio, please go ahead.
Hi, good morning. I just have one question. If you could just elaborate a bit on what will be your TLTRO exit strategy? So what has been the take up? How do you think you're planning to replace that, particularly looking to the potential impact on the net stable funding ratios?
Thanks.
Okay. Our take up, it's €23,700,000,000 We currently have a very high cash position that together with a high quality liquid asset portfolio that we've already had I have prepared in order to meet this payment will more or less allow us to fully pay that amount. It is true that we're seeing already discussions been happening over the last 2 months on potential TLTRO extension, which is clearly something that we do not completely rule out. As you say, 12 months before maturity, the NSFR will be affected. We have a very high net stable funding ratio, well above regulatory requirements.
So that will not be a significant impact on us. But we will be forced to issue longer term during 2019. But that is completely consistent With the issuing the funding plan that we have in order to meet our annual requirement. So nothing that is going to change, as I've always said, structurally, the funding structure of the bank.
Thank you, Nacho. Next question, please.
Our Our next question is from Ignacio Cerezo calling from UBS. Ignacio, your line is now open.
Yes. Hi, good morning. Just a couple of things for me. One is on Turkey. If you can give us your best approximation of when the large tickets and the macro adjustments are going to start fading In terms of provisions and then the second one, I understand the hyperinflation adjustment has also had a retroactive impact line by line in Argentina.
So if you can give us Color in terms of the new run rate actually of profits in the country. Thank you.
So hyperinflation, yes, there is a restatement of all the lines, But with a zero effect. That restatement has a zero effect on the bottom line. It's really taking all the past pesos and bringing them forward to today's pesos. So it sort of inflates the local account in pesos to reflect that. But then when we bring that to the group, it has 2 negative effects, Like we explained, which are recorded then in the other income line And basically mean that a lot of the profits that we make in Argentina are directly taken into the book equity without going through the P and L.
So we do increase our book, but we don't call it a P and L because it's a reflection of the higher inflation. I I think that's the sense in which you should think about the hyperinflation. And that diminishes our profits in Argentina in a very significant way As we consider most of the profits really just inflation adjustment. Jaime?
Yes, completely. At the end of the process, The perinflation adjustment is neutral in CET1 ratios. It's more or less neutral in terms of book value. And what we've reduced is the monetary illusion in the P and L. So going forward, it is true that the real contribution In P and L terms of Argentina will be greatly diminished.
But on the other hand, the depreciation of the currency will not affect negatively Our tangible book value. In the case of Turkey, Clearly, IFRS 9 front loads negative impacts. We will probably see Very high cost of risks for the whole 2019. That's probably our expectation today. As the macro keeps deteriorating, that is something that will be recognized faster It's a lot more complicated on how large star tickets will behave.
But again, I I think that 2018 2019 will be too high cost of risk years in Turkey.
Thank you, Nacho. Next question please.
Our next question is from Mario Ripero from Fidentis. Mario, please go ahead.
Hello, good morning. My first question is on some indications of the risk In the euro area ALCO portfolio, maybe you can give us the duration of the book, also the duration of the unhedged Fair value portion and perhaps the exposure to Italy. And then my second question is, if you can disclose the amount of legal provisions In Spain, how much is mortgage floors and how much is everything else? Thank you.
Okay. On the structure of the ALCO portfolio. The overall size of the ALCO book in Spain remains quite stable versus Q2, around €28,500,000,000 And the duration is very
Concept. And the reason why the clients have been paying this and not the bank has been because the regulation established so. So this is not the fact that the customers paid is not a result of contractual clause with them. It's a result of a regulation, Regulation that has been in place for more than 23 years. And before that, The situation was actually the same actually since 1980, at least, when the prior law Everywhere else is the case in the U.
K, in France, in Italy, in Portugal, Even in some regions in Spain that have their own fiscal rules, it's so as well. So we don't know what's going to happen November 5, but you should all be very clear that we have been applying a regulation. And therefore, we should not be penalized by applying a regulation. Going forward, there might be a change in the rule, And we will, of course, accept that and continue our business with changed rules on who pays the tax. No problem.
But looking back, There is absolutely no way that we can be penalized for applying a regulation. That's why we have no provisions for that, and we have no likelihood in our mind that we should be liable for anything other than what happens going forward.
Thank you, Mario. Next question please.
Our next question is from Britta Schmidt calling from Autonomous Research. Britta, please go ahead.
Yes. Hi, there. I've got two questions, please. Just going back to Mexico, looking at the constant euro The loans were flat in local currency Q on Q. Maybe you can break that down a little bit in terms of What was seasonality?
What were the FX impacts? And also explain why despite this, we saw the net interest income increase 5% Q on Q. Maybe you can go A little bit into the drivers here. And then on Spain, a question on NII. The loan yield has been flat for Over the last kind of 6 quarters, more or less, obviously, we've had negative revival resets play a role.
But can you give us an idea as to what the accretion to the loan yield is from writing more consumer and very small business customer loans on a quarterly basis, let's say. And maybe you can also give us an indication as to what you expect versus your prior guidance of the second half being similar to the first half in terms of NII?
Okay. I didn't understand you well, Britta, but I'll try to do my best on the first question. I think you were asking on quarter on quarter P and L evolution in Bancomer. Okay. If that was Oh, loans.
Yes, yes. Okay. The reason why loans. Our FX affects the growth rate. Okay, okay, okay.
Perfect. The loans in the quarter were affected by the decrease in the wholesale portfolio, As I've been mentioning now for quite some time on the call, they went down by 3.6%. Clearly, this was affected by the fact that the peso behaved very well over the course of the quarter, appreciating 5%. And that's a portfolio which is mainly foreign currency denominated. Excluding the FX impact, quarter on quarter growth Provisioning requirements are flat, €337,000,000 And the biggest difference, it's in the provisions and other results line in which we have a negative this quarter And was a positive in Q2 because we sold some real estate assets at a very significant profit.
And that's what I think explains the P and L in Mancoma.
Yes. There was another question on Spain NII. But before you answer that, just to complement, NII was also supported this quarter By contribution from Global Markets and from the ALCO portfolio as well, which behaved well. So that supported the NII growth beyond the growth in loans that Jaime just commented. And there was another question from Rita Jaime on the NII dynamics.
I didn't Follow very well because it was quite a detailed question.
Yes. I think I already tried to answer that. Clearly, loan growth is not easy to achieve. I don't think we'll be able to grow our loan portfolio in 2018. It will start Growing in 2019, customer spreads have been flat for 2 years, almost 2 years.
Hopefully, higher arrival rates, especially in the second half of next year, will allow the positive sensitivity to start to materialize in our NII line. But clearly NII in 2019 will still be quite challenging especially on the first half.
Thank you, Britta. I think there is one last question.
Our final question today comes from Carlos Peixoto calling from Caxiobank. Carlos, please go ahead.
Hello, good morning. First of all, I would just apologize if I might be repeating any question because I was cut off for a moment. But I was wondering if you could give us some color On how do you see cost of risk in Mexico for the full year? And also in Spain, on NII, your previous guidance or last quarter, You're giving us guidance that the second half will be more or less at the same levels as the first half, which basically meant Something in the areas of EUR 3,267,000,000 in the second half. Do you maintain sorry, in the full year, Do you maintain that guidance for the full year?
Or does it seem a bit difficult to reach at this point? Thank
you. Okay. As I think we said over the presentation, cost of risk in Banco Mer keeps surprising on the positive side. We are guiding down again this quarter, And we now expect cost of risk at the end of the year to be around 300 basis points. Cost of risk as of September, it's a little over 280 basis points.
At the beginning of the year, we're expecting something around $350,000,000 The very good behavior of the real retail portfolios And the credit policy decisions that Carlos has mentioned before has clearly benefit the franchise significantly. And as you say, Regarding NII in Spain, the guidance remains the same. 2nd half NII will more or less be the same as in the first half.
Thank you, Carlos. I think there is one last question.
Our last question today is from Francisco Rick Well calling from Alantra. Francisco, please go ahead.
Yes, thank you. Just a follow-up on the mortgage litigation issue. If you can please Update your exposure to IRPH mortgages and multicurrency mortgages. Thank you.
Okay. Our current exposure to IRPH mortgages are €4,000,000,000 it is €4,000,000,000 On our current exposure to multi currency loans, mainly in Japanese and in Swiss francs, It's €450,000,000
Okay. Thank you. Thank you, Paco. Thank you all for joining this call. As you know, the entire IR team will remain available to answer any further questions you may have.
Thank you very much and have a good day.
Thank you. Bye bye. Thank you.