Good morning, and welcome to Vanquinter Third Quarter 2021 Earnings Call. Our CFO, Jacobo Diaz, will now explain.
Good morning, and welcome to Vanquinta's earnings presentation for the Q3 of 2021. The related financial statements were posted on the website of the CNMV a few minutes ago before market opens. All documents can also be found at this time on our corporate website. Let me start, as usual, emphasizing the main achievements that we have obtained during the 1st 9 months of 2021, with a continued strong commercial performance driving volume growth in most balance sheet and off balance sheet items. That brings consistent growth in our pre provisioning profit.
We consider this a remarkable performance in a continued challenging environment with interest rates at the bottom and an incipient recovery post COVID that still needs to push more positively in all our business and geographies. These are more specifically some of the achievements. We've been able to maintain positive growth in our loan portfolio Despite the contraction of the corporate loan book in the quarter, thanks to a continued strong mortgage production now in all geographies. Also, retail deposits continue to post growth, thanks to the strong customer acquisition in the year and remarkably, a stunning growth rate in our assets under management that confirms a powerful recovery pattern since the launch of 2020. The resilience shown in our net interest income and increased growth rate of our fee income, Thanks to a recovered customer activity and some one off resulted in an increase of our operating income by close to 10%, well above our guidance the beginning of the year.
As I just mentioned, an extraordinary success fee income from an investment banking deal of €45,000,000 has been booked in the quarter. And at the same time, for the same amount, a front loaded provision for future litigation expenses has control despite the increase in personnel expenses due to the half year variable pay, and this has allowed pre provision profit of the group to grow strongly by 15% year on year. Finally, our asset quality continued to show stable NPLs year to date with an increased coverage in provision after last year's the uncertainties and our solvency measured in Z1 fully reloaded ratio maintains comfortable levels above 12%. If we start with the main summary, this is the comparison of our key financial indicators as of September 21, over the 1st 9 months of 2020 2019, the last pre COVID year, as we've shown in previous presentation. Group's total loan book grew 4% to €66,000,000,000 thanks to the strong mortgage production everywhere that more than offset the reduction close to EUR 1,000,000,000 in the large corporate loan book in the quarter.
At the same time, Consumer Finance has started to recover in all geographies. Loan growth from September 2019 is 11% high. Gross operating income at EUR 1423,000,000 grew by 10% with respect to last year and by 15% from 2019, showing growing resilience in incomes coming from our recurring business. Despite some extraordinary cost increase from commercial bonuses, we firmly believe operating costs remain under control, making pre provisioning profit trend to improve growth rate to 15% over 202023% since 2019. NPL ratio remained very low, in line with all our asset quality indicators at 2.40%.
It dropped by 11 basis points from a year ago and with a small increase since June in consumer finance. Coverage ratio after the Excluding the provisions of last year remains at a comfortable 63%. Group's net profit reached a record of €1251,000,000 Like for like, that is excluding the LDA transaction, net profit would be 3.55 EUR 1,000,000 growing by 61 from a year ago and minus 20% below of 2019 with full Linea Directa contribution and a €57,000,000 extraordinary badwill from the Evobanca acquisition. Excluding this badwill, it will be a 3% increase. Our CET1 fully loaded ratio remained almost unchanged at 12.3% despite the 50% dividend payout.
It comfortably 28 basis points above last year and well above our long term guidance of 11.5. Our return on equity adjusted by the extraordinary fee income reflects the improved performance of the year and stands at 9.4%, 2 32 basis points ahead of last year and again, above cost of capital. We now move into our usual agenda with the 1st 9 month results and tariff management and, as usual, a review of the different business in the period. So moving to our income statement. The group's income statement continued to show strong growth in all revenue lines.
Net interest income maintained its growth the trend despite the quarter negative seasonality in corporate business. It is up by 3% from September 2020. The positive market environment and an increased commercial activity supports our fee income. It grew, excluding the one off of extraordinary fees from Investment Banking, by close to 11% with respect to the previous year in a major way, thanks to the growth in assets under management in the quarter and through the year favorably by 0 interest rate environment. Other operating income and expenses of €25,000,000 were 14,000,000 higher than a year ago due to good trading income year to date.
Total gross operating income at EUR 423,000,000 went up by almost 10% from 2020. The diversification of this income remained very high, with increased contribution from Portugal, Evo and Avan Money, as we will see later. Group operating costs went up below income growth as we have been anticipating in all our previous presentation. We believe they will remain under control both in Spain and The group's total cost grew by 3.8% with respect to September 2020, below the rate as of June 21. General and administrative expenses remain controlled through the year with a minimal increase.
This positive income and cost performance brings pre provision profit to increased by 15% from September 2020, what we think is a remarkable growth and above our best plan for the year. Loan loans and other provisions went down 34% from 2020 due to the EUR 243,000,000 extraordinary provisions booked in 2020. Without this effect, the provision for NPL increased in line with our review forecast of cost of risk for the year. Also, other provisions grew due to the front loaded of litigation expense in the quarter. After taxes, group net profit, excluding Linea Directa the spin off were €355,000,000 or 61,000,000 up from September last year and 20% down from 2019 with the full contribution of Vina Directa and the €57,000,000 badwill from the Evo acquisition.
Adding this, total net profit reached an historic €1251,000,000. We think this is a very positive 9 months. We continue to feel optimistic about 2021 full year. On the quarterly comparison, we can see resilience here on net interest income, flat year on year and with a seasonal reduction in the quarter and a very positive growth pattern in fee income, up 55% 32% in respect to last year and previous quarter, With operating costs increasing only by 2%, 3%, pre provisioning profit showed increases of 31% 22% in respect to the same quarter last year and the previous one. After credit risk and other provision and taxes, net income ex Lina Directa spinoff has EUR110,000,000, 15% up respect to previous quarter and almost flat from the Q3 of 2020.
The group's loan book in the following slide grew by 4.3% from a year ago, bringing over €2,700,000,000 in net new loans to reach €66,000,000,000 Growth in the period comes mostly from our mortgage business that now includes both Banquinter and Evobanca in Spain, Portugal and Ireland. At the same time, as unexpected, loan demand in corporates were negative, impacted by the end of the government programs for corporate an excess liquidity elsewhere that leads some of the large corporates to reduce their credit outstanding during the quarter. After the 2nd quarter jump in lending from working capital activity in corporates, in this quarter, the the reduction is only concentrated in large corporates and in short term lines of credit. On the other hand, consumer loan book grew by 5%, mainly in personal loans to existing customers of the bank. In Spain, despite lending growth slowing down for the pattern in previous year, It continued to grow by 2.6% year on year, still gaining market share since the sector contracts by more than 1% with latest data of August.
In Portugal, lending is up by 5% from a year ago to reach €6,800,000,000 and slightly below our business Evo was also able to grow their loan book by €600,000,000 year on year, thanks to a strong mortgage production that we will review later. Retail deposits continued to perform strongly in all geographies at 10.4% year on year and €6,500,000,000 new to €69,000,000,000 More important, close to 75% of this growth comes from new customers of the bank. Deposits were up by 9.7% in Spain as of August, while the market only grew by 4.6%. In Portugal, deposits continued to grow strongly in the year. They have grown a remarkable 19% year on year to reach EUR 5,600,000,000.
Moving into NII. Net interest income continued to show the positive trend as we have anticipated. It grew by 3% over the same period a year ago an 11% from the same period in 2019 in the last pre COVID year and with Linea Directa. Evobanca stand alone The contribution of Evo and Avan money to our net interest income stands at almost €20,000,000 for Evo and €40,000,000 for Abalmoney versus 19% and 38% the same period last year. In Portugal, net interest income also grew by 4% with respect to 2020.
The growth trend in Portugal in net interest income is a consequence of the yearly loan book growth in all our books, mortgage, corporate and consumer finance. Group's customer margin decreased by 7 basis points from previous quarter when extraordinary contribution from the Ecologues catch up €7,000,000 Like for like, that is excluding this effect, the reduction in the quarter is only 3 basis points from the previous one. The stable trend on credit yields has been maintained despite this extraordinary and the reduction of the loan book in the quarter. At the same time, increasing our deposits at the ECB increased the wholesale cost. Customer cost of deposit remained flat at 3 basis points.
After 3 quarters, with the cost of deposits at all time lows, we believe maintaining stable credit yields is key to customer margin resilience going forward. We continue to suffer from a negative repricing of the mortgage loan book. However, we expect total loan book to recover its growth pattern. It is also to be mentioned the negative impact of 2,500,000 in the quarter from the cost of the last Tier 2 issue in June 'twenty one. Moving into the ALCO portfolio.
It remained without change, its size decreased by €200,000,000 to €8,400,000,000 Its proportion between portfolio type is 75% under amortized cost with no impact in capital ratio and 25% at fair value. Spanish government bonds continue to represent 56% of total and 23% are other sovereigns, mainly Italy and Portugal. The portfolio's Metric improved in the quarter to average maturity of 8.9 years with an average duration of 4 0.5 years and an average yield of 1.6%. After another quarter, unrealized gains of the portfolio amount to approximately 5 EUR 40,000,000, only 20% of them are the fair value portfolio with a very small impact in capital. Over the next few years, maturity of the portfolio are minimal except for 2023, where EUR 1,000,000,000 will amortize or renew.
Fee income continued to perform very well and ahead of our guidance of the year. In the quarter, fees were EUR 43,000,000 over the previous quarter due to an extraordinary success fee on the sale of 1 of our venture capital funds Promoted by our investment banking team of a similar amount. Excluding this, fees maintained their growth rate in a negative seasonal quarter, Thanks to our commercial activity during the summer. They grew by 23% over the same period last year and 32 from the previous quarter. This quarter, all recurrent fees from our customer business showed growth, including payment and collections, recovering from previous slowdown in activity.
At the same time, assets under management continued to enjoy another very good quarter and is reflected in its strong the performance. The largest contributor to our fees with €143,000,000 is asset management fees, up 26% year on year. An increased commercial activity brings this figure to record levels at the end of the quarter as well as fees. The second contributor to fees is Payments and collections from corporates and individuals. Performance has been clearly recovering after the impact of the slowdown in an economic activity.
And since this environment started to change in the second half of this year, this has made fees to grow by 12% from September last year. 3rd is fees from bond and equity trading together with customer fees growing 22% to €84,000,000 in the period. And other relevant fees like FX business with customer went up 6%, back on the back of the strong international trading and third party mutual the risk related transactions fees and life insurance and pension fund sales bring their fees up 12%. Finally, fees from investment banking and other fees are up 15% and 43%, respectively. In other operating income and expenses, this.
Main components are €79,000,000 of trading income plus dividends. That compares very well from last year due to a good trading activity, Plus €9,000,000 more from Linea Directa dividends, the last one announced in the 3rd quarter a 14% increase in regulatory charges our EUR 7,000,000 more, together with other small miscellaneous impacts such lower operating fees from Icolon's production in 2020, Weighted on the other income expenses, negative €9,000,000 difference in the period. Moving to next slide. The gross operating income for the period stood at EUR1423 million, an increase of 10% from a year ago and more relevant to us, 15% from the same quarter in pre COVID 2019. Quarterly comparison is less relevant.
It went up by 13% from the previous the Q1 due to the regulatory charges booked last quarter, and extraordinary fee income in this one. In Portugal, gross operating income grew by 12% Interyear and quarterly grew by 4.7% from last quarter and 5.9% from the same quarter of last year, following again a very positive trend of recurring business in our Portuguese franchise. Moving into costs. Group operating costs in the period totaled €624,000,000 They are up 4% from previous year and only €5,000,000 up or 2% more from the 2nd quarter. Operating costs from Evo shows a good performance that is expected to continue.
They were reduced to €40,000,000 down 7% from a year ago and 13% down from the Q2 last year. In Portugal, costs are EUR 3,000,000 up or 5% over the last year with the last year 1st 9 months, While income continued to grow by 12%. That means that the efficiency stands at 56%, again showing a strong performance and a continued positive trend. Group personnel expenses are up 6.6% over the same period last year due to the one off increase of commercial staff variable pay of the strong first half twenty twenty one paid in August. General and administrative expenses remain under control, almost flat from last year.
Efficiency continued to improve in the group. And 360 points from 2 years ago. We plan to keep the long term cost to income below 43%. To do so, we need to improve efficiency in our different new businesses and geographies. In Portugal, now efficiency stands at 56% from 60% a year ago.
And in Ireland, our money efficiency is at 59%, coming from much larger figures. And finally, Evo is improving, but still in negative efficiency. Our efficient operations in Spain and stand alone runs at 39.9 efficiency ratio. And excluding the extraordinary income, it will be 41.2%. And at the group level, it would be 45.3%, improving figures from last year once again.
With all this, quarterly pre provisioning profit showed almost €800,000,000 standing 15% increase from 2020 a more relevant more than 23% ahead of 2019 prior to COVID-nineteen crisis with a full contribution on Linea Directa. Moving into cost of risk. The recurring cost of risk in the quarter finished €64,000,000 or 35 basis points of total credit exposure, similar to that of the Q1 and probably showing a peak in the Q2 from the upward trend started in the Q3 2020. However, Total cost of risk, including the 2020 extraordinary provision, remained well below last year. The increase in cost of risk We expect this good behavior to remain stable in the last quarter of the year.
It is still early to anticipate what will be the impact in cost of risk when a pickup in consumption should start, but we are somehow optimistic after almost all the mortgage and consumption or consumer finance Moratorium has matured, and 38% of the equal liquidity lines for corporate and SMEs has been extended as well as the government guarantees protecting them. In Portugal, the use of moratoriums have been larger than in Spain, where it is up 15% of the total portfolio or €1,000,000,000 And maturity had occurred at September 30 and includes SME lending as well as mortgages. We will see this month how it's evolving, but we are optimistic based on the quality of our customers. As we see things today, after a good year so far, we expect our cost of risk to be at the low end of our guidance for the full year, that is around 40 basis points. On the other provisions, mainly for future litigation expenses, a continued downward trend can be expected in the range of 10%, 20% reduction every year.
This is part for the extraordinary front loaded that occurred this quarter, thanks to the extraordinary fee income book in the same quarter. This front loaded, together with a downward trend in this provisioning, will produce a quite positive effect in the run rate of 2022. After provisions of the LDA spin off result, group net income stands at €1251,000,000 a new record figure. Without the extraordinary profit from Lidar Directa transaction net income would be €335,000,000 EUR 355,000,000 still up 1.6x from EUR 2020,000,000 a year ago when we took the decision of a front loading €244,000,000 of extraordinary provisions related to the macroeconomic scenarios And still below the 2019 1st 9 months. Bear in mind that net income in 2019 includes €57,000,000 extraordinary badwill Coming from the transaction of Evo, without this, net income is down only by 8% since the last pre COVID year.
Moving into return on equity. Return on equity stands at 9,400,000 Sorry, 9.4 percent with a 4 month contribution of Linea Directa excluding the extraordinary from the spin off. Should we include the full LDA contribution, return on equity should be above 29%. After closing 9 months, we expect by year end 2021 to stand return on equity around 9.4%, 9 point in line with our target to return to double digit by 2023. Excluding intangibles, this figure will be close to 10.
I will now go over our credit risk, liquidity and solvency management section. So moving into NPLs. Nonperforming loans continue their stable trend with total NPLs at EUR 1,770,000,000, Up by €33,000,000 from June 21, mainly due to consumer finance and only €6,000,000 up from a year ago with a bigger loan book. NPLs grew by 82,000,000 in the year. Of this growth, CHF 70 from our consumer finance business in Spain.
The rest of the business in Spain, like mortgages, corporate, SMEs and real estate developers, came only with around €20,000,000 overall. Portugal NPLs came down €13,000,000 in the year. Once more, the growth in consumer finance NPLs was somehow offset by reduction in other businesses segments, corporates, mortgages and affluent banking. The group's NPL ratio continues bottoming at 2.40% and 11 basis points lower from a year ago. It decreases 3 basis points from last December, mainly due to some growth in total risk exposure.
In Spain, NPLs Stands at 2.53, which is 4 basis points below last year and only 11 basis points up from December. This ratio continues to be way down from the sector average at 4.39%. In Portugal, the NPL ratio to 1.84, 42 basis points down from a year ago. As shown in the chart on the right, the group's NPL ratio in Spain went slightly up On 2.32 percent for households, including consumer finance, at 7.9% and also 5 basis points. Total provision for nonperforming loans after the extra provisioning built in 2020 stands at €1,200,000,000 up 1,000,000 from last year and 6.5% since December.
All this had a relevant impact on our provisions coverage, which now extend at 63%. The group's next slide. The group's foreclosed assets portfolio is 27% smaller than a year ago. It decreased by 68 €1,000,000 from the previous year. This small portfolio now amounts to €184,000,000 Total sales in the period amounted to €67,000,000 or 30 percent of the stock at the beginning of the year, we sell our repossessed assets with an average discount sale at 38%, actually below their provision coverage at 41%.
The coverage stands at 52%, 11% increase and clearly above the average discounts. Moving to capital. Our CET1 ratio finished the quarter flat at 12.25%, an increase of 5 basis points from last quarter and only 5 basis points below December 20. Since then, our return on earnings contributed with a total increase of 51 basis points, taking into consideration the Linea Directa spin off. Capital consumption of risk weighted assets from the business has been 29 basis points negative.
Valuation adjustments also to bring 8 basis points negative due to market volatility in our portfolio. The IRB deficit and implementation of new regulatory parameters took 17 basis points negative across the year. And finally, the insurance participation and other small items decreased by 1 basis point. With all this, total capital ratio went to 15.7 percent at a comfortable level of the minimum regulatory requirement. Leverage ratio stands at 5.2.
Finally, the 22.2% ratio of risk weighted assets for MREL remain well ahead on the requirement for 2022. This very comfortable situation has been reflected in the 2021 EBA stress test results, where once again Banquinta ranked 3rd among European banks in capital depletion for 2023 and first within our domestic peers. Moving into liquidity. Our funding gap continues to be negative since 2020, thus from €700,000,000 a year ago to a negative of €3,900,000,000 commercial GAAP. The negative GAAP in Spain more than offset the one coming from Portugal and Ireland having higher lending the balance sheet.
As a result, loan to deposit ratio at record levels of 94% from 101% per year ago. As of the telcos, just a reminder of our total take of €14,200,000,000 that we account the interest earned at 3 year average of 85 basis points approximately rather than a full rate of 1%, and we maintain a total confidence of meeting the growth requirement for the period. Let's review the performance of our business lines. The corporate and SME loan book in Spain and Portugal decreased by 11 for banks in Spain to shrink against this year after an exceptional 2020 with a +100 billion of ECO facilities. It will also produce increased market share for Banquinter in the corporate world.
Despite the quarterly reduction like every year to €27,600,000,000 our corporate loan book have increased market share to 5.5% from 5.4% a year ago and 5.2% 2 years ago. The Spain owned book evolution has been mainly impacted by the reduction of 1,600,000,000 in large corporate due to their the strong liquidity that has not been able to offset by the small growth in mid corporates and SMEs. In Portugal, where we continue to grow our market share in corporate lending year after year. It is now over 2%. This trend has been maintained since the start of our corporate loan book in 2016 from less than €400,000,000 to reach over €2,000,000,000 on September 21.
Now as in every quarter, a quick review of the 3 most relevant sources the corporate segment. International Trade and Supply Chain Finance continued to grow its activity, mainly in short term working capital financing. For particularly in the Q3, bringing their operating income up 14% to €91,000,000 Finally, Investment Banking has closed another quarter with a very good performance in revenues coming from corporate products. Their corporate operating income year to date is growing 18%. Moving into the next slide, the ECO funds for corporate and SME as of September, outstanding amount of EUR 6,400,000,000 from a total committed of 8,700,000.
From this total, 38% have been asking for extension, either the maturity or the grace period. On moratoriums for mortgages and consumer finance, they have almost come to an end, and only EUR 47,000,000 are outstanding as of September. Remember that they did represent almost 2% of the loan book. Since January 21, we have signed EUR 100 and EUR 16,000,000 of numeratoriums related to Torence and Transportation Sector also outstanding. NPLs on the amortized ones have been close where moratoriums were more relevant and include the corporate loans as well.
They represent approximately 15% of total portfolio as of October 8. Outstanding were €70,000,000 in mortgage moratorium and €175,000,000 in corporate guarantees. All of them have matured in September, Wealth Management customer assets continued to grow due to strong commercial activity, together with an increased customer acquisition. Adding both businesses, Private and Personal Banking, assets under management grew by 21% to EUR 63,300,000,000. The strong commercial activity measured by net new money in the period shows a total €4,200,000,000 increase, this split between EUR 2,200,000,000 in private banking and EUR 2,000,000,000 in personal banking.
Moving into our activity in retail banking, a very strong, another quarter. Customer acquisition in Spain continued to grow by over 40% from that a year ago. Destination in the period of 3,800,000,000 Represent an increase of 1.7 times for the 1st 9 months of 2020 and even more of 1 point 2x sorry, the production was €4,300,000,000 Sorry for the mistake. Vankilter holds a bigger market share in the front that in the back book, despite of a better quality of loans, where 68% of mortgages were fixed rate and their average Load to value is at 63%. In Spain, our market share in new mortgages during the last 12 months, including Banquinter and Evo, It's at 9.3%.
Thus our total mortgage book keep growing and reached 30.6 EUR 1,000,000,000, an increase of EUR 8,400,000,000 while the rest of the market only grew by EUR 0.7 billion. Our Asset Management business to improve its growth trend in all these 3 categories: mutual funds, 25 percent pension funds, 16% and patrimonial services, 20% EUR 7,400,000,000 in new off balance sheet managed funds. In mutual funds, net new money in the period has been very strong and together with the positive market effect brings the total to €29,200,000,000 25 percent up to a new record. All this commercial activity in Spain is fueled by strong customer acquisition, growing over 30% year on year and 8% in active clients. Let's move to Portuguese operation.
Portugal have grown their book by 5% to €6,800,000,000 and retail funds grew at €5,600,000,000 or 19%, up from a year ago. Growth in loan book was balanced between corporate banking, up 5% and retail banking also up 5%. Like in Spain, off balance sheet, the strong commercial strong performance reached €4,200,000,000 in a stunning 20% increase from last year. As of the income statement, operating income grew by 12% with very little contribution from extraordinary recoveries. Costs show a contained growth of 5% in line with cost control plans for improving efficiency now at 56% from 60% last year.
All of the above brings PPP up by a strong 21% over September 2020. Finally, after €10,000,000 of a more normalized loan losses provision, including a positive impact of €3,300,000 from extraordinary recoveries, Portugal profit before taxes reached €40,000,000 a remarkable 24% increase. Moving to the consumer finance business. Beka Consumer Finance in Spain, Portugal and Ireland, including the mortgage production, reached a total loan book of 3,300,000,000 from last December, 15% up from a year ago and helped by the mortgage origination in Ireland and despite the contraction in credit card outstanding in Spain. The breakdown of the total loan book by geography is now EUR 772,000,000 coming from Ireland Abant Money, growing 44% from last year And almost 300,000,000 coming from Portugal, growing 16%.
The rest is Spain, where the loan book grew by 5%, mainly in personal loans despite a reduction of EUR 83,000,000 in revolving credit cards. The breakdown of the loan book by product this on the right hand pie. Personal loans represent 55% of total, growing by 13%. Transactor credit cards, mainly in Spain and with Banquinta clients represent 24% or €800,000,000 with a 9% growth. What we call open market revolving credit cards is now only 15% of the total book and less than EUR 500,000,000 in outstanding after a decrease of 16% in the year.
Also, the new home mortgages in Ireland reached €300,000,000 and represent now 9% of loan total book. Total new credit origination in 12 months, mainly in personal loans in Spain and Ares Mortgage, represent close to EUR 1,000,000,000 And total number of customers grew by 4%. In Spain, credit card business represent less than 40% of the total EUR 2,200,000,000 total loan book and 53% of them are revolving loans. The rest of the cards are payable at the end of the month with a much better risk profile. NPL ratio stands at 7.5 percent from 8.2% a year ago or EUR 247,000,000 in LPS.
We continue to see good opportunities in this profitable business, where we feel comfortable with a degree of control of asset quality indicators and with a very high efficiency of the business, cost to income ratios below 20%. Let's move to Ireland. On the new name of Avan Mone, this activity has been able to increase the loan book by 237,000,000 year on year and at the same time, maintaining very good asset quality with NPLs below 0.5% and cost of risk 1.4% with coverage provision of 400%. We aim to reach the 1st €1,000,000,000 in mortgage disburse by early 2022 and to keep growing as the market allows us to do from 3% actual market share coming from 0 to whatever is possible in the future. Moving into Evo.
During the 1st months, Evo has been in a positive development of its new business plan, with some expected slowdown in credit card business. But with all the focus on recurring increase in mortgage underwriting that has been keeping up their commercial activities strong through that period. New mortgages granted from December were a record of €546,000,000 This is 2.3 the origination of last year, making the loan book to jump to €1,700,000,000 Subsequently, net interest margin Customer activity continue growing by 20% year on year. Personal loans and credit cards came down €55,000,000 and today represent only 3% of the total book. As for liabilities, Ebo has EUR 3,600,000,000 in retail deposit, up by 10% from last year and EUR 2 82,000,000 in up balance sheet funds, up 12 As for asset quality, NPLs remains at 1% and are only €17,000,000 with a coverage of 60%, and the cost of risk stands only 13 basis points of €1,600,000 year on year.
Okay. Before our summary. Let me highlight or resume some ESG strategic plan or figures that we want to share with you. Here, we share some of the actions and targets included in the plan that has been recently approved by our Board of the Arendtos. Okay.
And then let's go into the summary. I think we have performed, again, a strong commercial quarter. Commercial activity reflected in volume growth with increased pre provisioning profit. In accordance with the complex environment, we continue with our costs under control to be able to support PPP. We continue to manage to increase coverage for potential risk arising from any future credit quality deterioration, mainly in the Stage 2 migration from consumers and smallmid Customers corporates and a strong solvency and liquidity levels.
We Expect growth in all geographies: Portugal, in all commercial, corporate and consumer loans. In Ireland, we do expect Increasing production in mortgages and in personal loans and in credit cards as well as the recovery of the country and the opening of the economy. Evobanko, we expect growth in mortgage production and personal loans. And for Spain, we expect corporate book to recover from the impact of ECO financing in this Q4 and with an increased activity in corporate demand during 2022 As well as continued loan growth in mortgage, of course, and in other non mortgage retail lending as consumer finance. Thus, our guidance for the end of the year continues to be net interest income low single digit growth despite the difficult environment.
The increase in activity and stable markets will bring fee income growth above double digit level, Excluding this €45,000,000 one off, the increase in activity The operating income in growth mid single digit, improving 2020 by mid single digit. Group cost will end up flattish once again, meaning growth below income growth or slightly up from 0 due to better than expected performance in income. And we expect pre provision profit to remain resilient and improve the growth of 2020. And finally, cost of risk. As I did mention before, after a very benign first part of the year and with a comfortable loan book going forward, we will end the year at the very low end of the previous range in the guidance that is around 40 basis points.
And I think that's it for the presentation. We got all the time required for your questions.
Thank you, Jacobo. As usual, we had a few questions already, and we will try to group them through the different topics in the interest of time. Probably, you just have a recap on the guidance through the different lines of the P and L. Troy, you just can highlight what if any change from previous quarter for the guidance on the different lines. So the what we have changed
in the guidance is we have increased our guidance in fees from a high single digit into a double digit. And we have also be a little bit more In the cost of risk guidance, we did provide a guidance of a range of 40 to 50 basis points. And what we are seeing today is that that we will be at the lower range that is at more or less 40 basis points. Definitely, we are proceeding that the behavior of the cost of risk is better than expected basically.
Very clear. We had some questions also regarding our loan growth. You can probably add some color to the what happened in the last quarter and also your expectations for the next quarter and next year, if any.
Okay. Yes. Loan growth, I mean, year on year, the growth has been very positive in all geographies and in all best the businesses. So as I did mention in the session, we grew EUR 2,700,000,000 in the year, which is 4.3%, and all the geographies have grown quite strongly. Specifically, during this quarter, loan growth has been a reduction of 1%, more or less, in the book.
This is only concentrated in the corporate banking loan book in Spain. Portugal has increased in the quarter. Ireland has increased in the the quarter. Evobanko has increased in the quarter. Consumer Finance businesses have increased in the quarter as well.
Of course, the mortgage book has increased in the quarter. So basically, there is a focus on the corporate loan book. And the reason is, Of course, seasonality. Every year, we have a negative seasonality this quarter, and this year has not been an exception. That in addition, we believe that the excess liquidity that our deposits in the overall balance of the banks have implied that some very large corporations have decided to reduce the level of limits that they need, and this is the only reason.
Just to finish off because we have of additional questions about the guidance we just mentioned in the previous question. Can you just confirm the guidance for fees and cost of risk?
Okay. I will repeat. What I did mention is that we did change the guidance in fees. It was previously at 1 single digit growth and now is a double digit growth, Okay. So we were somewhere between 5% to 9% increase in our guidance before, And now we believe we are more close to the 10% increase.
And the second thing we've changed is the cost of risk guidance. We are under a range of 40 to 50 basis points guidance. And what we did mention was that Our guidance now is focused on the lower range of this range, which is 40 basis points. This is our guidance. I hope this is clear now.
Okay. Moving on to the NII now and the P and L. Can you just comment on the performance in
the last quarter? Yes. During the last quarter, we had, I would say a couple of issues. The first one, I would say, as I did mention, we have an issue of 2 bonds in late June. So in this quarter, we have a new cost that we didn't have in the past, and this was around EUR 2,500,000.
Bear in mind that in the second quarter Of this year, we recorded an extraordinary increase of around €7,000,000 due to the ECO extensions. Just remember that we have an eco extension in the second half of the year in the second quarter of the year, And that implied an increase of EUR 7,000,000 of upfront income as well as we have upfront fees paid to the Ico, okay? So this is, in terms of comparison, another issue. This and I did mention, there's a Tier 2 issue, which is new. Then we have the repricing of the Euribor.
That, again, has been negative. In comparison to last year, it's around €8,000,000 year on year, and quarter on quarter is an additional €3,000,000 more or less. Of course, there is a reprision of the LIBOR as well for all positions in FX. And as well as I did mention the reduction of the volumes the corporate loan book. That means that the mix has changed.
And then we have not only have less income, but also we have more cost because we have more liquidity at the ECB account, and that means an extraordinary cost. So I think these are the main three topics that might be waiting on the negative side. But I want also to mention that there are positive things. We have more portfolio of mortgages at fixed rate. We have, of course, much more volume.
As you've seen, we've been Producing originating €4,300,000,000 in the year versus €2,500,000,000 in the year and also that we have increase in pricing of the ECO facilities since last quarter. So the overall is a negative effect in this quarter, But year on year is a positive. So I think this is more or less a summary for the quarter.
Very clear. What can we expect going forward?
We do expect similar things in terms of mortgages. That means that the book will continue to grow, while the repricing effect will continue to the pricing effect will continue to be negative. We expect next quarter to also be negative, probably with less amount deducting for the net interest income, but still repricing will be negative. We do expect growth in consumer finance. That is the positive.
We do expect growth in all geographies because Ireland is performing extremely well. Portugal is performing extremely well. Evo is performing extremely well. And as I did mention, consumer finance is also performing well and recovering. The main uncertainty comes from the corporate banking book that, as you know, since the ECO facilities grew, The overall book in the system grew by almost €50,000,000,000 and now there is some contention due to the excess liquidity.
We expect at least to repeat or slightly increase the net interest income of this quarter and the following quarter. The Q4 tend to have positive seasonality. That means that they tend to be a lot focus at the end of the year, which is December tends to be a very strong month. And we will see we hopefully will see some good reaction. And of course, we do have expectation regarding the next generation EU funds that we do expect someday to be reality.
We believe the impact will be not very high or not very large in this quarter, but at least to see if this is going to be a reality or not.
All right. What about the customer margin trends?
Similar answer. Since the portfolio of mortgages keeps growing, we We expect the repricing of this mortgage. Therefore, there is some pressure to reduce a little bit, that consumer finance is recovering fast, so we expect some sort of compensation. Again, the uncertainty will come back to recover in this quarter, but obviously, there is a lot of uncertainty due to the positive recovery of the economy. That means that is a good news.
And if there is a negative impact on the net interest income, we will see a very positive income in the fees. Of course, more transactional business will bring us much more fees and a recovery in the working capital funding and facilities. That will be a good news as well.
Fair enough. Okay. Two more questions on the NII to finish off the topic. Can you talk about the sensitivity to your arrival rates going up? And also, if if we have any change on our ALCO strategy.
I will start with the second one. Basically, there is no changes in the ALCO the strategy for the time being, the amount of the portfolio is not expected to change. And as you see, the maturities are expected in So no nothing will change in the ALCO portfolio. Regarding the sensitivity, of course, Improving interest rates is very positive for us. Of course, if the increase is as larger as it will be more positive.
So that means that a small increase in Euribor We'll drive a small increase in net interest income and a very larger whatever increase of interest rates above 0 will be an excellent new and, of course, at least a double digit increase in our net interest income.
Thank you. Very clear. Moving on to fees now. We had more interest this quarter on our fee income line. Can you explain the how does this one off the work.
And also on the same topic, if there is any other recurring fees associated with this type of funds or any other future income that we can expect from this product.
Okay. So the way it works, basically, this is an investment fund, which normally has 3 types of fees. It has distribution fees, which is at the initial moment. It has a management fee that is during the life of that fund, And there is a success fee depending on the return brought to the participants the the fee that we have achieved due to the extraordinary performance of this fund for our clients. So there is nothing special.
There's nothing new. There was this was a fund that was created in 2017. It has invested in 33 solar infrastructures and renewables infrastructures. There was an offer to purchase those assets, and that's what happened during this summer. And therefore, it was executed, the figures to find out if there was a the success fee, and this is a result of the success fee.
So there is no major complexity on this. We do have more vehicles. I would say most of the vehicles do have a success fee under their agreements, although it is obviously very uncertain that there will be an occasion to find a company or a bid for those assets and then materialize an unrealized gain. But we have all the investment banking vehicles tend to have this structure of fees. And of course, it's very uncertain if this is something that might be repeated in the future.
Hopefully, we might achieve that those extraordinary income can become regular income, but I guess this is very complex.
Thank you. Moving on to cost now. Looking at the the inflation growth out there. What are your expectations in terms of expense growth for the next few years for the next few quarters.
Okay. Yes. We do not expect any impact in 2021 regarding this inflation. In following years, there's not there are not so many contracts related to inflation, at least for of those that are included in the concept of general and administrative expenses, there are not so many. Basically, potentially rentals And some limited number of contracts.
That means that probably inflation might cause an increase somewhere between 0% and 1% of cost in the following year just for this reason.
Thank you. Now regarding other provisions, how shall we think about how shall we think about other provisions going forward for 2022 and 2023, you want, after this €45,000,000 from loading we just made in the quarter. Yes.
I think as I did mention, the other provisions, We do expect to figure out a reduction in the overall year of 10% to 20% in the following years. That means that we have this year already, excluding this extraordinary provision, we are already demonstrated that we are reducing 10% to 20% the effort. Next year will be again 10% to 20% reduction in the effort. And the following year, we do expect as well a 10% to 20% reduction. That means that we might, in 2 in 3 year times, more or less, reduce by 50% discharge or more.
Thank you. Cost of risk. Can you provide some color on the expected trends for the next few quarters and also for 'twenty two?
Okay. So we had a very, I would say, a better than expected year in As you know, we have started the year with cost of risk expectation higher than the ones that we have today. Today, our guidance is in the lower range of €40,000,000 to and basically focus more focus on Fortis. You know that next year, on the 2nd quarter, there will be the end of the payment holidays, and therefore, there will be a good moment to find out which is the reality. But as of today, all the moratoria has been very positive impact.
So they have come to an end, the moratoria in Spain, and results are very positive like the ones that we've shared. Portuguese operations have just finished our moratorium, so we are we are very closely monitoring the impact in these 1st days of October. As of today, similar feelings that in Spain, that is positive. Therefore, maybe cost of risk should be similar or a little bit lower in the coming years in the coming quarters. And of course, we are not mentioning that the extraordinary provision that we built last year, based on the macro scenarios that we have last year, has not been used yet.
So we do expect good figures on cost of risk for the following quarters.
Thank you. More specific in this quarter, what is driving NPLs up?
Yes, I did mention, in this quarter, the NPLs have increased basically the consumer finance business. And we have some small Stage 2 reclassifications, that the focus on NPLs in this quarter and in the whole year is basically on consumer finance. But I want to again, share with you that last year, by November, we did a sale of the portfolio, and that will bring our the reduction of NPLs in this business. This is something that we try to do every year. And this year, we hopefully will not be an exception.
There's also one specific question about whether we are still benefiting from the provision releases in Portugal.
I think there's a very little amount of €2,000,000 to €3,000,000 of releases this year on the overall year, But that's it. I mean, it's almost irrelevant.
Okay. Ending with the capital. We have a few questions from analysts regarding the capital ratio being above, obviously, 12%, our long term targets, guidance, whether we are considering any extraordinary dividends, buybacks or any other remuneration upgrade.
No, we are not expecting any buyback. We want to grow organically with the level of capital that we have, and therefore, we will keep these levels of capital. And of course, we will keep our policy our dividend policy of 50% payout in the coming quarters.
And also on capital, whether you had any comments on regulatory impacts or any expected headwinds going forward.
Not for the time being. We are waiting for more information or news regarding Basel IV implications. But as of today, we do not have enough clarity to be able to share with you any thoughts. We need unfortunately, we need to wait a little bit more. And once we got some figures, don't worry, we'll try to share that
with you. Excellent. Thank you, Jacobo. That's all from us now. Please feel free to contact our Investor Relations team for any further questions you might have.
Many thanks, and goodbye.