Good morning, everyone, and welcome to Banquinta Third Quarter Results Presentation. Our CFO, Jacobo Diaz, takes now the floor to explain the figures in more detail, and we will follow-up with a Q and A afterwards. Thank you.
Good morning, everyone. This is Jacobo. How are you? Welcome to this presentation of Banquintaro's earnings for the 9 months ended September 30, 2020. As usual, the related financial statements were posted on the website on the CNMV few minutes ago before market opens.
All related documents can also be found at this time on the Banquinta corporate website. Let me start by pointing out that we ended the Q3 with a continued strong commercial performance reflected in pre provisioning profit growth, considering the special circumstances of the year and their impact on all our businesses and geographies. We are here to present our quarterly results, But first, let me start, as we did in previous one, sharing some thoughts about the pandemic and how it is impacting our business at Bankinter. We at Banquinter, we are committed to ensure that jobs and sanitary conditions of all our Spanish, Portuguese, Luxembourg and Irish staffs will be preserved. We continue to believe that we have a clear differentiation in credit quality from the market and that we are making an appropriate use of all government facilities to provide liquidity, funding and services to our customers.
This is the main reason to prioritize adequate levels of capital and coverage of NPLs. Finally, and more important and once again, we want to remind everyone that we see capital and solvency as the key to ensure a proper performance in difficult times. We think it is relevant to understand how regulators set minimum capital requirements from bank, and this is always done taking into consideration a combination of relevant variables: credit quality, profitability, efficiency, governance and overall business model. This is precisely why Banquinta has a pilot tour of 1.2%, the 6th lowest out of 109 banks in Europe. Even more on a stress situation and it was reflected in the last stress test performed by EBA, The capital depletion of Banquintra was set as 114 basis points, the 2nd lowest in the universe, well below the European average close to 400 basis Having said that, I will review our businesses activity in the quarter and during the 1st 9 months of the year as well as I try to provide some guidance about potential future evolutions.
Our main achievements were We showed again resilient quarter on quarter performance, supported by our customer activity, resulting in increasing operating income by 5%. We maintain continued growth in the loan portfolio, retail deposits and also in assets under management. Therefore, net interest and fee income, the main contributors to incomes, together with the tight cost control, has allowed pre provisioning profit to grow by 7% in the period. We present strengthened solvency, NPL coverage and liquidity ratios with reduced NPLs year on year. In there, our CET1 ratio reaches almost 12%, forty basis still not considering the last 81 issuance that will bring 45 basis points in addition.
Please note that in this quarter, we have updated the extraordinary provision booked in the previous quarter related to macro scenario impact on credit risk models. In this quarter, Bank of Spain has changed our estimates for GDP growth, unemployment, etcetera, over the next 3 years, And we have adapted our models to this slightly more complex scenario published by our Central Bank. Thus, we have registered an additional charge for this topic of €51,000,000 in this quarter to be added to the Bodea, €51,000,000 in this quarter to be added to the €192,000,000 anticipated in Q2. Despite this increase in our extraordinary provisions, we are not going to change our guidance for total group cost of risk at year end between 6570 basis points, an approximately equal split between the extraordinary impact, 35 basis points from our recurrent cost of risk, around 35 basis points. As usual, let's start with a brief comparison of the 1st 9 months of 2020 and those last year in some key financial indicators.
Group's total loan book grew by 6.7 percent to €63,300,000,000 thanks to the strong corporate and SME demand and a stable mortgage loan book, while consumer finance continued to show some contraction. Gross operating income at €1296,000,000 at the end of the period. It grew by 5% with respect to the 1st 9 months last year, showing again a strong resilience in very difficult times. After a continued cost control, pre provisioning profit showed a solid growth of 7% in one of the most difficult years ever. NPL ratio shows resilience in Bodea, despite the difficult economic situation during the year at 2.51%.
It dropped by 22 basis points from a year ago. Coverage ratio after the recorded extraordinary provision stands at 62%, 11 percentage points over last year or a 21% increase. Group's net profit stands at €220,000,000 a 51% decrease from a year ago. Our SET1 fully loaded SET1 capital ratio also improved 40 basis points to 12%. Despite the unprecedented extraordinary provisioning, it stands comfortably above our guidance.
And our return on equity reflects the exceptional situation and stands at 7.1%. Without this extraordinary provision, it will be at 10.9 percent, well above the cost of capital. Now we have our usual agenda for a quarterly presentation. 1st, we will go through the results, then risk management, and we will end with the business developments. Moving on to our income statement.
As a reminder, the acquisition of Evo and Avancar took place on June 2019. Thus their contribution to the group's income statement in the 1st 9 months is very different each year. For comparison purposes, We have restated the 9 months income without Evo and Avancard. For the 1st 9 months of 2020, the contribution of Evo and Avancard brings an additional €64,000,000 in net interest income and fee income as well as €68,000,000 in expenses and €11,000,000 in provisions. This compares with 26%, 31% and 5%, respectively, for the 1st 9 months of 2019.
Here are the group's comparative P and L account for the 1st 9 months of 2020 with the new accounting of Linea Directa at the bottom and the like for like comparison On the right columns. Our income statement continued to reveal positive trends in core lines of revenue, Net interest income and fee income. Like in the first half, other operating income and expenses with our Plinadirecta contribution show a small contribution of €11,000,000 mainly coming from the trading. Group net interest income maintains a very positive Trend despite the negative environment for interest rates in the quarter, but this is based on our lending growth and improved asset mix. It is up by 8% or €68,000,000 more than 2019, with a 3.3% increase since last quarter or €10,000,000 more or less.
This would be 4% and 3.4%, respectively, without the additional EUR 34,000,000 coming from Evo Anavancar. The seasonal commercial activity during the summer, very weak on August and weak until mid September, did not help our fee income but was somehow offset by the steady growth in assets under management and the continued increased activity in our broker online and market related activities. Therefore, fee income finished the period growing by 3.5% with respect to the previous year, with a decrease of €6,000,000 from the previous quarter and remaining flat from same quarter last year. Total gross operating income reached €1,296,000,000 up by 4.6% from 2019. Without Evana Bank, our income still grew by 1.5%, and the quality remains very high as the weight from extraordinary income from EMEA Portugal was reduced €2,900,000 Group operating costs continue under control in both Spain and Portugal.
The group maintained very good efficiency level. Costs from DIA and Avankar operations are not comparable year on year since they are €68,000,000 in additional operating expenses in the 1st 9 months versus €31,000,000 last year. In total, they grew only by 2.1% Bodea, year on year and only €12,000,000 from the previous year. On a like for like basis, the group cost clearly fell by 2% with respect to the same period in the past year. This positive income and cost performance 1 more quarter allowed pre provisioning profit to increase by almost 7% from a year ago and 1% from last quarter.
Like for like growth is up 4.3% so far this year and down 4% from the same quarter a year ago. Loan loss and other provisions are up 35%. I remind you of the contributors of this increase. One is Portugal. Due to the anticipated normalization of cost of risk from the finishing of the extraordinary recoveries of previously provisioned loans acquired from Barclays.
Another is the expected rise in cost of risk from Consumer Finance Business. And finally, the provisions for other contingencies, litigation, etcetera, with a sustained run rate so far in the year. After provisions, profits from the recurrent banking activities stands at €397,000,000 only 7.6% below 2019. As mentioned earlier, we have decided to adjust last quarter extraordinary credit risk provision to the new macroeconomic scenario of Bank of Spain. And we have record a top up provision of €51,000,000 in the quarter that brings the total extraordinary credit risk provision to 244,000,000 After this extraordinary provisioning and also taking into the duration last year, one off bad will arising from the Evonavancar integration.
Pretax profits of the banking activity stands at €153,000,000 a reduction of 68% from the same period last year. Like for like reduction is 63%. Pretax profits coming from Hila Dia brings an additional €133,000,000 to the group in these 1st 9 months or 23% more. This shows an improved performance of the insurance business from the good first half, and we will analyze this later on. After taxes, the group posted a net profit of €220,000,000 a decrease of €51,000,000 from a year ago.
Like for like, This decrease would be of 45% approximately. Despite a continued difficult situation in the quarter, it is important to highlight that the banking recurrent business, after closing the 1st 9 months of the year, continues in line with our plans and those of the beginning of the year in income, in volumes, in cost and including the slightly increased recurrent cost of risk. However, the necessary anticipation of the future macroeconomic scenarios had impacted from provisioning and dragged down net profit. Group's pre provisioning profit growing close to 7% clearly indicates recurrent growth in all our activities. Here we present then the quarterly P and L, which shows improvement in incomes, also increasing cost and a strong reduction in recurring provisions from the previous quarter.
Plus the profit of recurrent banking activity grew by 43%. From the same quarter last year, net interest income shows 4.1% increase, almost flat in fees and a much lower trading income brings total incomes down by 1%. Thanks to a 3.1% decrease in operating cost, the pre provisioning profit increased by 1% from last year's Q3. After provisioning, quarterly comparison are not relevant due to the impact of this extraordinary macro scenario provision this year. The profit before taxes of Lina Directa shows a 33% increase over the previous quarter and a 48% over the same quarter in 2019, showing the strong evolution of this business during the pandemia, thanks to the reduced combined ratio as well that we will see later on.
Finally, the €111,000,000 net profit of the quarter recovered a normalized trend after an extraordinary second quarter and only 18% below that of 2019, a record year. Let's move on. The group's Loan book grew by 6.7% from a year ago, bringing in over €4,000,000,000 in new loans in the last 12 months. This growth comes from our business in Spain, Portugal and the new Evo Navankar during this period, showing a relevant impact from the government program for storing the economy, namely the eco liquidity lines of credit. 3rd quarters always see flattish lending growth with low activity in August in corporate loans, even this year with the government programs for liquidity through ECO as well as in mortgage lending to individuals that we will see later the presentation.
On the other hand, consumer loan book continued to fall on purpose during the quarter with more stricter requirements in the new production and lower consumer finance demand in general. In net terms, this 3rd quarter loan book remained almost stable in all geographies. In Spain, The majority came from corporate loans with a state guarantee, as we will see later. In Spain, lending somehow reduced growth rates from the previous In commercial banking to individuals, it grew by almost 2% year on year, well over the minus 1.2% of the sector as of August 2020, bringing the market share of household lending over 4%. Corporate loan book had started to reduce growth rate in this quarter after the strong growth in the 2nd quarter.
Loan growth has been 12% year on year or €2,800,000,000 with a large Corporate lending adding €1,300,000,000 mid corporates €0.9 billion and SNE €0.6 million mainly with the ECO guarantee credit lines. In Portugal, lending is up by 8% from year ago with an additional 344,000,000 slightly short of our business plan for the year. Retail deposits continued to perform strongly in all geographies at close to 10% year on year or 4 sorry, or EUR 5,500,000,000 to EUR 62,600,000,000. They were up by 10.2% in Spain from a year ago, while the market grew by 6.8%, bringing Banquinter once again market share on the effective deposit to increase to reach 3.7% with the last available data. In Portugal, deposits grew by 3.4% in the year or 155 1,000,000.
Net interest income continued to show resilience. It grew by 4% over the same quarter a year ago and over 3% from last quarter €10,000,000 more or less. Like for like, growth rates are similar. The The contribution of Avon Avoncar to our net interest income has been growing every quarter. This one, it contributes with €57,000,000 to the group net interest income versus €23,000,000 last year.
In Portugal, net interest income also grew by 10% with respect to the same period in 2019 and over 3% in respect to the previous quarter with a very small impact from extraordinary recoveries in the quarter. Net interest income quarterly evolution is driven mainly by the loan book growth and by somehow stable customer margin shown in the chart of the right, it decreased by only 1 basis points from last quarter. And the 17 basis points decrease year on year is almost exclusively due to the reduction in consumer finance yields, together with the desired reduction of the loan book in Spain for credit risk results. Also, it should be noted that we have started to see some increase in corporate yields that are able to offset recently negative impact from repricing our mortgage back book at much lower 12 months arrival rates. After a year with the cost of deposit at all time lows, we believe that stable credit yields are the key to our customer margin to remain resilient in the coming We continue with a positive repricing of yields on the mortgage loan book, front versus back book yields and also better asset mix with more growth in corporate lending than in rest of our loan book.
Here, we also show the 9 basis points pressure the bank's net interest margin during 1 year to 143%, still above most of our peers. Thanks to margin and volume trends in loans and deposits, together with a stable contribution from the current trade of our ALCO portfolio. We now guide for an increase in the group's net interest income by mid single digit at year end, the same guidance we had at the beginning of the year. Moving to the next Slide the composition of our ALCO portfolio changed very little in the quarter. Its size stable at €8,700,000,000 Its proportion between different portfolios continues to improve today.
72% of the portfolio remains under amortized cost with no impact in capital ratio and 28% in fair value. Still, Spanish government bonds represent 55% of totaled together with 22% of other sovereigns, mainly Italy and Portugal. The portfolio's average maturity is 8.1 yields with an average life of 4.4% and the average yield stands at 1.6%. After better quarters in bond and equity markets, we can see improvement in the unrealized gains of the portfolio. Now they amount approximately €580,000,000 a similar level of last December.
Moving into fees. Fee income performed in line with the Q3 last year even under a reduction in activity levels due to the pandemic situation during the summer. 3rd quarter has always negative seasonality every year. Despite this, last quarter fee income was only €5,000,000 below the previous quarter And he continued to show growth for the 1st 9 months of 3.5% year on year. Fee income from our recurrent business continued to grow, except payment and collections fees as we have anticipated in previous quarter due to the slowdown of activity in the economy and fees from working capital financing included in other fees down 18 Bottiap.
On the other hand, assets under management volumes recovered previous levels, and this is reflected in the 3% improvement From the 1st 9 months last year, total fees still account for 28% of our gross operating income. The largest contributor to fee income continues to be asset management fees, being 25% of total fees charged, up by 3% with respect to a year ago. We can confirm that commercial activity has recovered after the lockdown. And by September, our Private and Personal Banking assets under management recovered levels pre COVID-nineteen crisis. The 2nd largest contributor to fee income by 18% is payment and collections, including credit cards From corporates and individuals, their performance has clearly been impacted by the slowdown in the summer season, but it only paused a 4% decrease year on year on the back of our increasing online banking activity.
Also, a more stable market situation has shown positive impact on fees from bond and equity trading, both in our broker online as well as in other platforms, with a strong growth rate of 26% from the same period a year ago. Other relevant fees such as FX business with customers went up 22% from a year ago on the back of international mutual fund activity. More stable life insurance and pension sales are also up in the year by 3%. And finally, risk related transactions and other fees from investment banking are also up 14% 12 percent, respectively, showing again a strong commercial activity in very difficult environment. We believe the effects of the economic crisis provided by the And then it will continue to be noticed in our fee income in the last quarter of the year, although we don't know to what extent and in which business lines.
Thus, we will continue to pursue growth in business volumes and value added advisory products to our customers. And assuming the certain degree of market stability, we should be able to maintain our guidance for free income growth by low single digit by year end. In other operating income and expenses, here you can see the 2 main components of the 69% reduction during the period. The first one, the €50,000,000 approach of trading income plus dividends this year were reduced by €12,000,000 from last year due to the lower trading volumes in the period and the 34% increase in regulatory charges or €13,000,000 more contribution to the Single Resolution Fund. Next slide.
Gross operating income for the 1st 9 months stood at EUR 1296,000,000 an increase of 4.6% from a year ago. Quarterly operating income of €433,000,000 grew by 1.4% from the previous one and 1% down from the same quarter last year, all with a very small contribution from results from financial transactions or what in Spanish we call Rolf. In Portugal, gross operating income grew by 11% from last year and grew by 19% from last quarter. Therefore, we can see the strong improvement of recurrent business in our Portugal franchise. All in all, the group's operating income grew above our mid- to low single digit guidance for the year.
Assuming some kind of economic recovery in the last quarter of the year, We believe revenues will grow at least at the same pace for the full year 2020. The chart On the right shows the breakdown of the contribution to operating income now without Virid Directta. Net interest income represents 71%, fees 28% and finally, other income, which not come from customers activity, only account for 1%. Group operating costs totaled €208,000,000 in the quarter. They are up 1.7% from previous quarter and down by 3% from last year same quarter.
Total operating costs for the 1st 9 months are up From the previous year by 2% and like for like, that is excluding €43,000,000 coming from Evo and 25 from Avancar, recurrent costs would have been reduced by 2%, minus 1% in Spain and minus 8% in Portugal. Personal expenses are down 4% year on year, mainly due to the €14,000,000 one off adjustment of the variable paid bonuses and long term incentives to Bodea. General management recorded in the Q1, general and administrative expenses are under control despite growing by 6.7% over last year. But considering the incorporation of Evana and Car without this will be reduced by 3% on a like for like basis. All this cost reduction more than offset the increased amortization expenses from investing in our banking platform in digital product services developments in recent years.
Again, keeping all operating expenses and investment programs under control, we expect to finish the year without within guidance of low single digit cost growth. Thanks to all these efforts, our recurring banking efficiency continued to improve the group Cost to income dropped 100 basis points from December 2019 and 100 sorry, 500 basis points from December 2019 and 100 basis points from a year ago to 48.1%. We aim to keep the long term banking cost to income ratio below 45% as we always try to improve efficiency in all our acquired business. We continue to do so in Portugal now with efficiency below 59% and an Avangar at 58% evo still in negative efficiency, Our Spanish business runs at 41.5 percent efficiency ratio. Now we show how resilient has been our group's pre in pre provisioning profit.
We think this shows a remarkable operating performance. So let's move into credit into cost of risk. Let's focus first on the recurrent business, it started its way up this year only due to the increased provisioning in our consumer finance activity because, as expected, Other NPLs coming from personal lending, mortgages, corporate and even SMEs are still not significantly affected by the downturn in the economic cycle. Good behavior in the first half has been extended to the 3rd quarter as well. However, the consumer finance cost of risk continues to grow announced our 4 40 basis points.
Total recurrent cost of risk in the 1st 9 months stands just below 34 basis points of total credit exposure reduced by 6 basis points from the previous quarter, a very good trend and up 11 basis points over last year as expected. The increase in cost of risk in our banking activity in Spain was again related only to the consumer finance loan book. Thus, the small SMEs loan book, the commercial banking loan book on mortgages and personal loans as well as the large and mid corporate loan book did not have any significant impact during the 1st 9 months of the year despite the very difficult economic conditions. Probably is still too early to anticipate what will be the impact of the liquidity lines guaranteed by state for S and Es and corporate and the use of the public and private moratoriums for individuals. We expect all of this measure will make recurrent cost of risk to remain under control at least for the rest of the year.
Despite this distressed global situation, we strongly believe in the quality of our loan book in our different businesses and geographies, thus we are convinced to maintain the guidance around 35 basis points for recurrent cost of risk at year end. On the other hand, provisions for litigations, while some over our FX mortgage portfolio is slightly falling, other miscellaneous legal provisions are growing offsetting any possible production, those we think it will remain similar for the full year. Regarding nonrecurring cost of risk and the extraordinary front loaded provision booked in the 2nd quarter, 177,000,000 and 15,000,000 in the Q1 to adapt Bank of Spain macroeconomic scenario to all our internal IRB models for credit risk management. After the recent release of the new macroeconomic scenario about most central banks, Spain, Portugal and Ireland, which basically delayed the economic recovery for 2021 2022 in terms of GDP and unemployment, this has made us record an additional provision of €51,000,000 in Spain in this quarter. This, together with €192,500,000 booked in the first half, will make the total nonrecurring cost of risk at just 35 basis points for the full year.
As we see things today, cost of risk will show an equal split between 35 basis points from the increased extraordinary provision and 35 basis points from the reduced recurrent cost of risk. All this will bring total cost of risk at the year on close to 70 basis points of total exposure. After this strong provisioning, group net income stands at €220,000,000 down 50% over a year ago. However, we expect some improvement in the coming quarters when extraordinary impacts finishes and a slow recovery takes Bodea, plays in the economy and asset quality normalized. All the above has impacted our group's return on equity that now stands at 7.1 percent after this strong provision in the year.
Excluding the impact of extraordinary provisions, return on equity will reach 10.9 percent, still above our cost of capital and differential from peers. We will see return on equity to recover fueled by the growth of recurring business and some normalization of NPL provisioning in Spain, improved Portuguese work around operation and the future developments of the efforts on integration of Evo Anavant I will go now over our management of credit risk, liquidity and solvency. Moving into the nonperforming loans. Nonperforming loans changed The long standing downward trend in December 'nineteen and in this difficult year started to show some increase, also at a very low rate. Total NPAs NPLs remain almost flat from last quarter mainly because NPLs did not grew in consumer finance.
Year on year, total NPLs are down by 2% or €37,000,000 less to €1762,000,000 Total group NPLs in 2020 grew by only €80,000,000 or less than 4.8 percent. Of this growth, 18,000,000, come from SMEs, 11,000,000 from mid corporates and large corporates reduced by 11 as well. Portuguese NPLs came down 4,000,000 and Evo brought 1,000,000. Finally, consumer finance grew by €104,000,000 as expected. All of the rest, mortgage, affluent banking, etcetera, came with Bodea, €59,000,000 reduction in the period.
The group NPLs ratio stand at 2.51, same level as the year end 2019 and 22 basis Bodea, are 8% lower from a year ago. It remains almost flat from last quarter due to flat NPLS net entries in the period to the 26,000,000 gross entries and 28,000,000 write offs. In Spain, at 2.57%, one basis point over December and almost half of the sector average at 4.72% as of July. In Portugal, NPL ratio declined to 2.26%. As shown in the chart on the right and as of September 20, The group's NPL ratio went down to 2.27 percent for households, including consumer finance at 8.2% and increases a bit to 2.83% for corporates and SME, including small SMEs at 7.1%.
Here, we bring again a breakdown of the bank total credit portfolio as of September 2020 and the current NPLs and NPLs ratio by business segment. We compare this with January 2008 when IFRS 9 start to be implemented and right after the transparency stress test of the EBA. Here you can see 41% of the loan book is in residential mortgages and personal loans to the bank's individual customers with NPL ratio 2.52. It was 2.71 back in 2018, of which consumer finance now represent 4% of total loan book, up from 3% in 2018 and with an NPS ratio of 8.6%. Corporate banking loan book represents 46% of the total loan book, similar to what it was in 2018, but with much better NPS ratio today at 2 point 70%.
Of this book, large corporates represent 24% of total with an NPL ratio of 0.65. Medium corporates, Snow call SMEs, 11% of total NPLs ratio at 3.53% and finally, small SMEs with 8% of total book With 7.56 percent NPL ratio, better than the 9.1% back in 2018. Portugal now represents 10% of total portfolio and improved NPL ratio to 2.26% from over 7.5% back in 2018. And finally, Ebor still represent only 2% of total non book with 1.41 percent of NPL ratio. This almost unchanged distribution against The previous period shows our strength in the quality of the loan book with small changes over the year.
Overweight in affluent mortgages lending and in large corporate lending continues as in 2018 when Banquinta showed the lowest capital depletion, as I mentioned in the beginning. Moving on. Total provision for irregular assets increased consequently after the extra provisioning to a comfortable level at €1,100,000, €172,000,000 increase from last year. This has a relevant impact on our provision coverage. We now stand at 52%, 3 percent real points over the previous quarter and 11% real points over the last year.
Coverage for foreclosed assets were maintained at 46%, still above the average discount. The group's foreclosed asset portfolio is 19% smaller than a year ago. It decreased by €57,000,000 from the previous year. This small portfolio now amounts to €251,000,000 Total sales in the year amount to €65,000,000 or 22 percent of the stock at the beginning of 2020. We sell most of our repossessed assets through our commercial network with an average discount sales of 33 37% close to their provision coverage.
Let's move into capital. Our fully launched CET1 ratio stood at 11.97 percent or 12% at the end of the 1st 9 months increased by 22 basis points from last quarter and 40 basis points from 1 year ago, including the Avonavancar transactions that deducted 22 basis points. Since December, our retained earnings bring an increase of 49 basis points underpinned by the cancellation of the 2 first quarters' dividend. This increase helps to offset some of the negative impacts in the period, such as the increase in insurance equity or new intangibles accounting. The impact on risk weighted assets growth of the year has has been minus 12% points due to a flat lending growth in the quarter.
Also, the reduction in the IRB shortfall of 32 basis points year to date and 6 basis points in the quarter more than compensate the extra provisioning. Total capital ratio, leverage ratio remained mostly stable at 14.3% and 4.64%, respectively, and this is without taking into consideration our last 81 issuance in July to replace the 16.1 still pending of approval. After this capital ratio, we'll improve to 14.75%, very comfortable reached above minimum regulatory requirements. Finally, as of September, we had a ratio of 22% of our risk weight assets in Empreil requirement. And after closing the 1st 9 months of the year and despite the new more complex environment, we almost reached 12% in our CET1 ratio.
Nonetheless, we are able to reiterate our long term guidance of CET1 ratio of 11.5. The continued increase in our customer deposits has helped to reduce to 0 our funding gap, and I'm just already talking about liquidity. We are in all time lows from over €10,000,000,000 5 years ago to a positive €700,000,000 And now the gap is only coming from Portugal is still having higher growth in lending than in deposits. As a result, loan to deposit ratio reached record level of 98.7% from 102% a year ago, owing to consistent growth in retail deposits in the last few years. Our LCR ratio stands at almost 200%.
Our wholesale funding maturity are well balanced with only €8,000,000 due to this year and 0 next year, excluding the €200,000,000 €81,000,000 during May 2021 and recently been refinanced. Thus, we are very comfortably positioned for the coming years with an increased €20,300,000,000 in liquid assets and the capacity to issue €2,300,000,000 in Corporate and SME loan book in Spain and Portugal grew by over 12% from last year and almost €3,000,000,000 It increased by 15% in Spain, while the sector had started to grow at 7.6% year on year since last August. All this growth started last quarter boosted by the government guarantee ecolines and the entire sector has made a wide use of them, has been slowed down after the summer. As of September 20, we have signed over €7,000,000,000 of government guaranteed eCO lines with Our customer, mainly with large SMEs, then small SMEs and lastly, large corporates. We will review our production in a separate slide.
In Portugal, where we have been growing our market share in corporate lending, it now stands at 2.1% or 46 basis points up a year ago. This trend will continue since our front book market share continues to be above that of the back book and growing. Corporate loan book went up by 16 representing 1 year, reaching €1,900,000,000 as of September 20 on a continued effort to increase our presence in the mid corporate market. Other important sources of income for the Corporate Banking today and going forward are the International Trade and Supply Chain Finance continue showed loan book growth. Operating income grew by 5% from a year ago to €130,000,000 And over 51% of this revenue came from fees rather than interest.
The transactional business turnover with corporate Customers, including commercial, credit, tax and social security payments, went down below double digit in the period to lower activity, as we mentioned, due Odiap. [SPEAKER JACOB BODIAPO DIAPO DIAPO DIAPO:] Through the pandemia, an investment banking generated €57,000,000 in operating income, a 19% increase from the same period last year. Out of them, €17,000,000 are fee income with a
growth of
24%. Moving on, some indicators of the credit quality of the corporate loan book in Spain and Diaz. The corporate loan book granted to non financial enterprises amount to €28,000,000,000 at the end of September. From this total lending, €10,600,000,000 are granted to large corporates, those with yearly turnover over €50,000,000 and more than 2 50 employees euros 6,800,000,000 loans granted to medium sized enterprise, those with a turnover between €5,000,000,000 50,000,000 and we can call them the SMEs Type A, these 2 largest loan book represent over 62% of the total corporate loan book. Only 18% or €5,100,000,000 of the bank's total corporate loan book are loans to small enterprises with turnover between 15 or SMEs Type B, that we call.
And the rest is split between €2,500,000 of property and housing related financing, excluding developers, and €1,900,000,000 of international trade finance with our corporate customers and finally, €1,000,000,000 lending to public sector corporates. Out of the SME loan book with European definition, below €50,000,000 turnover of €12,000,000 we can see relevant difference in LPL behavior between small and large SMEs. We see ratios of that were 7.1% and 3.8%, respectively. These two segments were the main beneficiary of the equal liquidity lines that account to 23% 29% of the respective portfolios as of September with state guarantee for close to 75%. In addition, these two segments have today 42% real guarantee on its loan outstanding.
Banquinta has always enjoyed a high quality loan book relative to peers, and today, we feel comfortable with the current asset mix. It has shown no significant changes over the last 10 years, preserving the strong asset quality standards for each segment of corporates and always obtaining yields according to our risk reward models. Moving on, this slide will show Banquinta's participation in the government and guarantee eco lines. So eco loans granted and these borrowers as of September were close to €5,000,000,000 All of these loans have been granted mainly in medium and small corporate and the rest to large corporate. The average state guarantee of the total loan book is close to 75% and the maturity is over 3 years.
A total of 7,200,000,000 Avico loans have been signed with Banquinta, well above our market share, with an additional amount of the loans on the last tranches where we got €1,500,000,000 additional loans to be signed until the end of the year. And on moratoriums For mortgages and consumer finance to individuals, amounts are reducing and represent a very small part of our loan portfolio, EUR 5 EUR46,000,000 EUR14,000,000, respectively. That represents only 2% market share on the mortgage book and less than 1% in the consumer book. Moving on in Private and Personal Banking. Customer assets recovered from the back beginning of the year due to the difficult behavior and the negative market effect.
Now in both businesses, Assets under management shows increase of €3,800,000,000 in the net new patrimony, split €1,500,000,000 in private banking and €1,300,000,000 in personal banking. Total assets from customers in both segments amount to 63,300,000,000 up 62,000,000,000 from a year ago or 2.1%. The recovered commercial activity measured by new money in the period ended September shows a €2,800,000,000 increase, equal split between Private Banking and Personal Banking with 7% growth. Despite negative market effects of €3,900,000,000 in total during the 1st 9 months, Our Luxembourg unit continued to play an important role in our advisory and profit product offering for our customers looking to further diversify their patrimony. Activity in our commercial banking during the 1st 9 months has been strong and shown in the 2 main retail products.
Salary account balances continue to grow. They are up 23% from a year ago, totaling over €12,000,000,000 Most important and the main difference with many other peers, in Banquinter, we have not changed any of the terms and condition on our salary account since the last 8 years. Also, the new mortgage origination, although logically below that of last year, is only 7% down and above 2 years ago, showing a very strong resilience in this core business. Of the new origination of mortgage, 60% were fixed rate and in average, the loan to value is 61%. Our market share in new mortgages is now at 6%, 6.3% in the 12 months ending in July.
As a result, the total mortgage back book maintained growth and reached 27,000,000,000 in Spain growing by 1.4%, while the rest of the market continues to shrink by 1%. The loan to value of the total back book tenants at a very healthy 55%. Now let's look at Portugal. Loan book grew by 8%. Retail funds grew at €4,700,000,000 reduced 1% from last year.
Growth in loan book was in both midcorporates, up 16% as well as in retail lending growth at 5%. Off balance sheet of €3,500,000,000 shows a 2% decrease from the 1st month of last year. As for the income statement, operating income from the business grew 11%. Costs show again 8% reduction, And we have a pre provisioning profit up with a very strong of 60% or €16,000,000 However, after the €6,000,000 normalized loan losses provision with a very small impact of extraordinary recoveries, here I remind you that last year, we had €25,000,000 of positive cost of risk from this recovery and the €3,000,000 extraordinary provisions from the macro scenario. Portugal profit before taxes stands at €33,000,000 Today, 4 years since the acquisition, Banquito Portugal showed an efficiency ratio below 60% and has become the 5th Region in operating income contribution to the group with close at close to 8%.
Consumer Finance. Consumer Finance, which include our business in Spain, Portugal and Ireland under the AvantCar brand. At the end of September 2020, total loan book was €2,900,000,000 4% up. The growth comps have €457,000,000 from Ireland Car growing by €25,000,000 in the year, €237,000,000 from Banquinto, Portugal growing €41,000,000 and €2,200,000,000 in Dias, where the loan book only grew €39,000,000 exclusively in personal loans since revolving credit card outstanding went down €151,000,000 in New credit origination, mainly in personal loans, went down on purpose by 21%. As mentioned, early EUR 100 and €51,000,000 reduction in revolving credit cards bring the total outstanding under 557,000,000 or 21% less.
Total number of customers grew by 5% to €1,700,000 And despite this, the consumer finance loan book, it is expected to shrink in all geographies by double digit by year end. In Spain, credit card business represents 42% of the €2,183,000,000 of total customer finance outstanding and revolving credit cards, only 25 percent of them. The rest are payable at the end of the month, even though they are mainly granted to existing bank inter customers with a much better risk profile Thank you, than pure consumer finance customers. The new and stricter accounting standards for NPLs implemented in 2020 with transfer NPLs write offs for sale after 12 months with full provision and the new extra provision for micro adjustment for ARB models increased cost of risk for the year. But After a very good 3rd quarter, NPLs stood at 8.2%.
Provision coverage reached 96% and cost of risk climbed to 4.4%. All this brought the risk adjusted return to the business to 6.7%. Finally, let's look at Linea Directa. For the 1st 9 months, Linea Directa continued to perform strongly despite continued pressures on premiums. Total insured risk increased by 1.4%, keeping increased linear direct as market share in Spain.
Issued premiums grew only by 0.6%, which, apart from a small increase versus the previous quarter, suggests continued price competition and weak demand, particularly in motor insurance. Nonetheless, Ligandirecta's growth in motor premiums continues to outperform the industry. In home insurance, it grew by 8.6%, which is 3.5x the market growth as of August. In health insurance, Viva sold more new policies. Total policies closed took quarter over 80,000, 30% increase.
This is in line with the business plan. The combined ratio improved again to a Turning 83.3%, more than 400 basis points less from last September. Despite lagging premium growth, it continued to improve in the quarter due to the reduction of 2 60 basis points in claim costs after the traffic slowdown during and after the lockdown. The cost ratio remained flat at 21.4%. Lidadeca's combined ratio, clearly below 85%, is at its slows in recent years, and Line Directa expect to maintain this level for the full year.
Having one of the lowest, if not the lowest, combined ratio in the industry represent a strong competitive advantage that will allow Linea Directa to outgrow its competitors in the coming years despite the new market conditions. If we look at its income statement, net profit went up 22%, improving the results obtained during the first half. This is due to the 9 sorry, to a 7% decrease in claim cost combined with a 2% increase in net earned premiums. These revenue trends from operations resulted in a technical insurance result of €110,000,000 in the 1st 9 months, a 36% increase. This better earnings performance improved the already very high return on equity to 35%.
And because of the absence of dividend distributions, Company's solvency ratio has increased to 2.64%. Okay. Let's move into the conclusion. A quick recap. We have shared with you a consistent delivery of recurrent income from our customer activity despite the impact of new Economic scenario with increased pre provisioning profit.
We have in anticipation of a more difficult environment for income, we are doing a strong effort in cost to remain very efficient and to be able to support pre provisioning profit going forward and also a strong effort in increasing the coverage for potential risk to try to anticipate the impact of the new macroeconomic scenario in consumers' behavior on the small and mid Odiya. And at the end, an improved and appropriate solvency levels with a stable asset quality, improved liquidity, solid capital ratio and a strong buffer for regulatory purposes. And finally, here are some figures that we have already mentioned in the presentation. So in summary, I will review the guidance. So we have for the net interest income growth in the range of mid single digit some fee income growth of low single digit at best group operating income in the lowtomid single digit range group cost below gross operating income growth and the cost of risk in the range of 65 to 70 basis points.
And now I will happy I'll be happy to take your questions.
Thank you, Jacobo. As usual, we will try to group the questions to try to reduce the time for the Q and A. Okay. Let's start with volume growth. Can you elaborate on the performance of the corporate book in this quarter?
And also, what do you expect for next quarters?
Okay. Thank you. Sorry, I did I will try I will repeat Because I have my mute on. I was mentioning that we had achieved during the first half of the year a very high volume in corporate loans due to the ECO lines. In fact, we achieved even above our targeted figures for the entire year.
So we do expect much more stable volumes for the rest of the year. In this Q3, we signed an additional €1,200,000,000 of Ecolines. And in the Q4, we still have some volumes to sign from these state guarantee lines. So there might be some stabilization or potentially a slight growth at the end of the year, but the stationality of the 3rd quarter is normal. It tends to be a very stable quarter.
And the Q4 tends to be more intense in volume growth. However, as I mentioned, we've made a very strong effort in the first half of the year to allocate those E. Coli. So we do not expect any large increase in the last quarter? I would say stable or slightly growth.
Okay. And the same question for consumer book.
Okay. As we mentioned, we do expect a shrink in the Sumic Book, this is something we're doing on purpose because we are more strict on the credit quality of new clients coming into the business. And in additional, the demand, of course, the demand is lower than in previous period. Showed the loan book the book of the consumer finance, we expect a double digit decrease from now into the following quarters. We have already mentioned there is a decrease of EUR 150,000,000 in revolving cards that will stay for the rest of the year for sure and that the only growth that we foresee is in personal loans, not in credit cards volumes.
Having said that, Of course, the situation, the environment has a very correlated impact on those volumes. However, as of today, we expect has some decrease in these volumes.
Moving on to payment and holidays. Can you update us on the moratoriums? Yes.
As we shared during the presentation, the percentage of the portfolio that accounts for remoratoria has been reduced by half. In June, we were at 4%, and today, we are at 2% of the book, in consumer, it is below 1%. So the level of moratoriums is going down. Although we expect that this level, I don't think we will increase anymore. In fact, they should be going down little by little in the following months.
Okay. In moratoriums, have you seen any changes in Portugal?
In Portugal, no, the moratorium is pretty similar. We're still at around 15% of our book is on Moratoria. It's around €1,000,000,000 we have around €600,000,000 in mortgages, which is 14% of the book in mortgages, 18% in corporates and around 15% in consumer. This is more or less the figures which are pretty similar in Portugal, a little bit lower but pretty similar. And we have Bodea, EUR 145,000,000 in state guarantee programs in Portugal.
Thank you. Now moving on to P and L, can you confirm guidance for NII? And any comments for the next few quarters and
the impact of Okay. So the guidance of NII, as I mentioned before, is a mid single digit growth for the end of the year. It is very difficult to provide a good guidance for 2021 now for net interest income. It's still a little bit early. We know that we have a new production in mortgages with a much more share of fixed rate mortgages.
That's something we will it is improving, the front book yield versus the back book yield. We know that the Telcos will provide some support to the growth in the following quarters, but as well, we know that Euribor will slowly impact the book as it will be repricing the 12 months average LIBOR, it is negatively even more every month. So the whole book will be impacted in the future. I must say that the corporate book has 50% is on fixed rates. So that provides you a very good support.
Anything related to the corporate business is much more protected from the LIBOR reduction.
Okay. Moving now on to fees. Again, analysts and investors are asking about the guidance that we have for fees. And what is your reading on the specifically quarterly performance?
Okay. On fees, again, we have a low single digit Growth guidance for the year. I think the quarter was a very good quarter, honestly, because The only topic that has present a negative impact is the payment and collections. And within payment and collections is the credit card activity. And as you know, because of the reduction in mobility over this summer, the number of transactions with credit cards have been Negative, of course, and that is the only impact that we perceive in fees because apart from that, we have demonstrated a strong capacity To compensate this decline, we have assets under management going up, brokerage fees going up, FX fees going up, endorsements fees going up, insurance going up.
So we have plenty of different business lines that provides investment banking going up, so international commerce going up. So we have presented a very good, a very good quarter in terms of fees, but there's nothing we can do about this credit card activity and payments and collection activity, which also companies have had lowest activity, and therefore, the payments have been Slightly smaller than the year before. But apart from that, if we exclude that, I think the bank has presented a very strong commercial activity even during this quarter in summer in Spain.
Moving on to asset quality. Have we can you confirm we have already updated our macro assumptions?
Yes. Yes, we did update the macro scenario from Banco of Spain. I remind you that Banco Spain presented in June some figures related to 2020, 2021 and 2022 forecast of GDP and much more unemployment figures. And that in the 1st week of June, it updated those figures. So those figures presented an improvement Of the 2020 reduction in GDP, it used to be 11.6%, and now it's minus 10.5%.
However, the speed of the recovery that is presented today is slower than the one presented in June. So I think that we have the obligation to update those figures, and that's exactly what we did. And these are the figures that we went up from the scenario 1.
Okay. More specifically in the consumer and SME book, what are we seeing there in terms of asset quality?
I think we share a slide where you can see exactly the composition of the corporate book, where you just see the presence of the SME book. And I think we mentioned that the concept of corporate book and even SME book is quite differential with others companies. We have a large corporate book. We have what we call SMEs Type A and SMEs Type B, and we have the smallest SMEs proportion of a total exposure of 8%, as you see in your screen, which is exactly the same that the one we got in 2018. And the NPL ratio today is even better than the one we have in 2018.
So from that perspective, I think we are quite comfortable with the SME book that we have today, with the overall SME book and same thing for consumer. We have new operations in Ireland. We have new operations also in Portugal, and you see that the overall exposure is at 4% compared with the 3% we used to have. NPL ratio is up at 8.6%, but just bear in mind that we every year, we used to have a sell of different parts of the portfolio. And this year, we have not executed that sell of the portfolio.
Therefore, we could see from now until the end of the year a reduction of the NPL ratio of the consumer business.
Thank you. Can you confirm the cost of risk do you expect for 2020? And any views beyond that? Welcome.
I mean, I confirm that we expect same guidance that we provide since the beginning in March, somewhere close to or below 70 basis points. We have just mentioned today that the range of the guidance is between 6570 basis points. And the things that have changed is that the reality tell us that the cost of risk is much lower than expected. So today, we are at 34 basis points Cost of risk for the recurrent cost of risk and that we had increased a little bit our macro scenario impact for the IRB models, and now it's at 35 basis points for the overall year. So in total, the figure should be below 70 basis points, and this is something that we'll reiterate because the reality today is that the cost of risk today as of today is much lower than expected.
Thank you. Moving on to litigation costs and other provisions. What are your views there? Any updates going forward?
I think for litigation cost, there is a we the FX mortgage keeps a slight reduction quarter on quarter. We still have some litigations, I would say, business as usual. And in this quarter, and it was public, we had a fine for the TAIL, which in English I think is the rate equivalent the annual equivalent rate That was published of around €5,000,000 and that we recorded in this quarter. But apart from that, there is nothing special, no news. And the level of demands, as I mentioned, is slightly going down.
And what is your view going forward?
Again, I think we will see Some sort of stabilization or a slight reduction on this topic as you can understand, the level of uncertainty today is quite high.
Okay. Thank you. On Capital, we're getting questions whether you can confirm if
we had accrued dividends this quarter already? Yes, what we have done this quarter is we have accrued a similar dividend policy as we used to have. So we have accrued from the 3rd quarter results a 50% of their results. So we have retained as capital 50% of the result, and we have accrued 50% of the result of this quarter just for the case that the ECB will allow banks after the 1st January to distribute dividends.
Thank you. Can you elaborate on what drove Greece with assets down in the quarter?
Yes. I think what what it's during this quarter, as I mentioned, we had a more stable book in corporate And a change in the mix of that book. So we have eco guarantee lines that have very little consumption capital and we have more mortgages and we have less consumer finance volumes, okay? So therefore, the consumption of the portfolio in this quarter has been smaller than in other different periods.
Okay. Are there any remaining regulatory impacts pending?
There is only one remaining impact, which is the deduction of the software impact that should be due in the Q4 of this year, and the impact should be around 10 basis points of improvement.
Thank you. And final on capital.
Can you confirm the capital target? Capital target, our guidance still at 11.5%. But I think that under these uncertain times, I think we might be around these figures that we are presenting today, somewhere in the 11.5% 12%, I think should be figures where we feel comfortable. Thank
you. Linea del Vecta, any updates on the spin off plans?
No additional update apart from the determination of Execution of this transaction as soon as we can. Okay. The combined ratio, shall we expect similar level for year end? Combined ratio should be around 83%, 85% for the rest of the year.
Okay. Last two final questions. What are business plans in Ireland?
Business plans in Aland are to continue developing the consumer finance business. And as you know, we have just started to a new business, new business related to mortgages in Ireland, which is is very, very new. We are in a pilot phase, and I hope that in the near future, I can share with you new figures and any updates on the expansion of this new business.
Final, final. Any comments on M
and A? Basically, no comments. I think we like to be independent, and this is the way we will continue to be in the short at least in the short future, but I can assure you that there's no willingness to do any transactions. We're very happy the way we are.
Thank you, Jacobo. Thank you, everyone, for joining us today. That's all from us now. Obviously, the Investor Relations team is at
your disposal to address any further questions you might have. Take care, and goodbye. Thank you all, and keep safe. Hope to see you soon. Thank you.
Bye bye. Have a nice day.