Good morning, and welcome to Banquinta Full Year 'nineteen Earnings Call. Our CFO, Jacob O'Diaz, will now comment on the figures in more detail. Thank you.
Hello. Good morning, and welcome to this presentation of Banquinta's earning From the Q4 of 2019 and the full year of 2019, the related financial statements were posted on the website of the CNMV a few minutes ago and before market opens. All related documents can also be found at this time on the Banquinta corporate website. First of all, a few words to emphasize that we had closed 1 more year with a remarkable performance based on our recurring business in all geographies, Spain, Portugal, Luxembourg and Ireland with us for 7 months so far. 2019 has been our 7th consecutive year of increased net profits for the group.
Among others, our achievements this past year were consistent quarter on quarter performance supported by our customer activity, resulting in a return on equity clearly above cost of equity. Solid growth maintaining net interest income, gross operating income and pre provisioning profit, even excluding inorganic growth Adequate solvency with decreased NPL and liquidity and capital ratios at expected levels are even improving. All this despite a much more challenging environment, together with negative rates, significant investments in the digital front and with lower extraordinary earnings in Portugal originated from the acquisition. In this Brief comparison of key financial indicators. Group loans group total loan book grew by 9% to €60,400,000,000 while domestic lending continued to shrink during the year.
Gross operating income reached almost €2,100,000,000 in the year. It shows the growth close to 6% over the previous year. NPL ratio continues its long term downward trend, the few basis points increase coming from the Evo and Avancar integration were more than offset by the last quarter sale of NPLs in Banquinta Consumer Finance subsidiary. Year on year, it dropped 39 basis points to 2.51%. Finally, group's net profit reached €551,000,000 an increase of 5% from last year.
Without the acquisition of Evo Navankart and other integration costs, This would show an increase of 2.4% from the previous year profit before taxes, a new record high. At the same time, our Z1 fully load capital ratio stand at stable 11.61%, which is comfortably within our guidance for the year, and our return on equity stands at 12.98%, 13.0 percent, if you were around Thus, we can affirm that after closing the full year 2019 in an increasingly difficult interest rate environment, the continued growth in our recurrent commercial activity has been the driving force of revenue growth and that with costs and provisions under control, We have been able to post a new record net profit, the 7th in a row and with an annual compound rate of growth of 24% in the period. Before we look at all our performance indicators, once again, I would like to highlight a different story and strong return on equity. The group's return on equity has maintained steady growth in the last 5 years, as shown in the chart. It now stands at a solid 13%, clearly above cost of capital.
Now we will move on our income statement performance for the full year. Our income statement for the full year of 2019 has proved positive trends in almost all line of revenues: interest income, fee income, trading income, bringing operating income growth to close to 6% and meeting our guidance across the year. Here, you can see the group's cumulative and comparative P and L account as of December 2019 on the left and a like for like comparison with our EVO Group on the right. Will easily notice that the impact from integration Evo and Avancard as of 1st June and in the second half of the year, which is an additional €48,000,000 in net interest income and fee income, an increase of €79,000,000 in expenses, including €23,700,000 in integration expenses at an increase of €32,600,000 in impairments and other provisions, €22,000,000 of them are nonrecurring. The total group's net interest income is up by a solid 8.8%, And the net fee income finally rose by 6.6%.
Other operating income and expenses is slightly down by €27,000,000 or 8 year on year mainly due to increasing regulatory expenses and a forecasted decrease in our linear debt insurance income. Finally, Our trading income grew by 29%, but only €68,000,000 in a year on a better year for dead markets. We proved that group's net interest income remains strong despite a negative interest rate environment, thanks to our solid growth in lending and a positive asset mix. Is up by almost 9% in the year or by 13% since the same last quarter the previous year. The positive seasonality in the 4th quarter commercial activity like every year and the improved market addition did help activity and therefore fee income and asset under management volumes in the last quarter.
Those fee income finishes the year growing at 6 0.6% with respect to the previous year and 15% more than in the previous quarter. It is also up 13% from the same quarter last year. Like for like fee income ends right in our mid single digit guidance. It is up by 5% year on year owing to our increased commercial activity. Other operating income and expenses show a decrease of €27,000,000 or 8 from a year ago due to different factors.
First, regulatory charges increased by 19% or €15,000,000 2nd, the slowdown in the insurance income coming from Linea Directa with a 4.4% reduction in its technical margin for the year. We will analyze later in detail in the following specific chapter. Gains on financial transactions were 29% higher than in 2018, but its contribution of €8,000,000 to earnings is still very low, and it continues to represent less than 3.3% of all group revenues. Total gross operating income has reached close to €2,100,000,000 up by 5.9% from 2018. At the same time, excluding Evo and AvantCar, income growth was 3.1% and quality remains very high as the weight from extraordinary revenues coming from Portugal has fallen by 10,000,000 to only 5,000,000 in this year.
Group operating costs continue under control despite Evo Navankar acquisition and integration expenses. They have grown by 7.2% year on year, mainly due to the acquisition of Evo and Avant Garde. On a like for like basis, the group's costs are clearly under control with almost a 1% decrease with respect to the previous year. The positive income and cost performance have caused pre provision profit to increase by 4.4% with respect to the full year and by 4.5% over the same 4th quarter last year. Like for like growth for the year was up by more than 7.4% and by 9.7% over the same quarter last year.
Loss loan loss and other provisions are up by 38% in 2019 or 27% without Evo After the positive impact of the €62,000,000 of nonrecurrent Badwill from the acquisition of Evo, our profit deferred taxes reached €741,000,000 or 2.8 percent more than in 2018. This will became 2.4% without the Avonavancar Finally, group's net profit has grown by €4,600,000 to €551,000,000 in the year with a help from a lower tax rate, As you know, bad will is not a tax item. Using most of the bad will in the year, group net profit is a true reflection of the real retirement growth rate in another very good year for Banquinta, but an increasing difficult environment. Here, you can see the quarterly income statement were discussing before for each specific line. As always, the 4th quarter is affected by the contribution to the Deposit Guarantee Fund, almost €50,000,000 in 2019.
And relative to the same quarter last year, the main impact is on the quarterly cost of risk last year affected by the NPL asset sale in Portugal and reclassification between impairments and other provisions. Moving on, the group's loan book has grown by a remarkable 8.9% year on year, bringing in over €4,900,000,000 in new loans, including €1,400,000,000 of inorganic growth coming from the Evo transaction. In Spain, while the sector continues contract by 1%, we showed €2,700,000,000 in net new lending, up 5% and not including Evo. In the new mortgages, our market share in new lending jumped to close to 6.4% as of October 2019, which is the last date available. We're moving from €5,800,000,000 to €6,400,000,000 On the other hand, in Portugal, ending up is by percent or an additional €800,000,000 somehow ahead of our business plan for Portugal, where our market shares are still market are still smaller than in Spain, and we plan to increase them.
I will give you more detail in the Portugal slide. Regarding retail deposits, both geographies continue to grow strongly at over 14% year on year. Without Evo, They are up by 7% in Spain from a year ago, while market is growing by 6%. Together with Portugal and Evo Group's customer deposits have grown by €7,200,000,000 to almost €58,000,000,000 despite deposit costs being kept under control. Net interest income has shown strong resilience.
It grew by more than 8.8% in the year and by 13.3% from the same last quarter a year ago. Abo and Avancar's balance sheet were integrated last year and our contribution to our net interest income has been of 41 €1,000,000 for the 7 months of the year. Net interest income in Spain alone saw an excellent performance in the quarter. Growth was 6.8% with respect to the same quarter last year and 2.8% or EUR 7,000,000 more than in the previous quarter. In Portugal, net interest income has also grown by 9.8% with respect to the same quarter 2018 and a 3% reduction in respect to the previous quarter due to €2,400,000 less extraordinary recoveries.
For the full year, excluding extraordinary recovers, Recurrent net interest income in Portugal is up by 17% year on year. Also, you can see the Evo 11 car contribution for each quarter of every year. Customer margin. Customer margin continues to show resilience, and it increased in average by 9 basis points from the last year. It is up 1 basis point from the previous quarter.
This is only owing to the variation in asset yields of +9basispoint and +1basispoint in respective periods with no variation in deposit costs. The yearly yield increase is due to a better asset mix that has been able to offset the impact of the negative repricing of our mortgage back book. The quarterly 2 basis points drop and yields were offset in 1 basis point, thanks the drop in cost of deposits now at 5 basis points at December. We expect our customer margin to remain resilient Even under market pressure in the coming quarters, given the positive delta between our mortgage front and back books, the larger proportion of fixed rate mortgages and the continued improved asset mix in our loan book. Going forward, We expect that asset mix, together with a little help from the cost of deposit, will be able to offset the headwind of the drop in the 12 month deribor.
Based on these trends in margin and in recurring volume growth in deposits and loans, we hope to be able to grow group net interest income by mid single digit in 2020. The composition of our ALCO portfolio has changed slightly in the year. Its size increased by €1,700,000,000 indicating additional liquidity after Evo integration. Today, over 50% of the portfolio remains under amortized cost, over 53% of it is in Spanish government bonds. The entire portfolio's average maturity is 8.8 years.
Its average yield stands at 1.8. As of December, unrealized gains on the total portfolio amounted to approximately €610,000,000 some EUR 100,000,000 lower than in September. Maturities for the coming years are minimal and well spread out until and after 2026. Moving into fee income. Fee income in the quarter has performed as expected with positive seasonality from the previous one and with a better market environment.
It continued to be fueled by growth in recurring business and now with increasing assets under management volumes. This indicates an improvement from the first half and nine months rate of growth. As a result, it now accounts for 23% of our gross operating income. The largest contributor continues to be asset management fees with 32% of total fees, still down by 4% with respect to a year ago. Despite the market slow recovery in the quarter, it's been a very difficult year in equities and mutual funds volume That still compares with a robust first half of twenty eighteen.
The 2nd largest contributor fee income with 25% is payment and collections and credit cards with corporates and SMEs. They continue to grow strongly, having posted a solid 19% increase on the back of our international business actions, the supply changed finance activity. Market recovery from the last quarter helped to offset some of the more volatile sources of fee income, such as brokerage, which ended growing by 4% RFx business with customers, which is up 1% up year on year life insurance sales, risk Related transactions, basically endorsements fees, commercial credit fees, nondisperse fees, etcetera, Another fees from the business are also improving. They are up 6%, 12% and 7%, respectively. Fees on structured finance from Investment Banking are now €24,000,000 up €74,000,000 from a year and in continued effort to increase their contribution going forward.
Therefore, we will continue to push forward volumes and value added products that will make fee income to grow by mid single digit this 2020 under is really the assumption that the market environment will remain somewhat stable through the year. In other operating income and expenses, the contribution of LDA's insurance margin ends the year 4.4% lower than a year ago. This is due to greater competition in premiums like in previous quarters. However, some of this pressure was offset by strong cost control over a flex very flexible costing structure and as we will see later. Regulatory charges increased by 19%, amount to €95,000,000 in the year.
This has a negative effect on other income expenses, which grew by 8% or €27,000,000 year on year. Gross operating income for the year stands at a new high of 2,055 €1,000,000,000 sorry, €2,055,000,000 or €2,055,000,000 and in the same quarter a year ago and reduced by 5.6% from the previous quarter due to the annual contribution of the guarantee fund. In Portugal, gross operating income grew by 2.6% from last year, considering €10,000,000 less in the contribution from extraordinary income, €5,300,000 in 2019 versus €15,300,000 in 2018. All in all, group's operating income grew above mid single digits in 2019. We expect this growth rate to hold for 2020 revenues.
The chart on the left show the contribution to operating income in the last 5 years. In 2019, net interest income accounted for 58% and fee income at 23% of total operating income. This the contribution from other income and expenses, mainly Nida Directa, fell to 15%, and the contribution from non Customer operation remained at 3%. Looking at cost. Looking at the group operating costs, which totaled over €1,000,000,000 They are up 7% from previous year.
You'll see in this pie, The €79,000,000 costs arising from the Evo integration. Recurrent banking costs included in Spain and Portugal, we have increased by only 0.2% over a year ago, while Lidna Direct Insurance costs were 2.8% down, lower than the previous year. Over this €79,000,000 in Evo transaction extraordinary costs, €24,000,000 only relate to integration expenses. Therefore, million only relate to integration expenses, therefore, non recurring and will be not in the next year. Recurring costs in Ewa were €55,000,000 in the last 7 months of 2019.
We expect these expenses to be under control in 2020 with of improving their efficiency. Like for like personnel expenses remain under control in both the banking business and Linea Directa with a small two growth in general expenses on a clear reduction in both businesses. By controlling all our operating expense tightly, We expect to be able to finish the year 2020 with a guidance of mid single digit growth mid single digit cost growth in order to keep cost increases always below income growth and maintain our efficiency in overall banking operations. Group's cost to income jumped 60 basis points after the acquisition of Evo and Avantgard in addition to nonrecurring integration expenses. Excluding these two items, the jaws of recurring expenses remained positive, bringing recurring cost to income to 45.3%.
Moving into cost of risk. Cost of risk remained low at 23 basis points of total credit risk, although increasing by 4 basis points from previous year cost of risk or €32,000,000 The small increase in cost of risk from last year has to do only with the recent integration of Evo and Avancar and the growth in the loan book of the banking operations, although mainly due to consumer finance activity. 2019 total impairments went up by €76,000,000 over the last year, €51,000,000 of them has to do with last year reclassification of provisions. Therefore, the €25,000,000 year on year increase is due to the incorporation of Evoc Group and our growth in consumer lending. Although slightly increased from last year, cost of risk continued to be at all time lows and in line with asset quality and with no signs of deterioration in their current business.
Therefore, we maintain that total cost of risk, which includes credit related provisions and cost of selling foreclosed assets, will be slowly growing towards our long term normalized cost of 30 to 35 basis points. I will note I will go over our management of credit risk, liquidity and solvency. Nonperforming loans continued to drop for another consecutive year, although at a lower rate than previous ones due to the already low level. NPLs fell by 5.8% year on year across the group to €1,680,000,000 a drop of 4.5% in Spain and by 40 sorry, 23% in Portugal. The reduction of almost €100,000,000 since last September in Spain is mainly due to the sale of the NPL portfolio from Maginta Consumer Finance, sequentially reduced our nonperforming levels to close to 5% as we will see later on.
The group's NPL ratio now extends at 2.51% from 2.90 a year ago, a drop of 39 basis points due to the ongoing reduction in NPLs and the sale of the NPL portfolio in the consumer business. In Spain, it remained below half of the average of the sector, which is at 5.0 percent, as you see in the slide. Finally, in Portugal, the NPL ratio now extends at a normalized 2.4%, down from 3.5% a year ago. Total NPL provisions at €814,000,000 after asset sales had a small impact in our provisions coverage now standing at 48, similar to other to our peers. And coverage for foreclosed assets also went down after the yearly sales at 44%, but maintained above the average discount on sold assets.
The group's foreclosed assets portfolio is sorry, is 17% smaller than a year ago, having increased by 58 having decreased by €58,000,000 year on year, a larger reduction than in previous year. This small portfolio NAV accounts amounts for €291,000,000 Total sales in the year amount to 34 percent of the stock from the beginning of 2019. We continue to sell repossessed assets through our commercial network with an average discount on sale slightly higher of 34%, but below our provision coverage. Moving into capital. Our fully loaded Z1 ratio stand at 11.61 percent at the end of the year.
Since December 2018, our retained earnings bring an increase of 67 basis points, 10 basis points more than in September. This increase can offset all the negative impacts of risk weighted assets growth of 33 basis points after the implementation of the new IRB model in corporate, saving over 10 basis points approximately in this quarter and most of the 28 basis points owing to the Evo acquisition. So we've been able to offset half of the impact of Evo. Finally, value adjustments comparing with last year, mainly coming from our ALCO portfolio brings additional 3 basis points. However, compared with last quarter, we have a negative 10 basis points impact from this portfolio.
Other issues such as IP amortization, etcetera, detracts 22 basis points to the December ratio. Total capital ratio and leverage ratios remains mostly stable, up 13.9% and 4.8%, respectively, from previous quarter and within our guidance. Once more, we reiterate our guidance of CET1 ratio in the range of 11.5% for 20 Volume increases in deposits and the incorporation of Evos and Avant Garde since June has helped to close our funding gap in Spain from over €10,000,000,000 5 years ago. Now the group's funding gap is only €1,300,000,000, 66% lower than a year ago and only coming from Portugal, where it shows a strong growth in lending after deposits. As a result of all that, loan to deposit ratio is at 101.8, the lowest level ever, owing to the continued strong growth in retail deposits over the last few years.
The maturity structure of our wholesale funding is well balanced with only €800,000,000 in this year and 0 next year. We enjoy a very comfortable situation with respect to the coming years with an estimated 13.4 €1,000,000,000 in liquid assets and our current capacity to issue over €6,000,000,000 in covered bonds. Just a reminder, In 2019, we issued €500,000,000 in NREL eligible senior preferred debt. And in July, We issued a benchmark senior non preferred bond issue for €750,000,000 also to fulfill yearly I remind you, MREL requirements, 18.87 percent of our risk weighted assets or 8.52 or TLOF, the lowest of all Spanish banks. For 2020, issuance plans are similar to last year in terms of size and instruments, more probably senior nonpreferred.
Now let's review the performance of our business lines and our contribution to group income. Contribution from different businesses has improved its size and diversification if we compare with 5 years ago, as is shown in the graph, While Linea Directa's contribution decreased to 20%, other new businesses such as consumer finance, which now represent 13% And Portugal, now 6% of our incomes became a strong and recurring source of customer businesses and finally, the new Evo Group's contribution with 2% of our incomes. All of this reduced non customer operations, such as treasury or other corporate operations, to only 6% from 17% in 2014. The corporate and SME Banking loan book grew by other 5 percent year on year in Spain, while the sectors ranked by 2.7% at November 2019. This is our 10th year In a row, growing this loan book, this recurrent loan growth is key for the increase in transactional corporate operations And collateral business volume growth, now a very important source of income and fees for the bank.
In Portugal, where we still have a small market share in the corporate sector, new corporate lending is up by 26%, reaching 1 point €7,000,000,000 and a continued effort to increase market share in the mid corporate market. The breakdown of our corporate loan book in Spain shows no major change. In Spain, the number of active corporate customers grew organically at 4% year on year, while our market share in new lending in the year continues to expand. As we have been following through all this year, the main drivers of income in Corporate Banking are our corporate international business that continues to lead in loan book growth, now by 14% year on year. It has become a very important source of income for the corporate segment, with 29% of its total operating income.
International business operating income is up by 7% in the year, and more importantly, Half of its revenues have come from fees rather than interest. Transactional business volumes with corporates, including commercial credit balances, are up 14% as well as the fees generated by very sticky business where we are specialized. In Investment Banking, New products and services have made its loan book and operating income increase by 19% 22%, respectively, from the previous year, Those collected fees increased by 52%. In Private Banking, customer wealth grew by €4,800,000,000 almost €5,000,000,000 in the year, 13% with a positive market effect of €2,100,000,000 Our year end amount of €40,400,000,000 resulted in a 7% compound annual growth rate in managed customer wealth from the 5 years ago, which are €23,000,000,000 in 2014. At the same time, the proportion of managed funds moved from 17% in 2014 to 42% at the end of 2019, with a positive implication in fee income the group.
Personal Banking assets under management are up by 9% from the last year. This rate of growth increased quarter on quarter. Total customer wealth is up by €2,100,000 in the year with a positive market effect of €0,800,000,000 in the period. Net new money was up by €1 point €4,000,000,000 increase from last year. Our delegated and advised assets, including mutual funds, only represent 29% of total managed assets in this segment with a clear room for improvement.
Commercial Banking continues with its strong performance in the main products. Salary account balances are up by 25% To reach €10,400,000,000 new mortgage origination set a new record in recent years at almost €3,000,000,000 of production in the year, climbing 17% from the previous year now with 38% being fixed rate. Our market share in new mortgages jumped from 5.8% to 6.4% in the last 12 months. As a result, the total mortgage back book grew by €1,700,000,000 organically and keeps leading the growth in the Spanish and Portuguese market. Loan to value the portfolio maintains a strong 58% ratio.
Off balance sheet funds are growing again after a more difficult first half of the year, although the low interest rate, basically negative interest rate. High volatility environment persists. As of December, total off balance sheet funds amounted to 30 €400,000,000 up €3,600,000,000 13.7 percent increase and 3% more since September. Year on year, mutual funds grew by 15%, while pension funds grew by 12% and other managed assets with private banking customers grew by over 6%. Let's move on on consumer finance.
Banquinta consumer finance. So this slide refers to our consumer finance activity in Spain and Portugal and do not include AvantCar in Arvan since it still belongs to Evobanko. In the period ended December 2019, our loan book continued to grow by €400,000,000 along with the number of customers, which now sums more than 1,400,000 clients. This pure organic growth brings the total consumer finance loan book to €2,400,000,000 or up 21 percent over a year ago, somehow slowing down from previous year rate of growth. Meanwhile, revolving credit card outstanding decreased by 2% to less than EUR670,000,000 while standard credit cards, those cards payable only at the end of the month, went up by 5%, while personal loans grew about 44% in the year.
After this fine tuning and an LPL sell €100,000,000 approximately in the quarter, credit quality ratio improved and remained under tight control. Now NPLs stand at below 5.7%. Provisions coverage reached 111% and cost of risk is at 3.6%. All of the above brings the risk adjusted return of the business to 8.4%, which looks good and in line with plans, particularly since over 40% of our business is with current banking inter customer with a much better risk profile than the ones in pure consumer finance. Consumer lending in Portugal continues to be relatively small and is included in this figure, it accounts for 7% of the total portfolio or €211,000,000 I will now go over Banquinta Portugal, where balance sheet continues to grow in line with our expectation.
Loan book in Portugal increased by a strong 13% with respect to 2018, mainly in corporate loans, which grew by a remarkable 26% to €1,700,000,000 and by 9% in Commercial Banking, mainly mortgage lending to €4,500,000,000. With respect to customer deposits, €1,000,000,000 With respect to customer deposits are also up by a solid 7%, while off balance sheet funds, mostly unit linked and mutual funds, have increased by 12% to CHF3.4 billion. As for the earnings, the 3% increase in net interest income will be €10,000,000 higher, up 17%, not including the impact of the decrease recoveries, €10,000,000 less this year, €15,000,000 in 20 2018 and 5% in 2019. This positive performance, adjusted for extraordinaries, together with a 3% increase in fee income, we bring 11% increase in total operating income. As in the previous year, strong Cost control and positive cost of risk have led to a 9% increase in profit before taxes to €66,000,000 The extraordinary contribution from NPL's recoveries of BRL 18,000,000 in 2019 are expected to finish this year.
Those cost of risk in Portugal for 2020 will be nearby 0, and therefore, Portugal is expected to reduce its contribution to the group After eliminating all excess provisions since the 2016 acquisition, efficiency will continue to improve once again. Recurring business trends in Portugal continue to improve. Here you can see our quarterly performance in recurring net interest income, up by 27 percent with respect to the same quarter last year as well as our recurring total income with a 28% increase with respect to the same quarter last year since fee income growth continued relevant. In the following slide, we have updated some figures from Evo and Avancak Businesses. Evobanko's balance sheet amounts to €900,000,000 in net loans, of which €800,000,000 are home mortgages €85,000,000 granted since September this year sorry, 2019 and €80,000,000 personal loans, of them only €15,000,000 in revolving credit cards.
As for the liability site ever shows €3,100,000,000 in retail deposits and €319,000,000 in our balance sheet split between mutual funds, pension funds, equity and unit links. Client acquisition has been over 50,000 clients since June to a total of 481,000 customers at year end. Strong commercial activity is now on its way. As per management ratio, customer margin stands at 1.62 percent, NPL ratio at 1.62% as well with a provision coverage of 60% approximately. And for Avant Card Our consumer finance unit, Alana, it has a loan book of €0,460,000,000 split into 2 thirds in credit cards and 1 third in consumer lending to our customers with a 23 year growth year on year and with a total gross yield of 12.6%.
NPL ratio for Avantkari is 1.2%. Avantkari is a very profitable business with a return of equity over 20% and its main task will be to be growing its marketplace always within the limits for the group and without deteriorating the credit quality standards. Let's move into Linea Directa. Linea Directa's contribution in 2019. Total insured risk, this is the old number of policies, continued to increase by 5%, allowing Linea Directa to continue to increase its market share.
Now 6.8% in Spanish motor insurance market, the increase in premiums grew by 4.5%, reflecting a strong price competition, particularly in motor insurance. Nonetheless, Linea Directa's growth in motor premiums continued to almost double the sector growth and in home insurance growing by 10.6%, which is almost 3 times the market growth. These are excellent track records. In the new health business, the new health insurance business, a company called VBAP, it continues to grow in policies, mostly to new customers. Total policies closed the year at 69,460 within the business plan for the new company.
Iberia Directa's combined ratio of 87.9% continues to be well below that of the sector. It improved from the first half of the year, but continues 230 basis points below that of the previous year, impacted by the increase of the claims ratio to 68.1% from 64.8% a year ago. The Baremo adjustments, extraordinary weather issues and a more difficult start of the year are responsible for this 3 30 basis point increase. But Due to 100 basis point decrease in the cost ratio during the year, they offset 1 third of this increase in the combined ratio. Still a combined ratio under 90% clearly represent a very strong competitive advantage that will allow Linea Directa to outgrow the industry in the coming years.
If we look at its cumulative income statements, Net profit is down by 8% from last year. This is due to the 10% cost increase from net claims due to higher than expected claims and non recurring provisions, which exceeds the 5% increase in net earned premiums. This behavior reduces revenues from businesses by €15,000,000 And thanks to strong cost control, its technical insurance is down by 12% to €104,000,000 a 12% decrease from a year ago. This relatively modest earnings performance is still translated into a very high return of equity of 33% while maintaining the company's Solvency II ratio at 211%. Now let me finish with a brief recap of what we have seen in 2019.
In our opinion, it's been a consistent delivery of results year after year in an increasingly more difficult environment, supported by ordinary and recurring income from our customer activity and profitability expressed by a solid return on equity, clearly above cost of equity. We have an appropriate solvency levels with a stable asset quality, capital ratio at expected levels and a solid buffer for regulatory requirements and integration of Evo and Avancar with no major impact in our performance, quality of asset and capital structure. These are the figures that we've shared with you In this session, a solid a very solid balance sheet growth, 9% in lending and 14% in deposits, which we believe it's an outstanding performance. Customer margin, fees and volumes supports by 5% net interest income and 6% operating income growth, which again, we believe it's an excellent performance. Strong growth of recurrent core banking business to offset volatile markets.
Cost to income in our recurring business continues to show positive jaws. Total cost of risk maintained clearly below the normalized, the long term 30%, 35% basis points and capital at 11.6% after the acquisition of Ebo right in our guidance. And also, I would like to summarize what we expect in 2020. Net interest income growth of mid single digit fee income growth in mid single digit group's operating income again in mid single digit growth and group's cost below gross operating income at mid single digit. And of course, as usual, I'll be very happy to take your questions after this long speech.
Thank you, Jacobo, for the effort. Obviously, we have a few questions already here. You have answered in fact, thank you for the Late wrap up on guidance for 2020. Just could you please confirm that this Guidance is on based on the reported figures rather than like for like as we did previous years?
Yes, yes. I think I confirm this out on the reported figures.
Okay. And finally, just on the guidance for 2020. Can you just go through the loan growth expectations in both Spain and Portugal and also touch on the cost of risk that you expect for this year.
Okay. As this year, we have grown €4,500,000,000 But out of this €4,900,000,000 some of them have been inorganically from the contribution of the new business of Evo and Avancar. Excluding this inorganic growth, I would say the like for like growth has been of EUR 3,500,000,000. For 2020, There is no reason why we shouldn't grow again this amount, EUR 3,500,000,000 or somewhere around those figures and of course, including some levels of growth from the new businesses. So I confirm you that growth should be somewhere between €3,000,000,000 and €4,000,000,000 And probably repeating this €3,500,000,000 that we've seen this year.
This in percentage terms, I think it's somewhere between 5% 7% increase even though book.
Okay. Thank you.
I think there was another question.
There was cost of risk. You just kind of repeat for 2020, your guidance?
For 2020, our guidance for 2020, so there is an increase because we have Diego and avancar businesses in house, so that means there is an increase in impairments just because our new business are here. Let me remind you that in Portugal, we've been releasing provisions all these years and we've come into an end. Therefore, in next year, we expect no release of provisions. So basically, a nearby 0 release of provisions. And in Spain, the increase of the cost of risk will be reaching the normalized 30 basis points reference that we have for our business, and it will be correlated with the level of growth of our book that I just mentioned, and I believe the asset mix will be pretty similar to what we've seen this year.
Okay. Let's start now with the quarter performance. Let's, for example, move to the NII. What would you say that are the drivers in the quarter of the growth? And also, you can just break down the main drivers here.
Net interest income in this quarter in our I think it has a very an excellent behavior. Once again, we have the impact of Evo and AvantCar business. I think in the slides where I stated the level of contribution of those business to the NII in this last quarter. We have loan growth and the asset mix that it's still improving the level of NII and it's compensated the expected decrease in the levels of Euribor 12 months. We have also the impacts of the tiering that is contributing to a better net interest income.
And there is a little contribution from releases in Portugal that we have been able to with loan growth in Portugal as well.
Okay. What's the ALCO contribution going forward to the NII?
The ALCO contribution for 2020 will be a little bit lower than in 2019. So we normally account for 12% of the net interest income. So it should be probably somewhere between 11% 12 contribution in the next year.
Okay. Moving now on to the fee income. Would you highlight any one offs In the quarter or again, what are the drivers for the growth quarter?
Okay. So the last quarter has been an outstanding quarter. There is only one one off, which are a success fee on our funds and products related to advisory services, which is a EUR 5,000,000 of, let's say, non recurrent fees based on success fees of our products. But apart from that, everything is recurrent. We have a good quarter on Income related to investment banking products, which is something which we don't know exactly when it happens during the quarter or even during the semester, but now it's now we know it's recurrent.
So this type of business, we will see again the following quarters in the next year. We had a very good performance in asset under management and management fee and mutual funds fees. And this is based, 1st of all, because last year was very bad, then the comparison is very good. We have been increasing the volume of our assets under management quarter after quarter, and this quarter has been a good quarter of commercial activity. It is true that market environment has helped to improve the confidence in the market and the confidence of the clients in order to increase our position in mutual funds.
Of course, the last quarter of the year is also a good quarter of commercial activity. Therefore, the non related to market fees, the non related non market related fees had had a very good behavior, anything related to endorsement, everything related to International commerce activity, I think related to insurance, all this activity have performed very well in the last quarter. And apart from the €5,000,000 of nonrecurring fees that I've just mentioned, the rest is totally recurrent.
Excellent. On the expenses, how much are the nonrecurring expenses that we had booked this year?
I think I've mentioned there's €23,000,000 out of the €79,000,000 which are new from Evonavancar Transactions, euros 23,000,000 were non recurrent.
Okay. Moving down on the and L, okay. Can you explain on the NPL performance in the quarter and also what happened to the Consumer NPL ratio?
Okay. In the last quarter, the 4th quarter, we have sold portfolio of EUR 100,000,000 of NPL's position from the consumer finance business, And this has improved the level of our NPL ratio of the company from 8.8, I think, or 8.9 to 5.4, this is the main impact. There is no major impact apart from the growth of the business, apart from The growth in the consumer finance business, which as you know, accounts for a little more of impairments than the rest of the book And the integration of Evo and Avankato.
Okay. Just to confirm, the NPL impact on the P and L Sorry, the P and L impact of the sale of the assets was neutral?
Neutral.
Okay, perfect. Moving now for On 2L provisions, any updates on the litigation charges?
This quarter has been, I think, the best quarter in litigation charges of this year comparing I mean, the overall year has been around 12% less effort compared to the previous year. And this quarter, compared to last quarter of 2018, It's been a reduction in the effort of around 20%, okay? So we think that the worst moments have already been passed, and we expect that this reduction will continue over the next quarters.
Thank you. On liquidity, regarding our TLTRO strategy and also Isvan's plans regarding MREL
Okay. Regarding the TELTO strategies, what we'll do is we will slowly replace the TensorFlow 2 program with the TensorFlow 3 program. In fact, we have already replaced around €2,000,000,000 of it. And we'll continue to do this in several in the following quarters. And regarding to MREL requirements, As I mentioned, we have the lowest MREL requirement.
We have 18.85 percent of risk weighted assets or 8 0.52% of TLOF. We are meeting NPL requirements, and we will over this first half of the year, We will issue again similar levels than we've done in 2018. These are not very relevant levels overall. And so we feel very comfortable in meeting those requirements.
Moving now on to the businesses. We have Questions on the strategy in consumer finance and how is the growth expected there?
Okay. As we've mentioned, the growth in consumer Finance this year has been a 21% growth, and now we are we have operations also in Ireland. The strategy is to continue to grow mainly in loans, mainly in loans. As you've seen, the growth in 2019 has been 100% in loans and our position in credit cards, it's been very stable with indeed a different mix with more standard credit cards and less revolving credit cards. There is no changes in those strategies, we will still grow in loans, in personal growth in each geography, in Spain, Portugal and Ireland.
And we will focus on taking care of cost of risk and NPL ratio that, as you know, for Banquinter is very important.
Moving now on to Linea Directa topic. First of all, any comments about in the quarter. And then moving on to the guidance or the outlook for 2020.
I think Linea Directa has is performing from commercial activity very well. I mean, it's their growth the level of growth, Honestly, I think it's outstanding. In motor, they are more than doubling the industry. In home insurance, they're almost Multiplying by 3, the level of growth of the industry and of course, in health, which is a new business, They are growing at a very, very large growth rate. So from this business activity, I think they're performing an excellent year, and it's been an excellent quarter as well.
Obviously, there are pressures on the market and The level the margins are under pressure, but I think Line Director will continue to be very competitive in this environment as it has been over the past quarters. The level of efficiency is stable. I think the level of flexibility of their costs And the level of reduction of costs in this quarter is demonstrating that they can properly manage their efficiency ratio. Return on equity has been, again, very performant with 33%. Level of solvency with 211% is still very good and probably one of the best in class.
And as you know, this company, Lirae Directa, is a company that tends to be very prudent and very Therefore, the level of provisions tend to be normally a little bit higher or higher than the industry. From a claims perspective, it has been not a very good year. As you remember, the Q1, we have a couple of nonrecurring and unexpected extraordinary claims. We had in the 3rd quarter another claims due to these climate issues in Spain. Apart from that, the claims quarter 4th quarter has been average in claims.
It's been a normal I would say a normal quarter. What is true is in this Q4, Line Directa had to increased the level of provisions of about EUR 6,000,000 due to the new health business. So the new health business is required to have larger level of provisions due to the still small site. So This one off provision will potentially be partially return over the next quarters in correlation with the level of growth in the number of policies.
Okay. Now moving On to 2020, what's the outlook there in terms of obviously premiums, business and also combined ratio?
I think in terms of premiums, The guidance is to keep similar levels of growth since we've seen in the last quarters, level of activity of policies, of number of insured risk, those levels should stand similar in term of relative performance compared to the industry. That means that motor insurance, we expect that we will still doubling the level of growth for the market and home insurance probably multiplying by 3, the level of performance the level of growth of the industry. From that perspective, we should see still growth. Efficiency or combined ratio levels should stand similar levels that we've seen today. We expect not extraordinary provisions, And we just expect that next year, the claims, we don't find any extraordinary claims as you've seen this year.
So we expect a better year than this year for 2020 in Line Directa.
Okay. Finally, any updates on the announced transaction on Linea Directa?
Not really. We have our Annual General Meeting in March 2019. So until there, up to that, if everything goes As we expect, there will be an approval for the transactions. And after that approval, we will put in place all the mechanism to share with you the process. As I mentioned in my session in December, there is the objective is to return the premium to our shareholders by the Q4 of next year and therefore, to list Linea Directa by the Q4 of next year if everything goes as we plan.
Okay. Last topic, capital. We're getting questions on the performance of the quarter. How much of the trends that we had seen in the quarter of the performance, it comes from IRB models that we gave some guidance regarding the one offs there. And also, if you can just elaborate on the outlook for 2020, whether you see any one offs there.
Okay. So what we've seen in this quarter is a reduction in the risk weight assets, which are mostly due to this corporate model. So we have some lower consumption in risk weighted assets. This accounts for around 10 basis points. And we have seen also is in the set 1 amount a reduction, and this is mainly due to valuation adjustments from the ALCO portfolio, which account negatively around 10 basis points.
The outlook for the rest for the next following quarters is, again, as I mentioned, to have a guidance around 11 0.5%. This is the level where we feel comfortable. I'd like to remind you that we have our minimum SREP level at 8.20, which is one of the lowest or the lowest in Spain, so that's why we feel comfortable with this level. We do not foresee Any surprise? As you know, we have already offset half of the thirty basis points of the Evo transaction over this 1st 6 months with Evo.
And there is no reason why we see that we could fully compensate in, again, 2 quarters this transaction and be, as we are today, in a quite adequate level of CET1 ratio.
Okay. Last one. Any updates on our dividend policy payout?
Nothing new in terms of we still have a 50% payout policy, and there is no changes for the time being neither in the future.
You, Jacob. Thank you, everyone, for joining us today. Obviously, for any further questions, the Investor Relations team will be at your disposal.
Thank you very much. And just to congratulate Alfonso, today is the San Alfonso Day in Spain, San Alfonso. So please join me in congratulating Alfonso