Good morning, and welcome to Vanquinter First Half Results Presentation. Our CFO, Jacob Bodhiad, will guide you through the main details of the presentation.
Thank you. Hello. Good morning, everybody. Good morning, and welcome to the presentation of Banquinta's Earnings from the second quarter and first half of twenty nineteen. The related financial statements were posted on the website of the CNM A few minutes ago, prior to market opening, all related documents can also be found at this time on the Banquinta corporate website.
This is the first time we include the financial statements of Evobanko and Avancar Ireland after the acquisition deal that was Fully closed on May 31. These circumstances have some impacts on figures ahead, and I will try to take you through them and provide As much information as possible, considering the short period of time elapsed since then. First, I would like to highlight That we closed the first half of twenty nineteen once again with solid performance in our recurrent business, both in Spain and Portugal, Pointing out a consistent delivery of results quarter after quarter supported by ordinary and recurrent Income from customer activity obtaining a good ROE above the cost of equity. The new high records in net interest income, Gross operating income, profit after taxes, even excluding recent transaction volumes More than adequate solvency levels with declining NPLs ratio and capital ratio at expected levels. And therefore, we maintain our guidance For 2019 earnings, in spite of a recent sharp decline in interest rates.
I will then start with summarize comparison of the main financial indicators Of the first half of this year, with the same period last year. First of all, our gross operating income has reached a new record high with over €1,000,000,000 in 6 months for the first time. It also shows year on year growth of close to 3% and 4.6% with respect to the same Q2 last year. Our loan book has paused year on year growth for an additional quarter with an incremental rate of 8.3 Percent, while domestic lending continued to shrink year on year as the latest figures from May 2019. As well, banking efficiency remains at an appropriate level below 47% and shows an improvement on last year quarter, maintaining Banquinta as one of the most efficient banks In the sector, our NPL ratio continues on a downward trend.
It has fallen further Since the Evo transaction is down by 16 basis points quarter on quarter and 54 basis points year on year to a record low Of 2.71 percent. Consequently, our group's net profit of €309,000,000 increased 18% from last year and 13 from last quarter. This quarterly figure is positively impacted by our recent acquisition of EVO and Avant Garde, as we will see later on. More significantly, our CET1 fully loaded capital ratio after the deal stands at 11.5%, which is Comfortably writing our guidance of 11.5 percent for the year. All in all, after closing the first half of twenty nineteen, In an increasingly difficult interest rate environment, growth in all our commercial operations maintains a very positive trend That should continue to drive revenues in the second half of the year.
Before we look at all our financial performance indicators, I would like to start again With return on equity, the group's ROE has grown steadily over recent years and now stand at a solid 12.8%. It is to be mentioned that our half ROE is lower than in the previous year due to the equity adjustment of €172,000,000 stemming from IFRS 9. Without an impact, the ROE from the previous year would have been slightly lower. Banquintor continues to post an excellent ROE with respect to It's European peers. This half year ROE is clearly above our cost of equity, and our aim still is to improve ROE and total return to shareholders in the near future.
Now we will move on to our income statement performance in the half year and second quarter specifically. Our income statement for the first half of twenty nineteen has again Showing positive trends in the most significant sources of revenue, net interest income and net fee income. Here, you can see the group's first half comparative P and L account On the right columns, and the same comparative but without Evergroup on the left. As you can notice, the impact of only 1 month of integration of Evergroup is minimal Of the income lines, €6,700,000 It is noticeable in the expenses line with an increase of €13,000,000 And it is relevant in the provisions and extraordinary results line arising from the booking of the bad will in the quarter. Looking Looking first at the total group level, net interest income is up by a solid 4.6%, while net fee income has risen by 3% despite market turbulence.
Other operating income is down by 8% year on year, mainly due to increase in regulatory expenses and a small decrease in insurance income. Finally, income. Trading profits have grown by less than €10,000,000 in an exceptionally high Q2 2019, But still represents less than 4% of operating income. Our net interest income remains strong despite ongoing low interest rate. It is up by 6.3% in the quarter or by almost 8% from the same period last year.
This would be 4% 6%, respectively, On a like for like basis, not including EVO and Avancard, this 6% growth rate over the same quarter of last year shows strong resilience despite Even lower contribution from NPL recoveries in Portugal in the quarter, EUR 1,200,000 versus EUR 3,000,000 last year. Despite the positive Seasonality that affects commercial operations in the Q2, market volatility has not helped fee income earned in assets under management. Thus, We can see fee income growing slightly by only 2% with respect to last quarter and just 1% from the same quarter last year. Year on year, Fee income remains solid. It is up 3%, owing to continued strong commercial activity overall and with an almost €1,000,000 negligible impact post Evo integration of only 1 month.
Other operating income and expenses show a €50,000,000 or 8% decrease compared to a year ago. This is due to 2 different factors that push in the same negative direction with a 50% contribution to the difference. First, a new increase of regulatory charges related to deposit taxes and the single resolution fund, among other things and second, a small slowdown in the performance of our insurance LDA, Which we will review specifically later in the presentation. Gains on financial transactions came €10,000,000 higher but still remain low On a year on year, it has contributed €39,000,000 to earnings, 33% more than in the previous year, still Less than 4% of our revenues. Our total gross operating income has set a new record high, surpassing the €1,000,000,000 mark, up to 3% from 2018.
Income quality remains high as the weight from extraordinary revenues coming from Portugal and Evo are minimal. Group operating costs are under control. They have grown by only 2% year on year, including the acquisition naivebo and below income growth. Like for like banking costs remain almost flat, showing a small 1.3% increase with respect to the previous year and 2% reduction in Lina Directa Insurance cost that has also helped to keep efficiency under control. Our positive income And cost performance has caused pre provisioning profit to increase by 3.4% with respect to the first half of last year and 5% over the same second quarter.
Loan loss and other provisions are up by 21% in the first half or 11% excluding Evo Group due to our efforts to mitigate the positive impact Of the nonrecurrent bad will arising from the acquisition of Evo and our continued commitment to enhance our provision buffer for legal contingencies. Finally, net profit after the accounting of €57,000,000 of bad will has grown by 18% to €309,000,000 in the period and by 39% year on year in the quarter. In like for like terms, the growth rate of net profit is 1%, similar to 1st quarter growth and also 1% with respect to the same quarter a year ago. The chart on the right shows our quarterly net profit performance, recurrent and with extraordinary. Also bear in mind that every year in the second quarter, we make Single Resolution Fund payment, this make it difficult to post growth with respect to the previous quarter.
As I have mentioned before, this year, the second quarter also bears the full impact of the bad will From the acquisition deal. Now a quick look at our quarterly income statement that we have been commenting Before for each specific line. Based on the resilient quarter Here we go. Based on this receiving quarterly income statement performance and after what we consider a very positive first half of the year, we feel comfortable with our guidance for the year That we put forth in January. The group's loan book has grown by an outstanding 8.3% year on year.
You can see the breakdown between Spain, Portugal and Evo plus Avancard. That totals over €4,500,000,000 in loan growth. This is an exceptional growth. In Spain, while the sector continues to contract, We showed €2,600,000,000 in new in net new lending from the last June 2018, up 5%, not including Enevo. Net lending growth in Corporate Banking bring less than half of the increase, almost €1,000,000,000 despite the repayment of the government supplies facility In November 2018.
At the same time, new mortgages account for an additional net €340,000,000 in the first half of the year, With such differential growth, our market share in mortgage lending has continued to grow and now stands at 7.3% as of April 2019, which is the last data available. In Spain, we are seeing an outlier in lending since total sector So loan book is down by almost 1%, by a negative 1% as well in mortgages and by a negative 3.7% according to the Banco Spain data from May. In Portugal, lending is up 13% or an additional €600,000,000 This is in line with our ongoing business plan for Banquinta Portugal, Where our market share now stands at 2.8% in lending and 1.6% in deposits. Retail deposits across both geographies continue to grow strongly, up 12% year on year. In particularly, without Evo, they are up by 5% in Spain from a year ago, intentionally reducing the growth rate from the Q1 in an effort either To either reduce short term liquidity and charge for it to our corporate and institutional customers.
At group level, we have included an additional €3,000,000,000 in customer deposits coming from Evo, while deposit costs have remained almost flat and under control, our market share in retail deposit, excluding Evo, stood at 3.5% in May, up From 3.2% from the previous year. Net interest income continues to show Strong resilience. It has grown by almost 8% despite the below 0 rating environment. This positive trend is mainly due to our loan book growth And sound customer margin management. Evos and Avancard's balance sheet were integrated only a month ago.
Therefore, the impact on both NII and fees is minimal, A mere €6,000,000 in the quarter in net interest income. Net interest income in Spain suggests solid quarterly performance. Growth is close to 6% with respect to the same quarter last year and EUR 11,000,000 more than the previous quarter, a 6.3% increase. In Portugal, net interest income has also grown by 5% with respect to the previous year as well as the same quarter last year. In the first half of the year, excluding extraordinary recoveries, Recurrent NII in Portugal is up by over 13% year on year.
Customer margin continues to improve quarter on quarter. In June, It stood at 2.02, up by 4 basis points from last quarter and 11 basis points from last year, Mainly owing to increasing yields of +5 and 11 basis points in the 3 12 months with almost no variation in deposit first. The yield increase is due to gradual loan yield recoveries and better asset mix, and the small one basis point increase in deposit cost is due to the higher deposit rate in U. S. Of Doros.
Even though deposit repricing has probably hit bottom, we expect our customer margin to remain resilient in the coming quarters given the existing positive delta Between our mortgage front book and back books and the continued improved asset mix in our loan book, we expect these two tailwinds will be able to offset Some of the additional drop in 12 month year over year headwind. Based on all these trends and facing Even facing a very difficult interest rate environment, we should be able to maintain our year on year NII guidance of a low single digit growth for the group. Although the composition of the ALCO portfolio has barely changed since last December, its Size increased by RUB 1,600,000,000 in the quarter to reflect the new balance sheet after the integration of Evo. Still, 47% of the portfolio remains Under amortized cost category, the average duration of the entire portfolio continues to be 3.3 and the average yield at 2.3. As of June, unrealized gains amounted to EUR 630,000,000.
Fee. Our fee income in the quarter has performed as expected with better seasonality than the previous quarter and continued to be Fueled by growth in current business operations and thanks to this, is up by 3% year on year. Still accounts for 23% of our gross operating income. However, this time collected fees are up from the previous year. This is an improvement from the small reduction in the previous quarter.
The largest contribution to fee income is asset management with €73,000,000 of total fees, now down by 12% with respect to a year ago. Despite the markets recovering somewhat in the Q1, it's been a very difficult half year in equities and mutual funds compared to a very robust half year period volumes And compares with a robust first half of twenty eighteen. We expect and hope this situation to reverse during the second half Of this year and make it possible for us to meet our guidance by the end of the year. The 2nd largest contributions to fee income is payment and collections. With Corporates and SMEs, they continue to grow steadily, having added €53,000,000 a solid 13% increase on the back of our growing international trade business and Supply Chain Finance.
This growth rate has to offset other more volatile sources of income such as a brokerage, Which has fallen by 5%, our FX business with customers flat year on year. In the coming quarters, we expect some of these volatile market related Fees to compare better year on year. Life insurance sales, risk related transactions and other fees from the business are also improving By 4%, 15% 13%, respectively, from a year ago. Furthermore, fees are structured financing mainly from investment banking operation, are By 53% from a still very low base, but in a continued effort to increase their contribution. After another difficult quarter for fee income from market related operation, but with some hope for a better comparison during the second half of the year, We are sticking our guidance of mid single digit growth for 2019.
In other operating income and expenses, the contribution from LDA's insurance margin continues to be 2% smaller than previous year. Due to greater competition in premiums, like in the previous quarter, some insurance margin is only €4,000,000 lower. However, regulatory charges have had the most negative effect on other income and expenses, which have grown by 24% of €7,000,000 on year, with other income from various Small items by 3%. Nonetheless, the quarterly performance of this income line is improving, and we expect the 8% year on year decrease to rebound at the end of this year. Overall, gross operating income at the end of the first half stands at a record high of EUR 1,000,000,000 And €5,000,000 an increase of 3% from a year ago.
2nd quarter operating income has grown close to 5% with Back to the same quarter a year ago, but decreased by 1% from the previous quarter, almost offsetting the effect of the Single Resolution Contribution. In Portugal, the small drop in gross operating income from the same quarter last year as well as from the previous quarter relates Only to the decrease in the contribution from extraordinary NPLs recoveries as we've been anticipating. The graph on the right shows the contribution from our various sources of revenue to gross operating income. It indicates a good diversification To counter the ongoing extremely low interest rates as well as a very small contribution from non customer business of only 4%. Net interest income accounts for 57 percent, fee income for 23%.
Other expenses, mainly Dina Directa sorry, other income and expenses, Mainly DINDA Directa has been reduced to 70% and contribution from non customer operation 4%. I will now go over operating costs. They have amounted for €514,000,000 up 2.1%. 73 percent of operating costs corresponds to banking, including Portugal and Evo, with only €7,000,000 in the quarter. The rest is from Eleta Insurance and more a much more flexible and volatile business model.
There are some differences in growth rates, while this year, Linea Directa Costs are down by 2% from the same quarter last year. The growth rate of banking cost is up by 3% compared to the same Quarter to last year, including €7,000,000 from the acquisition of Evo in the quarter. Thus, in a like for like comparison, Our banking operation costs, we have grown by only 2.5%. You should also point out that Portugal's operating expenses fell by 6% from the same quarter a year ago And by 3.6% from the previous quarter. By tightly controlling our operating expenses, We expect we will end the year within our low single digit guidance with the aim of keeping growth in expenses below growth in income and maintain Our improved efficiency in overall banking operation.
As we have done with Portugal, our plan for expenses for integrating Evo It's to keep them separately during the 1st year and offset them and as well as the negative operational result from the coming month with the bad will from the deal by the end of the year. All in all, jaws remain positive despite ongoing expenses and investments in our technological and digital transformation. We aim To keep our banking cost to income ratio within the 46%, 45% range, well below the industry average. First half cost of risk stand at 24 basis points of total credit risk and increased by 3% points from a year ago With the provisions that were classified in 2018, in regard to the full year 2018, when the total cost of risk amounted €122,000,000 or 19% basis point. The increase was 5 basis points as of June 2019.
Despite the small quarterly variation, cost of risk is running at minimums. We continue to expect that by the end of 2019, total cost Of risk, which includes credit related provision and cost of selling foreclosed assets, will be in line with the previous year And with a long term trend towards the 30, 35 basis points level. Okay. I will move on To our management of credit risk, liquidity and solvency, NPL loans have declined once again. They have fallen by 9% year on year across the group and by Almost 50% in Portugal after the year end sale of €128,000,000 in NPL, as you can remind.
The group's quarterly NPL ratio now stands at 2.71%, and it is 2.68% in Spain after the integration of Evo With a very small impact. And in Portugal, it now stands at 2.9%, down from 6.5% earlier ago. Total NPL provisions amount to €909,000,000 up €28,000,000 or 3%. Thus, we have increased our NPL coverage In the quarter, coverage for foreclosed assets is at 45%, well above the average discount on sold assets. The group's foreclosed assets portfolio is 19% smaller than a year ago.
We have decreased €72,000,000 and it amounts now To €315,000,000 Total sales in the quarter amounted to 18% of the stock from the beginning of this year. We continue to sell more Assets through our commercial network with an average discount sales of 28%, well below our provision coverage. Therefore, we always find a small positive impact on earnings. Let's move into capital. Our fully loaded CET1 ratio stands at 11.5 percent at the end of the quarter and after the acquisition of Evo, reflecting the 29 basis [SPEAKER JACQUES VAN DEN BROEK:] Points, capital consumption already previously announced.
Since December 2018, the negative impact of risky assets Coming from loan growth in Spain and Portugal of 14 8 basis points, respectively, are part of the 34 basis points negative income Coming from the risk weighted assets and IRB models. On the other hand, our organic capital generation brings an increase of 38 Basis points in the 6 month period and is able to mitigate in part the negative impact of 29 basis points owing to the EVO acquisition And some are insurance business and valuation adjustments that account for only a net positive of 1 basis point. Both our capital ratio and our leverage ratio remained fairly stable, 30.8% and 4.8%, respectively, from previous quarter And well within our guidance. As a reminder, 2019 MREL Requirements. Our ratio is the lowest among all quoted peers, standing on 8.20 percent for Z1 And 18.85 percent of TLOF.
This speaks clearly to Bancinterest asset Quality and a strong business model. Our GAAP of 3 60 basis points between our current CET1 ratio and the regulatory requirement in addition to The quality of capital with negligible DTAs make us feel very comfortable. Therefore, we are reiterating our medium term guidance of CET1 Core equity ratio in the range of 11.5%. Continued balance sheet increase In both deposits and loans plus the incorporation of Eros Avant Garde, balance sheet assets as of June have improved our funding gap, now a new record low of Less than €2,000,000,000 from €4,200,000,000 Now the gap is only €800,000,000 in Spain and €1,200,000,000 in Portugal, Where it is slightly increasing due to a strong growth in lending over deposit. As a result, our loan to deposit ratio has improved.
It now stands at 102.5 percent, its lowest level ever, owing to growth in retail deposits over lending in the last 8 quarters. The maturity structure of wholesale funding remains well matched. We can easily assume these amounts over the next 2 years with well over €12,400,000,000 in liquid assets and our capacity to issue up to €7,100,000 in cover bonds. In the first half of 2019, we have issued an MREL eligible senior preferred debt in amount of €500,000,000 In order to offset future maturities and the Telstra funding to be amortized in June 2020. Furthermore, using market opportunities, on July 8, We have successfully closed issuance of a benchmark senior non preferred bond issue of €750,000,000 in order to fulfill MREL requirements.
Last but not least, on July 18, Moody's has upgraded our long term senior unsecured debt rating to Baa1 with a stable outlook. Now let's look to To review the performance of our 5 main strategic business lines, the corporate and SME Banking loan book amounts for Amounts to €25,300,000,000 This is a 4.5 year on year increase in Spain, while the sector has ranked by 3.7%. We have been an outlier for more than 9 years in a row without any major change in the risk profile of the bank Nor in the required raro raro raro for these specific businesses. It also helps growth in low cost deposit, such as corporate site accounts And collateral business, we've generated fee income for the bank. In Portugal, where we still have a small market share in the corporate sector, New lending is up by 41%, reaching €1,600,000,000 with the aim of continually increasing our market share amid corporate market.
A breakdown of our corporate loan book. Dispensure is having loans to large enterprises growing at 1%. This This is due to deleveraging and disintermediation in the very large enterprises. The rest is almost split between loans to medium sized enterprise between €5,000,000 €15,000,000 in turnover, up 27%, with a strong 9% increase from last year and small and medium enterprise, less than €5,000,000 in turnover, up 20%, up 6% year on year. With this lending growth, we are improving the asset mix of our loan book and preserving average asset asset Despite increasing competition, in Spain, the number of corporate active customers has organically grown by 4% from a year ago.
Our market share in new lending continues to be above our natural market share. Therefore, our market share continues to expand in these strategic segments. Our Corporate International business leads in loan book growth and is a very important source of income for the corporate segment, particularly in trade and For finance, its operating income is up by 15% and represents close to 30% of operating income. This Profitable business continues on an upward trend, has grown its loan book by over 23% year on year. In this difficult interest rate environment, this is a very significant as almost half of this business revenues come from fees rather than interest.
In Investment Banking, ongoing products and services have made both its corporate loan book and operating income increase by 15% 18%, respectively, from the same Quarter last year. Also, corporate fees collected in the quarter have increased by 24% Respect to the year above. In Private Banking, customers' wealth grew by €2,500,000,000 in the first half With a market effect of nearly €1,300,000,000 this results in a 4% increase in managed wealth from the same semester a year ago to €38,000,000,000 More important, we are now collecting Fees in more value added managed funds now, which has turned at €16,900,000,000 or 44 overall managed assets. This is €2,000,000,000 more than in December. In Personal Banking, assets under management are up by 5% from the same last year.
Cargo Wealth is up by 1 point 4% in the first half with a market effect of €500,000,000 Our delegated and advised assets, including Mutual funds represent over 31% of total managed assets in this segment, where fees are more sizable than in the rest of assets under management. Commercial Banking continues with its strong performance in 2 of their main products. On the one hand, payroll Account balances are up by 24 percent to €9,500,000,000 On the other hand, new mortgage totaling €1420,000,000 in the last 6 months have climbed 10% from the same period last year, 30% of which are fixed rate mortgages and loan to value are on the 64% level. Our market share in new mortgages stands at 5.9%. As a result, the mortgage back book keeps leading the growth in both Spanish and Portuguese market with good quality indicators, loan to value of 59% 8% of total loan book at fixed rates.
Off balance sheet funds are growing again after the last two quarters of 2018, which were very difficult due to the low interest rate environment. As of June 2019 total assets amount to €30,100,000,000 a 7.5% increase with respect to the same date last year and 2.4% more Through December. With mutual funds staying almost flat, this growth refers mainly to pension funds, Portugal and other managed assets like CCAPs or investment vehicles. As our mix of funds, 61% of funds are managed by third parties. The average fees of own funds managed as of June 2019 is stands at 54 basis points, down 3 basis Now let's look at Lina Directa.
Lina Directa continues to perform very well from another quarter. Insured risk Have increased by 7% and maintains LinaDirecta's market share over 7% in motor insurance and close to 3% in home insurance, increase of 7.1 percent in new policies and 6.1% in premiums clearly reflects pricing pressures in the sector, Particularly in motor insurance. Nonetheless, Linea Directa's growth in motor premiums almost doubled the sector growth and triples home insurance Sector growth. Linea Directas Group half yearly combined ratio of 88.1% continues to be well Below that of the sector, although its claim ratio jumped 3 basis points in the quarter to 68% after a difficult start of the year, The growth rate of claim costs has been reduced by 1%, showing a better behavior of claims during the second quarter. Nowadays, an 88% combined ratio represents a strong competitive advantage and has allowed LDA to outgrow the lending and a 28 Percent increase in total loan book growth year on year.
Credit quality ratio remains under control. NPLs stand at 8.8% and cost of risk at 3.5%. The risk adjusted return on Up 8.3% continues to be favorable, particularly since over 40% of our current business is with current banquito customers with a better risk profile and somewhat Lower spreads. Moreover, for another quarter, all growth continues to come from personal loans rather than credit cards revolving lending. In Portugal, consumer lending already accounts for 7.8 percent of total portfolio of €2,200,000,000 Once we include the balance card loan book of €400,000,000 18% of the total loan book will be in Irish assets, Better diversifying our consumer finance exposure geographically.
As always, I'll now go over Banquinta Portugal's main quarterly and half yearly figures. Balance sheet Growth is in line with our expectation. Our loan book in Portugal increased by strong 13%. We could see continued concentration in corporate loans as positive They have grown by 41 percent to 1,600,000,000. In Commercial Banking, both mortgages and small consumer lending are up by 4%, amounting To EUR 4,200,000,000.
With respect to the first half of twenty eighteen, customer deposits also grew By 13% year on year with off balance sheet funds, mostly unit linked and mutual funds, increased by 7%. As for earnings, the €2,000,000 decline in net interest income is only due to the decrease in extraordinary NPL recoveries. 2.6 percent EUR 2,600,000 in this year versus EUR 10,500,000 EUR 10,100,000 in the previous year. I repeat, 2.6% last year versus sorry, 2.6% this year versus 10.1% last year. Otherwise, growth in recurrent net interest income should be close to 15%.
This positive performance adjusted for externalities will bring about a 3.3% Increase in total operating income. At the same time, strong cost control and positive cost of risk have led to a strong increase of 11% Of profit before taxes, recovered NPLs and the sale of an NPL portfolio have freed up credit provision, which have Improved from last year. Recurring business trends in Portugal continued to improve. Here you can see our quarterly performance in recurring. Recurrent net interest income, up by more than 17% As well as our recurring total income with a 4% increase.
The small decrease over the previous one only has to do with the 1,000,000 fee reclassification in May. As in our business plan, Banquito Portugal's cost performance is well constrained, dropping by 6% from the same quarter last year And by 4% with respect to the previous one. Finally, its pretax profit now less volatile to much lower NPLs recoveries is Clearly showing improvement quarter after quarter. This slide Includes some of the most significant figures of our recent Evo acquisition and Avancard acquisition in relation to the balance sheet volumes and the number of customers in both markets Spain and Ireland. On balance sheet terms, it brings €1,300,000,000 in loans in total, of which €800,000,000 are home mortgages And €100,000,000 personal loans in EVO.
And for Avancard, it brings €300,000,000 in credit cards consumer lending and €100,000,000 in personal loans To Irish customer. As for the liability side, the group gross €3,200,000,000 in retail deposit, split between €600,000,000 in checking accounts And €2,600,000,000 in time deposits coming from Evobanko. It also brings €300,000,000 of balance sheet funds from Spanish customer. So let's move to the summary. I will just want to reemphasize The consistent delivery of results quarter after quarter supported by ordinary and recurring income from customer activity maintaining a good ROE About cost of equity, a new set of results with new high records in net interest income, gross operating income, profit after taxes Even without recent transaction volumes, more than appropriate solvency levels considering declining NPLs and capital ratio At expected levels.
And therefore, we maintain our guidance for 2019 earnings in spite of a recent sharp decline in interest rates. Here are some figures as a summary. To highlight the resilient results we have presented today: A solid balance sheet growth of 8% in lending and 12% in deposit. Customer margin continues at record highs. Strong growth Of recurrent core banking fee income to offset volatile market effects, cost to income continues to show positive jaws To a good expense income management, even after the Evo integration, total cost of risk Maintain below the 30%, 35% long term range and capital ratio in line with our guidance at 11 point 5%.
Now I'll be happy to take questions from you.
Thank you, Jacobo. Probably, we can start with the questions regarding balance sheet and volumes. First one, How much of the loan book growth in the quarter was organic? How much came from Evo? And what shall we expect going forward?
Okay.
As we've mentioned, Evo has brought €1,000,000,000 Evo and Avancard, euros 1,300,000,000 in loans, of which €800,000,000 are home mortgages, euros 100,000,000 in personal loans. This is The slide that comes from Evo. From avant garde, we have €400,000,000, which €300,000,000 are credit card consumer lending and €100,000,000 in Personal loans. For in terms of expectations, I think We have provided a good set of growth in the Q2. I think This growth has been quite diversified.
So during the year, we have EUR 800,000,000 growth in mortgages. We have around EUR 1,400,000,000 coming from loans. We have EUR 700,000,000 coming from commercial credit, EUR 0.8 billion from credit And so on. So I think we there is no reason why we shouldn't expect a good second half of the year, Even though we understand that the market is still shrinking, however, we have been demonstrated quarter after quarter that We can beat the market and we can keep growing. I don't know if we will be able to grow with such a strong performance, but I just as a reminder, July December tend to be the most intense months in the year in terms of New production in loans and mortgages, so why we should expect a good second half of the year?
Thank you. Moving now on to the ALCO portfolio. There was an increase on the size of the portfolio. Can you go through the ALCO strategy? Yes.
The growth of the ALCO portfolio is basically due to the avantcard and evo transaction. So we have an increase of EUR 1.6 percent well, EUR 6,000,000,000 of the ALCO portfolio. And this is the main reason why it has grown. We keep our average maturity of 8 years, duration of 3.3%, and I think we have A very good yield of 2.3%. So I think this is a good ALCO ALCO portfolio in European, nothing no news basically and a good set of unrealized gains of EUR 630,000,000.
Okay. We move now to the P and L. We have some questions on the NII growth in the quarter. You can Frank, go any further?
Well, there is a different reason. First of all, obviously, it's the volume that I've just mentioned. So we have a very strong quarter in terms of volumes, and this is a good reason. Then we have We still haven't even if it's difficult to understand because we see that interest rates are sharply going down, but we're still repricing our mortgage A portfolio with a better spread than 1 year ago. We also have the new production of mortgages come with a better spread or better yield than the back So yield than the back book.
So this help us as well to increase the net interest margin. We have a diverse while Good diversification of our growth. As I mentioned before, we have a lot of loan growth coming from transactions related 2,000,000 Banking related to international commerce, and all this provide us a better margin. And that's, I would say the main reason. We are, as you have seen, month after month, quarter after Quarter increasing the proportion of fixed rate mortgages versus variable mortgages, so that will provide as well a better margin.
Okay. How would you see the target for the year in terms of NII?
So I think we as I mentioned, we keep our guidance Over low single digit in terms of growth for the overall year. I just want A quick reminder of different things. In terms of volumes, of course, we have Evo and Avancar coming to the group. So this will provide a new flow of income in terms of net interest margin. Of course, Banquinter Spain and Banquinter Portugal Still providing good set of growth, and this should support our growth in NII.
I also want to mention, as I just Make a quick reminder that new production in mortgages of fixed rate asset of fixed rate mortgages are at 32% And 8% in the entire book. So this is something that you will see in following quarters, again increasing. Also, reminder that the corporate banking business has Good proportion of this loan book is related to fixed rate assets to fixed rate loans, which Which will be not affected by a decline in interest rate. As well, in the corporate business, not all the loans are related to You're right, 12 months. We have also transactions that are related to the maturity of each transaction and The rate the short term rates have declined much less than the 12 months.
Also, I'd like to remind that the wholesale funding, Of course, we benefit of a reduction in interest rates. So we have a there is some maturity with the high cost Issues that will be replaced with much cheaper issues. And obviously, we have our ALCO team That tries to hedge and tries to protect from this strong movement in interest rates. So for the time being, I don't see any reason why we should As of today, we should move our guidance in net interest income for the income here. It's true that interest rate has gone down.
We are today, I think, at 31, negative year over 12 months. And we don't know today what the ECB will suggest, But we will fight. We'll
Thank you. What about the fee income? What shall
we expect on that line? Okay. So fee income, as I mentioned, anything related to market, I think, will be Starting to improve the comparison in the following quarters. Just to remind you that the first two quarters and half of the third quarter last year were very strong in markets And increase quite a lot the value of the portfolios. Therefore, the comparison in All fees related to the markets will improve month after month until the end of the year.
Something that is going to be difficult to change is the average fee of the mutual funds that due to MiFID II from last year, you know that the average Fee has been reduced. Anyway, apart from the market related fees, the other type of fees are increasing With a very, very strong performance. They are all related to real business activity with recurring activity. So we see anything related to, as I mentioned, international commerce providing good fees in terms of payments and transactions And anything related to risk drones. So from the investment banking products also provide us a good Set of income related to products adapted to private banking clients, but also to support specific Financial structures to corporate banking business.
Therefore, we think and of course, we keep our guidance Of a mid single digit growth in fees for the end of the year.
Okay. Moving now on to the expenses. What is This level the level we have seen in the quarter is recurrent? Or is there any impact coming from the EVO transaction? Okay.
Yes. From the
EVO transaction, we have recorded a Debt of around €7,000,000 in expenses. So these are nonrecurrent expenses Due to the deal, which is important is that Linea Directa is controlling very well their costs. Portugal is controlling very well their costs, And Spain is controlling quite well their costs as well. So in average, I think that the average increase of cost is under control And as I mentioned, it's below the increase of income. And we will keep and We will manage strongly our jaws to keep them as positive as possible.
Therefore, we keep our guidance again low single digit growth in expenses. Yes, sure.
We keep our guidance So low single digit growth in expenses.
Okay. Moving now on to provisions and cost of risk. Can you just go through the details of the quarter and also whether you had any updates on legal provision or any other risk arising from litigation such as credit cards and so on.
Okay. Coming from I'll start first with the last point. Regarding to the litigations cost, once again, We have a recurring quarter, I would say, in terms of our litigation costs. From the topic related to credit cards, Up to now, we honestly, we do not have any relevant issue with this topic. Therefore, that's the reason why we don't even mention it and Neither in terms of volumes, neither in terms of provisions.
There is no nothing relevant on that side. In terms of cost of risk, There is an increase in the overall provisions, which is our first of all, we have Evo and Avancar, which accounts for almost EUR 2,000,000 of additional cost of risk. And then due to the Evo transaction and due to the bad will that will have arise, as you've seen in our account, We have increased or we have anticipated our buffer For potential legal expenses or legal provisions of about EUR 10,000,000 in this 2nd quarter it is Q2. Apart from that, the remaining figures are as usual. In terms of cost of risk, it's a slight increase, but this is mainly due to a less release Of provisions in Portugal.
Moving on to linear director business. What shall we expect for the remaining of Here, and how do you see the combined ratio evolving? I see
the combined ratio will stay similar, I would say even equal to the figure we've seen today. I think the trends will be very similar. I think Linea Directa is performing very well in terms of growth, in terms of new business acquired, in terms of beating The industry and growing 2 times or 3 times depending on the industry. I think the market is under a lot of pressure in terms of margin, as I mentioned. So I will see as well this slight this minor gap between the number of policies Sold and the increase in premiums from the P and L perspective.
I think the claims, We had an extraordinary bad first quarter in terms of claim cost. We've seen the second quarter This level is coming down to a normal level, and I don't see this New increase in terms of claims similar to the Q1. So I will suggest that the LDA's P and Ls in the future quarters will be quite similar to the one that we've seen in the Q2, with pressure in terms of Margins, good cost control and trying to absorb the negative Q1 in terms of claims cost.
Okay. We move to capital now. A few questions here. Can you just guide us through the different impacts in the quarter?
Okay. So in the quarter, first of all, we have the Evo transaction. So basically, we have these 29 basis points that you Already we're aware of because this is the same figures that we provided in September last year. So this is something that we were already anticipated. Just a quick reminder that in the overall year, we had not any impact related to TRIM and that the IFRS 16 impact In the entire year, has been of 5 basis points, okay?
There is a positive impact, Which is the new IRB model for corporates. We have been approved our IRB model has been approved by the ECB. In this quarter, although we have just been able to recognize a slightly part of the overall benefit, So in this month in this quarter, we have benefit of around 6 basis point increase of this new IRB model for corporations. And we expect in the following 2, 3 quarters to benefit of further Additional basis points that we will be able to freeze in the next quarters, probably at the end of the year or the beginning of next year. Other comments are related to the risk weighted assets.
So obviously, we had a very, very strong second quarter in terms of Loan growth, and this obviously is reflected in the consumption of the risk weighted assets. Other things that I might take you through. We do not foresee any regulatory And news at the end of the year, of course, we have the second and the 4th quarter every year tends to be more intense in terms of loan growth. So that's why their risk weighted asset consumption is a little bit larger?
And now Sorry, just to confirm, no regulatory charges in the quarter are expected going forward?
In terms of capital?
Yes, in the capital, sorry. We didn't have any regulatory
No, no, no. Not in the exporters. There's nothing.
Okay. Just to confirm that. Okay. Just a few Final questions. Do we have any plan for the new round of CLTROs?
Okay. So as you know, we have As of today, we have €4,000,000,000 that will mature in June 'twenty. We have €2,500,000,000 that will mature in March 'twenty one. We might want to go to this TLTRO III to renew some Volumes that will mature in June. However, our new liquidity position, which is much stronger than some years ago, We might want to renew part of the volume, not all of it, part of the volume.
Obviously, the program seems to be less attractive. By any way, we might want to renew part of this €4,000,000,000 that will mature in June 2020.
Okay. Just to confirm, once again, the guidance on fee and NII income is excluding the Ivo transaction? Yes. Okay. Had a few questions on that.
And last question on EVO. Do we have any plans for the bad weather that we are generating in the quarter? And what are the expected evolution of the business? Evo. Evo,
Yes. Okay. So today as of today, it's still I mean, we have EVOS just for 1 month. So it's a little bit too early to provide you Some guidance, if I may, about the business. So the business has some objectives in the 2nd part of the year To focus on new client attraction and new loan production, new Commercial activity basically, but I hope you understand that it's too early For us, to provide you some guidance about EVO and Avancar.
Avancar, I just remind you, is a very profitable business. So It's a good ROE, and therefore, it's a good acquisition price.
Okay. That's all for now. Many thanks for joining the call and for any remaining questions. Obviously, the Investor Relations team Thank you. Bye bye.
Thank you. Have a nice day. Bye.