Good morning, and welcome to Bankinter first half results presentation. Our CFO, Jacobo Díaz, will guide you through the main details of the presentation. Thank you.
Hello. Good morning, everybody. Good morning and welcome to the presentation of Bankinter's earnings from the second quarter and first half of 2019. The related financial statements were posted on the website of the CNMV a few minutes ago, prior to market opening. All related documents can also be found at this time on the Bankinter corporate website. This is the first time we include the financial statements of EVO Banco and Avantcard Ireland, after the acquisition deal that was successfully closed on May 31st. 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 2019, 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. 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. Therefore, we maintain our guidance for 2019 earnings, in spite of a recent sharp decline in interest rates. I will start with summarized 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 EUR 1 billion in six months for the first time.
It also shows year-on-year growth of close to 3% and 4.6% with respect to the same second quarter last year. Our loan book has post year-on-year growth for an additional quarter, with an incremental rate of 8.3%, while domestic lending continued to shrink year-on-year, as the latest figures from May 2019. Banking efficiency remains at an appropriate level below 47% and shows an improvement on last year quarter, maintaining Bankinter 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 transactions, down by 16 basis points quarter-on-quarter, and 54 basis points year-on-year to a record low of 2.71%. Our group's net profit of EUR 309 million increased 18% from last year and 13% from last quarter.
This quarterly figure is positively impacted by our recent acquisition of EVO and Avantcard, as we will see later on. More significantly, our CET1 fully loaded capital ratio after the deal stands at 11.5, which is comfortably right in our guidance of 11.5 for the year. All in all, after closing the first half of 2019 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 our half ROE is lower than in the previous year due to the equity adjustment of EUR 172 million stemming from IFRS 9.
Without an impact, the ROE from the previous year would have been slightly lower. Bankinter continues to post an excellent ROE with respect to its 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 2019 has again shown 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&L account on the right column, and the same comparative but without EVO group on the left. As you can notice, the impact of only one month of integration of EVO group is minimal of the income lines, EUR 6.7 million.
It is noticeable in the expenses line with an increase of EUR 13 million, and it is relevant in the provisions and extraordinary results line arising from the booking of the badwill in the quarter. 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 increasing regulatory expenses and a small decrease in insurance income. Finally, in income, trading profits have grown by less than EUR 10 million in an exceptionally high second quarter 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% and 6% respectively on a like-for-like basis, not including EVO and Avantcard. This 6% growth rate over the same quarter last year shows strong resilience despite even lower contribution from NPL recoveries in Portugal in the quarter, EUR 1.2 million versus EUR 3 million last year. Despite the positive seasonality that affects commercial operations in the second quarter, market volatility has not helped fee income earn in assets under management. 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 EUR 1 million negligible impact post EVO integration of only one month. Other operating income and expenses show a EUR 50 million or 8% decrease compared to a year ago.
This is due to two 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. Second, a small slowdown in the performance of our insurance, LDA, which we will review specifically later in the presentation. Gains on financial transactions contain EUR 1 million higher, but still remain low on a year-over-year. It has contributed EUR 39 million 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 EUR 1 billion 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 of EVO, 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 Línea Directa insurance cost that has also helped to keep efficiency under control. Our positive income and cost performance has caused pre-provision in 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 all 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 non-recurrent badwill arising from the acquisition of EVO, and our continued commitment to enhance our provision buffer for legal contingencies.
Net profit after the accounting of 57 million of badwill has grown by 18% to 309 million EUR 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 first 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. Bear in mind that every year in the second quarter, we make the 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 badwill from the acquisition deal. A quick look at our quarterly income statement that we have been commenting before for each specific line.
Based on the resilient quarter. Based on this resilient 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 outstanding 8.3% year-over-year. You can see the breakdown between Spain, Portugal, and EVO, plus Avantcard, that totals over EUR 4.5 billion in loan growth. This is an exceptional growth. In Spain, while the sector continues to contract, we show EUR 2.6 billion in net new lending from the last June 2018, up 5%, not including EVO. Net lending growth in corporate banking bring less than half of the interest increase, almost EUR 1 billion, despite the repayment of the government supplies facility in November 2018.
At the same time, new mortgages account for an additional net EUR 340 million in the first half of the year. With such differential growth, our market share in mortgage lending has continued to grow and now stand at 7.3 as of April 2019, which is the last data available. In Spain, we are still an outlier in lending, since total sector 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 de España data from May. In Portugal, lending is up 13%, or an additional EUR 600 million. This is in line with our ongoing business plan for Bankinter 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-over-year.
In particular, without EVO, that are up by 5% in Spain from a year ago, intentionally reducing the growth rate from the first quarter in an effort to either reduce short-term liquidity and charge for it to our corporate and institutional customers. At group level, we have included an additional EUR 3 billion in as 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 zero rate environment. This positive trend is mainly due to our loan book growth and sound customer margin management. EVO's and Avantcard's balance sheet were integrated only a month ago, therefore, the impact on both NII and fees is minimal.
A mere EUR 6 million 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 million 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 four 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 three and 12 months, with almost no variation in deposit cost.
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 the US dollars. 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 Euribor headwind. Based on all these trends, and even facing a very difficult interest rate environment, we should be able to maintain our year-on-year NII guidance of low single-digit growth for the group.
Although the composition of the ALCO portfolio has barely changed since last December, its size increased by EUR 1.6 billion in the quarter to reflect the new balance sheet after the integration of EVO. Forty-seven percent 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 million. Fee. Our fee income in the quarter has performed as expected, with better seasonality than the previous quarter. It continued to be fueled by growth in recurrent business operations, thanks to this, is up by 3% year-on-year. Accounts for 23% of our gross operating income. 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 EUR 73 million in total fees, now down by 12% with respect to a year ago. Despite the markets recovering somewhat in the first quarter, it's been a very difficult half-year in equities and mutual funds, compared to a very robust half-year period volumes, and compared with a robust first half of 2018. We expect and hope these situations 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 second largest contributions to fee income is payment and collections. With corporates and SMEs, they continue to grow steadily, having added EUR 53 million, a solid 13% increase on the back of our growing international trade business and supply chain finance.
This growth rate helps to offset other more volatile sources of income, such as a brokerage rate, which has fallen by 5%, or 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%, and 13%, respectively, from a year ago. Furthermore, fees or structured financing, mainly from investment banking operations, are up 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 operations, 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 EUR 4 million lower. However, regulatory charges have had the most negative effect on other income and expenses, which have grown by 24% of EUR 7 million year-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 1.005 billion, an increase of 3% from a year ago.
Second quarter operating income has grown close to 5% with respect 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 NPL recoveries, as we've been anticipating. The graph on the right shows the contribution from 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%, fee income for 23%. Other income and expenses, mainly Línea Directa, has been reduced to 17%, and contribution from non-customer operation, 4%.
I will now go over operating costs. They have amounted for EUR 514 million, up 2.1%. 73% of operating costs corresponds to banking, including Portugal and EVO, with only EUR 7 million in the quarter. The rest is from LDA insurance and a much more flexible and volatile business model. There are some difference in growth rates. While this year Línea Directa's costs are down by 2% from the same quarter last year. The growth rate of banking costs is up by 3% compared to the same quarter last year, including EUR 7 million from the acquisition of EVO in the quarter. Thus, in a like-for-like comparison, our banking operation costs would have grown by only 2.5%. It 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 or improve efficiency in overall banking operations. As we have done with Portugal, our plan for expenses for integrating EVO is to keep them separately during the first year and offset them, and as well as the negative operation results from the coming month with the goodwill 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 stands at 24 basis points of total credit risk and increased by 3 percentage 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 amount of EUR 122 million or 19 basis points, the increase was five 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 EUR 128 million in NPL, as you can remind. The group's quarterly NPL ratio now stand at 2.71%, and it is 2.68% in Spain after the integration of EVO, with a very small impact. In Portugal, it now stands at 2.9%, down from 6.5% a year ago. Total NPL provisions amount to EUR 909 million, up EUR 28 million 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 EUR 72 million, and it amounts now to EUR 315 million. Total sales in the quarter amount 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. We've always found a small positive impact on earnings. Let's move into capital. Our fully loaded CET1 ratio stands at 11.5% at the end of the quarter and after the acquisition of EVO, reflecting the 29 basis points capital consumption already previously announced. Since December 2018, the negative impact of risk-weighted assets coming from loan growth in Spain and Portugal of 14 and eight basis points, respectively, are part of the 34 basis points negative income coming from the risk-weighted assets and IRB models. Our organic capital generation brings an increase of 38 basis points in the six-month period and is able to mitigate in part the negative impact of 29 basis points owing to the EVO acquisition.
Some are insurance business and valuation adjustments that account for only a net positive of one basis point. Both our capital ratio and our lever ratio remain 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% for CET1 and 18.85% of TLAC. This speaks clearly to Bankinter's asset quality and a strong business model. Our gap of 360 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 EVO's Avantcard balance sheet assets as of June, have improved our funding gap. Now a new record low of less than EUR 2 billion from EUR 4.2 billion. Now the gap is only EUR 800 million in Spain and EUR 1,021.2 billion in Portugal, where it is slightly increasing due to strong growth in lending over deposit. As a result, our loan-to-deposit ratio has improved. It now stands at 102.5%, its lowest level ever, owing to growth in retail deposits over lending in the last eight quarters. The maturity structure of wholesale funding remains well matched. We can easily assume these amounts over the next two years, with well over EUR 12.4 billion in liquid assets and our capacity to issue up to EUR 7.1 million in covered bonds.
In the first half of 2019, we have issued an MREL-eligible senior preferred debt in amount of EUR 500 million in order to offset future maturities and the TLTRO funding to be amortized in June 2020. Using market opportunities, on July 8th, we have successfully closed the issuance of a benchmark senior non-preferred bond issue of EUR 750 million in order to fulfill MREL requirements. On July 18th, Moody's has upgraded our long-term senior unsecured debt rating to Baa1 with a stable outlook. Let's look to review the performance of our five main strategic business lines. The corporate and SME banking loan book amounts to EUR 25.3 billion. This is a 4.5% year-on-year increase in Spain, while the sector has shrunk by 3.7%.
We have been an outlier for more than nine years in a row without any major change in the risk profile of the bank, nor in the required regulatory capital for these specific businesses. It also helps growth in low-cost deposits, such as corporate site accounts and collateral business, which generate 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 EUR 1.6 billion, with the aim of continually increasing our market share and meet corporate market. A breakdown of our corporate loan book in Spain shows half in loans to large enterprises growing at 1%. This is due to deleveraging and disintermediation in the very large enterprises.
The rest is almost split between loans to medium-sized enterprise, between EUR 5 million and EUR 50 million in turnover, at 27%, with a strong 9% increase from last year. Small and medium enterprise, less than EUR 5 million in turnover, at 23%, up 6% year-on-year. With this lending growth, we are improving the asset mix of our loan book and preserving average 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 export finance. Its operating income is up by 15% and represents close to 30% of operating income.
This profitable business continues on an upward trend. It has grown its loan book by over 23% year-on-year. In this difficult interest rate environment, this is 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% and 18%, respectively, from the same quarter last year. Corporate fees collected in the quarter have increased by 24% respect to the year above. In private banking, customers' wealth grew by EUR 2.5 billion in the first half, with a market effect of nearly EUR 1.3 billion. This results in a 4% increase in managed wealth from the same semester a year ago to EUR 38 billion. More important, we are now collecting fees in more value-added managed funds now, which stand at EUR 16.9 billion or 44% overall managed assets.
This is EUR 2 billion more than in December. In personal banking, assets under management are up by 5% from the same last year. Customer wealth is up by 1.4% in the first half with a market effect of EUR 0.5 billion. 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 two of their main products. On the one hand, payroll account balances are up by 24% to EUR 9.5 billion. On the other hand, new mortgages totaling EUR 1,420 million in the last six months have climbed at 10% from the same period last year, 32% 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-backed book keeps leading the growth in both the Spanish and Portuguese market with good quality indicators. Loan-to-value of 59% and 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 EUR 30.1 billion, a 7.5% increase with respect to the same date last year and 2.4% more since December. With mutual funds staying almost flat, this growth refers mainly to pension funds, Portugal, and other managed assets like SICAV 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 stands at 54 basis points, down three basis points. Now let's look at Línea Directa's half yearly.
Línea Directa continues to perform very well from another quarter. Insured risk have increased by 7% and maintains Línea Directa's market share over 7% in motor insurance and close to 3% in home insurance. Increase of 7.1% in new policies and 6.1% in premiums clearly reflects pricing pressures in the sector, particularly in motor insurance. Línea Directa's growth in motor premiums almost double the sector growth and triples home insurance sector growth. Línea Directa's group half yearly combined ratio of 88.1 continues to be well below that of the sector. Although its claim ratio jumped three 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 represent a strong competitive advantage and has allowed LDA to outgrow the lending and a 28% 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 of 8.3% continues to be favorable, particularly since over 40% of our current business is with current Bankinter 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% of total portfolio of EUR 2.2 billion. Once we include the Avantcard loan book of EUR 400 million, 18% of the total loan book will be in Irish assets, better diversifying our consumer finance exposure geographically.
As always, I will now go over Bankinter Portugal's main quarterly and half yearly figures. Balance sheet growth is in line with our expectation. Our loan book in Portugal increased by a strong 13%. We could see continued concentration in corporate loans as positive as they have grown by 41% to EUR 1.6 billion. In commercial banking, both mortgages and small consumer lending are up by 4%, amounting to EUR 4.2 billion. With respect to the first half of 2018, customer deposits also grew by 13% year-over-year, with off-balance sheet funds, mostly unit-linked and mutual funds, increased by 7%. As for earnings, the EUR 2 million decline in net interest income is only due to the decrease in extraordinary NPL recoveries. EUR 2.6 million in this year versus EUR 10.1 million in the previous year. I repeat, EUR 2.6 million this year versus EUR 10.1 million last year.
Otherwise, growth in recurrent net interest income should be close to 15%. This positive performance, adjusted for extraordinaries, 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. Recurrent business trends in Portugal continue to improve. Here you can see our quarterly performance in recurrent net interest income, up by more than 17%, as well as our recurrent total income with a 4% increase. The small decrease over the previous one only has to do with the EUR 1 million fee reclassification in May.
As in our business plan, Bankinter 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 pre-tax profit, now less volatile due 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 Avantcard 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 EUR 1.3 billion in loans in total, of which EUR 800 million are home mortgages and EUR 100 million personal loans in EVO. For Avantcard, it brings EUR 0.3 billion in credit cards, consumer lending, and EUR 0.1 in personal loans to Irish customer.
As for the liability side, the groups grows EUR 3.2 billion in retail deposits, split between EUR 600 million in checking accounts and EUR 2.6 billion in time deposits coming from EVO Banco. It also brings EUR 300 million of off-balance sheet funds from Spanish customer. Let's move to the summary. I would 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 above 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 are more than appropriate solvency levels, considering declining NPLs and capital ratio at expected levels. 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 growth to a good expense income management, even after the EVO integration. Total cost of risk maintained below the 30%-35% long-term range, and capital ratio in line with our guidance at 11.5%. 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 and Avantcard, EUR 1.3 billion in loans, of which EUR 800 million are home mortgages, EUR 100 million in personal loans. This is the side that comes from EVO. From Avantcard, we have EUR 0.4 billion, of which EUR 0.3 billion are credit card consumer lending and EUR 0.1 billion in personal loans. In terms of expectations, I think we have provided a good set of growth in this second quarter. I think this growth has been quite diversified. During the year, we have EUR 800 million growth in mortgages. We have around EUR 1.4 billion coming from loans. We have EUR 0.7 billion coming from commercial credit, EUR 0.8 billion from credit, and so on. I think 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.
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, just as a reminder, July and December tend to be the most intense months in the year in terms of new production in loans and mortgages. Why we should expect a good second half of the year?
Thank you. Moving 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. We have an increase of 1 point, I think it's 6%. Well, EUR 6 billion of the ALCO portfolio. This is the main reason why it has grown. We keep our average maturity of eight years, duration of 3.3, and I think we have a very good yield of 2.3%. I think this is a good ALCO portfolio in our opinion. No news, basically, and a good set of unrealized gains of EUR 630 million.
Okay. We move now to the P&L. We have some questions from the NII growth in the quarter. You can explain probably further.
There is a different reason. First of all, obviously, it's the volume that I've just mentioned. We have a very strong quarter in terms of volumes, and this is a good reason. We still having, even if it's difficult to understand because we see that interest rates are sharply going down, but we're still repricing our mortgage portfolio with a better spread than one year ago. We also have the new production of mortgages come with a better spread or better yield than the back book. This help us as well to increase the net interest margin. We have a good diversification of our growth. As I mentioned before, we have a lot of loan growth coming from transactions related to investment 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. That will provide as well a better margin.
Okay. How would you see the target for this year in terms of NII?
I think, as I mentioned, we keep our guidance of a 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 Avantcard coming to the group. This will provide a new flow of income in terms of net interest margin. Of course, Bankinter Spain and Bankinter Portugal are 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. This is something that you will see in following quarters, again, increasing.
Reminder that the corporate banking business has a good proportion of this loan book is related to fixed rate loans, which will be not affected by a decline in interest rate. In the corporate business, not all the loans are related to Euribor 12 months. We have also transactions that are related to the maturity of each transaction, and the short-term rates have declined much less than the 12 months. I would like to remind that the wholesale funding, of course, will benefit of reduction on interest rates. There is some maturity with the high cost issues that will be replaced with much cheaper issues. Obviously, we have our ALCO team that tries to hedge and tries to protect from this strong movement in interest rates.
For the time being, I don't see any reason why, as of today, we should move our guidance in net interest income for the income year. It's true that interest rate has gone down. We are today, I think, at 31 negative Euribor 12 months, and we don't know today what the ECB will suggest. We will fight. We will keep.
Thank you. What about the fee income? What's our prospect on that line?
Okay. 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 increased 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 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 strong performance. They are all related to real business activity with recurring activity.
We see anything related to, as I mentioned, international commerce providing good fees in terms of payments and transactions and anything related to risk, to loans. 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. We think, and of course, we keep our guidance of a mid-single-digit growth in fees for the end of the year.
Thank you. Moving now into the expenses. Is this level, the level we have seen in the quarter, is it recurrent, or is there any impact coming from the EVO transaction?
Okay, yes, from the EVO transaction, we have recorded a set of around EUR 7 million in expenses. These are non-recurrent expenses due to the deal. Which is important is that Línea Directa is controlling very well their cost, Portugal is controlling very well their cost, and Spain is controlling quite well their cost as well. In average, I think that the average increase of cost is under control, and as I mentioned, is below the increase of income. We will keep, and we will manage strongly our jaws to keep them as positive as possible.
We keep our guidance again, low single.
Sure. We keep our guidance of low single-digit growth in expenses.
Moving now into provisions and cost of risk. Can you just go through the details of the quarter and also whether you have any updates on legal provision or any other risk arising from litigation, such as credit cards and so on?
Okay. I'll start first with the last point. Regarding to the litigations cost, once again, we have a recurrent quarter, I would say, in terms of our litigation cost. From the topic related to credit cards, up to now, 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's nothing relevant on that side. In terms of cost of risk, there is an increase in the overall provisions. First of all, we have EVO and Avantcard, which accounts for almost EUR 2 million of additional cost of risk.
Due to the EVO transaction and due to the badwill that we have arised, as you've seen in our accounts, we have increased or we have anticipated our buffer for potential legal expenses or legal provisions of about EUR 10 million in this second quarter. Apart from that, the remaining figures are as usual. In terms of cost or risk, it's a slight increase, this is mainly due to a less release of provisions in Portugal.
Thank you. Moving on to Línea Directa business. What's our respect for the remaining of the year, 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 Línea Directa is performing very well in terms of growth, in terms of new business acquired, in terms of beating the industry and growing two times or three times, depending on the industry. I think the market is under a lot of pressure in terms of margin, as I mentioned. I would see as well this minor gap between the number of policies sold and the increase in premiums from the P&L perspective. I think the claims, we had an extraordinarily 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 first quarter.
I would suggest that the LDA's P&Ls in the future quarters would be quite similar to the one that we've seen in this second quarter, with this pressure in terms of margins, good cost control, and trying to absorb the negative first quarter in terms of claims cost.
We move to capital now. A few questions here. Can you just guide us through the different impacts in the quarters?
Okay.
First of all.
In the quarter, first of all, we have the EVO transaction. Basically, we have these 29 basis points that you already were aware of, because this is the same figures that we provided in September of last year. 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's a positive impact, which is the new IRB model for corporates. 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. In this quarter, we have benefit of around 6 basis point increase of this new IRB model for corporations.
We expect in the following two, three quarters to benefit of further basis points, probably around 20 additional basis points that we will be able to free in the next quarters, probably at the end of the year or the beginning of next year. Other comments are related to the risk-weight assets. Obviously, we had a very strong second quarter in terms of loan growth, and this obviously is reflected in the consumption of the risk-weight assets. Other things that I might take you through, we do not foresee any regulatory news at the end of the year. Of course, we have the second and the fourth quarter every year tends to be more intense in terms of loan growth. That's why the risk-weight asset consumption is a little bit larger.
Sorry, just to confirm, no regulatory charges in the quarter are expected going forward.
In terms of capital?
In the capital, sorry, we didn't have any regulatory charges.
No. Not in this quarter, there's nothing.
Okay, just to confirm that. Okay, just a few final questions. Do we have any plan for the new round of TLTROs?
As of today, we have EUR 4 billion that will mature in June 2020. We have EUR 2.5 billion that will mature in March 2021. We might want to go to this TLTRO III to renew some volumes that will mature in June. 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. The program seems to be less attractive. By any way, we might want to renew part of this EUR 4 billion that will mature in June 2020.
Okay. Just to confirm once again, the guidance on fee on NII income is excluding the EVO transaction?
Yes.
Okay. Had a few questions on that. Last question on EVO. Do we have any plans for the goodwill that we are generating in the quarter? What are the expected evolution of the business?
Of EVO?
EVO, yes.
As of today, we have EVO just for one month. It's a little bit too early to provide you some guidance, if I may, about the business. The business has some objectives in the second part of the year to focus on new client attraction and new loan production, new commercial activity, basically. I hope you understand that it's too early for us to provide you some guidance about EVO and Avantcard. Avantcard, 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. For any remaining questions, obviously, the investor relations team is at your disposal. Thank you. Bye-bye.
Thank you. Have a nice day. Bye.