Good morning, and welcome to Van Quintel First Quarter Results Presentation. Our CFO, Jacob O'Diaz, will guide you through the results, and we will follow-up with a Q and A session afterwards. Thank you.
Good morning, and welcome to the presentation of Banquinta's Q1 earnings in 2019. My name is Jacob O'Diaz, and I have been acting as the group CFO since January 25. Firstly, I would like to take a minute to thank my predecessor, Gloria Hernandez, who, as you know, retired from the bank last January after a long, intense and Successful professional career. It was a pleasure to work with Gloria in the last 8 years on the Executive Committee of the bank. As some of you already know, I also act as CFO from 2000 to 2,008.
It has been a long time. The related financial statements were posted on the website on the CNMV a few minutes ago prior to market opening. All related documents can also be found at this time on the Banquinta corporate website. Now as always, I will start with a summary of the main financial indicators from the quarter compared with the same period last year. First of all, Our loan book shows an additional period of growth, 5% year on year growth, while domestic lending has continued to shrink by 2.1%.
Our gross operating income also shows quarterly growth of 8% and 1% with respect to last year, setting a new quarterly record high for total income. Banking efficiency remains at an outstanding level below 47%, which is an improvement over last year. Our NPL ratio continues on a downward trend. It has fallen by 3 basis points quarter on quarter and by 53 basis points year on year to a record low of 2.87%. Consequently, our net profit of €145,000,000 indicate increases of 18% from last quarter and 1.4% from last year.
This figure sets, again, a new record high for our quarterly recurring income. More significantly, our Set Seat 1 Fully loaded capital ratio stands at 11.8%, which is comfortably above our guidance of 11.5%. As you can see, Growth in commercial operations holds a very positive trend, which fuels all of our sources of revenue. Before we look At our financial performance in the quarter and go over our quality of assets, liquidity, solvency and group's various strategic business, I would like to start with Return on equity, a very significant financial indicator for us. The group's ROE has grown steadily over recent year And now stands at a solid 12.6%.
I should note that our last year ROE is lower than the previous year, Included an equity adjustment of €172,000,000 stemming from IFRS 9. Without that impact, the ROE from the previous year would have stood at 12.9 Banquinta continues to post one of the best ROEs among its European peers. This quarter, ROEs is clearly above our cost of equity. Our aim is still Based on our income statement performance, we feel quite comfortable with our guidance for the year. Our income statement for the Q1 of 2019 suggests positive trends in our most significant sources of revenue, Net interest income and net fee income.
On the one hand, net interest income is up by 1.3%, While net fee income has risen by more than 5%, other operating income is down by less than 2% year on year due to decrease in insurance income. Also, trading profits have fallen by €2,600,000 in an exceptionally high Q1 of 2018. 2 important things to remember. First, the figures from the Q1 of 2018 are partially restated because of IFRS 16, particularly in terms of expenses. 2nd, since IFRS 9 took effect in 2018, extraordinary revenues from recovered NPLs in Portugal are now being recorded under separate Items on the income statement, small portion until net interest income and the rest under NPL provisions.
This shows a positive effect on cost of risk. This past quarter, only €1,400,000 in extraordinary recoveries are recognized as net interest income As opposed to €7,000,000 in the Q1 of 2018, with this in mind, our interest Our net interest income continues to reveal remarkable resilience as like for like growth would be 3.5% of the back of our lending growth and our continued asset mix and customer margin management. Our net interest income remains strong despite ongoing interest rates. It is up by 3,500,000 or 1% from previous year. Nonetheless, the Q1 of the year is today shorter than the previous quarter And always show some negative seasonality.
Seasonality effect also seasonality also affects commercial operations Despite market shifts, we can see this in fee income, which is down by €2,800,000 with respect to the 4th quarter last year. Year on year, fee income remained solid. It is up by 5%, owing to a strong commercial activity overall. Other operating income and expenses Show Slide 1.8 decrease compared to last year. This is mainly due to the performance of our insurance, Lina Directa, which I will discuss later.
Gains on financial transactions are €4,000,000 higher than in 4Q 'eighteen, but still remain very low. It has contributed €17,000,000 to earnings, 13% less than in the previous year, exceptionally high first quarter. Our total gross operating income sets a new record high in our quarterly series with €505,400,000 up 1% from 2018. Income quality remains the same as the weight from extraordinary revenues is minimal. Our operating costs remained flat year on year and decreased by 0.4% with respect to the previous quarter, mainly driven by a Our positive cost performance has allowed Pre provisioning profit to increase by 2% with respect to the Q1 of last year.
This sets again a new high record figure for our quarterly pre provision profit. Loan loans and other provisions are up By only 3.4% in the quarter due to continuous efforts to enhance our provision buffer for legal contingencies. By March 2019, after the quarterly provisions is recognized, our balance sheet shows a total amount of close to €270,000,000 which can certainly cover all risk at this time. Finally, net profit has grown by 18 percent to €145,000,000 in the quarter and by 1.4% year on year as part of the continuing trend of increasing quarterly earnings, as you can see in the chart that you have on your right. Just a reminder, quarter 2nd and quarter 4 were single resolution fund and deposit guarantee Fund payments every year, last year of €27,700,000 €39,200,000 Having said that, overall, we think that this is a good set of results on a very challenging environment.
The group loans book has grown by 5.4% year on year. In Spain, we have €2,200,000,000 in net new lending from the last 12 months. Net lending growth in corporate banking stands at €900,000,000 year on year, Despite a nearly €1,000,000,000 supplier payments facility that was fully prepaid in the last day of November 2018, We honestly believe this performance is outstanding. Meanwhile, new mortgages account for an additional €300,000,000 net in the last 12 months. In Spain, we are still an outlier since lending is down by 2.5% across the sector, Decreasing 1.1 percent in new mortgages and by 5% in corporate lending, according to Banco de Espana figures from In Portugal, lending is up by 12% or an additional €600,000,000 This validates our ongoing business plan for Banquinta Portugal, where our market shares now stand at 2.8% in lending and 1.5% in deposit.
I will discuss Again, this performance in a greater detail later on. On the right side, retail deposits Across both geographies are growing, in particular, they're up by a remarkable 9.6% in Spain from a year ago. In contrast, the sector growth is at 6.1 according to data from February 2019. In the Q1 of 2019, we have an additional €1,000,000,000 in customer deposits And related costs remained flat and under control. Our market share in retail deposits stand at 4%.
We are growing from the 3.6% level from the past year. Net interest income continues to show strong resilience Despite the zero rate environment, this trend is due to loan book growth and sound customer margin management. Net interest income in Spain suggests stable quarterly performance. Growth is close to 3% with respect to the same quarter last year And only €3,000,000 less than the previous quarter, which is 2 days longer, which is a significant figure. In Portugal, net interest income remains flat compared to the previous quarter.
It is down by €3,000,000 year on year due to a €6,000,000 decline In extraordinary NPL recoveries, nonetheless, recurrent net interest income in Portugal is up by over 15% year on year. On the right side, you can see our customer margin. Our customer margin is improving quarter on quarter. As of March, it stands at 1.98%, up by 5 basis points, mainly owing to increase in yields with no variation in deposit cost. Still, it has increased by 4 basis points year on year Due to the gradual loan yield recoveries, up 1% 1 basis point and falling deposit cost, which are down by 3 basis points.
Even though deposit repricing has hit bottom, we expect that our customer margin will remain resilient in the coming quarters given the positive delta between our mortgage front and back books and the improved asset mix of our total loan book. Based on these trends, we maintained our Net interest income guidance for the group in 2019 at low single digit. The size and composition of the ALCO portfolio has barely changed with respect to Last December, with a slightly lower contribution to net interest income. The average duration of the entire portfolio is 3.4 years. Average yields stand at 2.7 and unrealized gains on the entire portfolio amount to approximately €390,000,000 The 2nd most important income line, fee income, has performed quite well in the quarter.
It is fueled by the growth of business operation and is up by over 5% year on year. It still accounts for 23% of gross operating income, Even though collected fees are down from the previous quarter, ultimately, this is no different from any other year. The largest contributor to fee income is asset management, representing 32% of total fees. It amounts to €36,000,000 down by 14% with respect to previous year. Despite the market's recovery in Q1 this year, it is difficult to compare properly with the previous year due to the robustness of the Q1 performance a year ago.
The 2nd largest contributor is fees from payments and collections with corporates and SMEs. They continue to grow steadily, having added €25,000,000 a solid 11% increase. This is slightly offsets our more volatile sources of fee income, such as our brokerage and custody business, which have fallen by 20% due to market trends and the like of our like for like comparison with Lazir, As half of this reduction is related to the new investment vehicles launched last year, we expect that we will see Some of these fees in the second quarter. Life insurance, risk related transactions and other Fees from business are also better with respect to a year ago. This attests to the soundness of our business model.
Fees on foreign exchange are flat to market volatility. Furthermore, other fees, including fees on overdue loans and others, are down by 5%, while fees on structured deals, mainly related to our investment banking operations, are up by an outstanding 97%. After this quarter's fee income performance, we are sticking to our guidance of repeated mid single digit growth for 2019, assuming the market environment remains stable throughout the rest of the year. In operating income and expenses, the contribution from Ligna Directa's insurance margin is 2% smaller. Ligna Directa has seen greater competition in premiums As in the previous quarter, with some extraordinary claims without any negative effects from regulatory charges, Its year on year growth amounts to 20% with other income from various small items.
Nonetheless, the quarterly increase in this line is minor, And we expect the 2% year on year decrease to rebound by the end of this year. Overall, our gross operating income stands at a record high of €505,000,000 An increase of 1% from a year ago and over 8% from previous quarter. In Portugal, The €4,000,000 drop in gross operating income from last year only relates to the €5,600,000 decrease in the contribution from extraordinary recoveries for NPLs. Like for like, gross operating income would be €26,700,000 versus 28 €600,000 this year. The graph on the right shows the contribution to gross operating income from our different sources of revenues.
It indicates good diversification to counter the ongoing extremely low interest rate environment and a very small contribution from non customer business. Net interest income accounts for 54% and fee income Has increased to 23% of total. The contribution from other income and expenses, mainly Lilian Directa, makes up 20%, and the contribution from non customer operation has fallen to nearly 3%. I will now go through operating expenses. Total operating costs amount to €251,000,000 this Past quarter, down by 0.4% from previous quarter.
Only 67% 63% of our operating cost corresponds to banking, while the rest is from Line Direct Insurance Business. There are some clear differences in growth rates, while Line Direct costs this time are down by 3% from last quarter as well as last year. Still, the growth rate of banking costs is a modest 1% compared to the same quarter last year and declined in the amount of €1,000,000 from last quarter. By tightening control in our expense our general expenses, we expect we will end the year within our low single digit guidance with the aim of keeping expenses below income and maintaining or improving efficiency in banking operations. We keep managing to show positive jaws despite our ongoing increase in expenses and investments due to our focus on our Our banking cost to income ratio of 46.5% remains well below the industry average.
The Q1 cost of risk continued to fall to 16 basis points of total credit risk quarter on quarter. Cost of risk €27,000,000 and it also includes the positive cost of risk in our business in Portugal. By the end of 2019, we expect the total provisional cost of doing business. That means including credit related costs as well as Other provision, our litigations costs, will be in line with 2018 at a rate similar to this quarter's at 35 basis points approximately. I will go over our management of credit risk, liquidity and solvency.
Nonperforming loans are in decline once again. They have fallen by 11% year on year across the groups and almost 50% in Portugal after the year end sale of €128,000,000 in NPLs. The group's quarterly NPL stands at 2.87%. It's split into 2.81 percent in Spain and in Portugal, which stands at 3.4%, down from 6.8% a year ago. Total provisions amounts to €1,020,000,000 only down by 1% since December 2018, we have maintained our coverage this past quarter at a level similar to our peers.
Coverage for foreclosed assets is up By 116 basis points in the quarter, well above the average discount on sold assets, as you will see in the next slide that you have right in front of you now. The group's foreclosed assets portfolio is 17% smaller since March 2018, Having decreased by only €70,000,000 year on year, it now amounts to €329,000,000 Total sales in the quarter amounts for 9.5% of the stock from the start of 2019, we have sold most of these assets through our commercial network. The average discount on sales is now below our provision coverage rate with a minor impact on earnings. Our fully loaded capital It's 11.8% at the end of the quarter, which is 5 basis points more than in December. Compared with December figure, the small negative impact of loan growth on risk weighted assets in Spain and Portugal Of 1 4 basis points, respectively, is more than offset by organic capital generation of 22 basis points.
On the other hand, The negative impact of 5 basis points owing to the new IFRS 16 standard and overcharges related to IRB shortfall, Insurance Business and Valuation Adjustments that overall accounts for 7 basis points negative. Both our total capital ratio and our leverage ratio remained fairly stable, 14.3% And 5.1%, respectively, from previous quarter as well within our guidance. On your right and in regard to the new 2019's rep requirement, our ratio is the lowest Among all quoted peers in Spain, standing at 8.20%. This speaks clearly about Banquinta's Asset quality and strong business model. Our GAAP of 360 basis points between current CET1 And the regulatory requirement, in addition to the quality of our capital with negligible DTAs, make us feel Very comfortable with the group's solvency going forward.
Therefore, we are reiterating our medium term guidance of a ratio of CET1 ratio of 11.5%. Continued balance sheet increase in both deposits and loans ultimately improved our funding gap, now clearly below €4,000,000,000 In Portugal, it is also steadily decreasing. Our loan to deposit ratio has again performed better. It now stands at its highest level in years as a result of retail deposit growth. The maturity structure of our Wholesale funding remains unchanged.
We can easily assume these amounts over the next 2 years with well over €2,500,000,000 in liquid assets and our capacity to issue up to €6,900,000,000 in covered bonds. In the Q1 of 2019, The MREL eligible senior preferred debt we issue amounts to €500,000,000 in order to begin to offset Maturity funding and TILTRO funding starting in June 2020. Furthermore, by year end, We may carry out a small senior nonprofend bond issue around €500,000,000 to fulfill future NREL requirements. However, we have not yet received the formal MREL requirement letter. Let's talk now about our business lines.
Let's discuss the performance of our 5 main strategic business lines, starting with the most significant contributors to income from our customer business. Corporate Banking and Commercial Banking equally account for 53% of our recurring income. Insurance contributes a very significant 20%, followed by consumer lending by 12%. Banquinte Portugal's contribution now stands at 6%. Lastly, the contribution from our non customer business, trading, ALCO and other amounts to only 8% of our total operating income.
The largest Contributor to operating income is Corporate and SME Banking. It remains virtually on the same growth trend from 2010. Its loan book now amounts to €23,900,000,000 This is a 4.3% year on year increase in Spain, While the sector has shrunk by 5.7% as of February 2019. Thus, we continue to be an outlier here, which is crucial To income growth, in Portugal, where we still have a small market share, new lending is up by 41%, reaching €1,400,000,000 If we look to if we look at our corporate loan book for Spain, half consists of loans to large enterprises. Its growth rate is 1% in the year due to deleveraging and disintermediation in this segment.
The rest is almost split by loans to medium sized enterprise at 27% with a strong 8% increase in the last year and the small and medium enterprise at 23%, which is up again by 8 This improved asset mix preserves our average asset yield despite increasing competition in all three segments. And by the way, number of active customers has climbed organically by 4% in Spain from a year ago. Our market share in new lending continues to be above our natural market share. Therefore, we are gaining market share in this strategic segment, the Corporate SME Banking. On the left, our Corporate International business again showed significant growth, particularly in trade, supply chain and export finance activity.
Its income is up by 16% and represents 28% of operating income for the entire segment. This very profitable business is on a clear upward trend As evidenced by its quarterly performance and 25% growth in loan book year on year. Moreover, Almost half of this business revenues are from fees rather than interest. On the right side of your slide, In Investment Banking, new products and services have made both its corporate loan book and operating income to increase by 20% 31%, respectively, from the same quarter last year. Also, the corporate fees collected in the quarter have increased by 75% with respect to the year before.
Private Banking. In Private Banking customer wealth grew by €1,800,000,000 in this first quarter with a positive market effect of nearly €1,200,000,000 It has resulted in a 5% increase in managed wealth during the quarter and from a year ago. More significantly, we are collecting fees in more value added managed funds now at €15,600,000,000 or 42% of our managed assets, €700,000,000 more than in December 2018. In personal banking, assets under management are also up by 5% from last quarter and last year. Customer wealth is up by €800,000,000 in the quarter with positive market effect of €500,000,000 Our delegated and advised assets, including mutual funds, represent close to 29% of total managed assets in this segment, where fees are more sizable than in the rest of assets under management.
In Commercial Banking, Retail Banking, we continue to perform really well in our 2 main products. On the left, on the one hand, payroll accounts balances are up by 23%. On the other hand, new mortgages totaling 6 €121,000,000 in the quarter have climbed 8% from the same quarter last year, 30% of which are fixed Rate mortgages. Our market share in new mortgages stands at 5.8% from the last 12 months ended in January. As a result, the mortgage back book keeps leading the growth in both the Spanish and Portuguese markets with good quality indicators.
Loan to value stands at 59%, and 7% of total loan books are already at fixed rates. Assets under management. Off balance sheet funds are growing again after a very difficult market In the last two quarters of 2018, as of March, total assets amount to €27,900,000,000 a 3.8% increase with respect to same quarter last year and even more since December 2018. This related mainly to pension funds at close to 20% and with 17% growth in other managed assets such as our vehicles for private banking customers. Our mix of funds with 57% of funds managed by third parties and 43% of our own funds Continue to increase into more value added funds, which are helping to sustain fees.
Average fees On owned funds managed as of March stands just over 70 basis points, down from 6 basis points a year ago with an improved asset mix. And average balances where fees or charges declined by close to €1,000,000,000 from a year ago. Now I will talk about Lilia Directa's 1st quarter result. It continues to perform well. Insured risk have increased by close to 8%.
Line Directa maintains a market share in motor insurance of Over 7% and close to 3% in home insurance. The 7.7% increase in new policies and 7.2 percent more premiums reflect growing pricing pressures from peers, especially in motor insurance. This is evident in the insurance technical result in the income statement. LDA, Lina Directa Group's combined ratio of 87.6% continues to outperform the industry. Its claim ratio has jumped to 67.7% in the quarter and is slightly offset By a decrease of its expense ratio, again, below 20%.
It remains well below the industrial average. In our new health insurance business, Divas, the first 42,000 policies sold have Had no negative impact on this combined ratio, but rather a small impact on expenses. Lastly, if we look at the quarterly income statement, net profit is down by 2.9% from last year Q1. This is due to the cost increase from net claims, which exceed the increase in the outstanding net earned premiums. This brings its technical insurance result to €34,000,000 a 3.4% decrease from a year ago or €1,200,000 less.
This quarterly earnings performance still translates into a very high ROE of 38% with a high solvency II ratio of 209%. In consumer finance, our loan book continues to grow along with a number of customers, which is now well over €1,300,000 The lending front book is up by €196,000,000 in the quarter or 35% year on year, and credit quality ratios remain reasonable. NPS stands at 8.6% and cost of risk At 3.6 percent, the risk adjusted return of 8.2% continues to be favorable, particularly if we consider that almost 40% of our current business is with existing Banquinta customers who have a much better risk profile and somewhat lower spreads. Moreover, all the growth in this quarter was accounted for by the personal loans unit. In Portugal, consumer lending accounts for already 7.8 8% of total portfolio of €2,100,000,000 Once the AvantCar deal is finalized next quarter, it will represent Presumably an additional 16% of the total loan book in Irish assets, better diversifying our cost Let's move into Banquinta Portugal figures.
Balance sheet growth It's in line with our expectation. Our loan book in Portugal increased by a strong 12% with respect to the Q1 in 2018. Concentration in corporate loans is positive, having grown by 41% to 1,400,000,000. In commercial banking, both mortgages and consumer lending are up by 4%, accounting to 4,200,000. Customer deposits are also up by a solid 12% year on year, while off balance sheet funds, mostly unit linked and mutual funds, Have increased by 8% with respect to the Q1 of 2018.
As for earnings, The €3,000,000 decline in net interest income is only due to the €5,600,000 decrease in extraordinary NPL recoveries, which is basically EUR1.4 million in 20 19 versus EUR7 1,000,000 in 2018. Otherwise, growth in recurrent net interest income would be 15% 17% in fee income. This positive performance will bring A 3.3% increase in total operating income from 2018. At the same time, strong cost control and positive cost of risk Have led to a strong increase of 16% in profit before taxes. Recover NPLs and the sale of an NPL portfolio have freed up Credit provisions, which have more than doubled the positive effect from last year.
Recurrent business trends in Portugal continue to improve. Here you can see our quarterly performance In recurrent net interest income and fee income, up by more than 15% 17% with respect to the same quarter last year. On the other hand, Banquinta Portugal cost performance is more constrained, dropping by 1% from the same quarter last year. Its pretax profit is still volatile due to NPL recoveries, but it's clearly showing improvement from last year despite fewer extraordinary recovers in 2019. In summary, this last slide Shows a brief recap of what we have seen to highlight from the strong set of results we have presented today.
Even if the comparison with the same quarter last year is not an exact equivalent, let me just Summarize this. In our opinion, this figure shows a very solid balance sheet growth rate, Increased 5% lending and 10% retail deposit. Our figure shows customer margin at record highs, A strong growth of recurrent core banking fee income, A cost to income ratio that shows positive jaws due to a good expense income management, Total risk total cost of risk of doing business in the range of 30 to 35 basis points And a capital CET1 ratio of 11.8 above our guidance. And now we are very happy to take all the questions that you might have. Thank you.
Thank you, Hakobao, for highlighting all the details of the presentation. We now move on to the Q and A. Let's start with loan growth, given our recent performance there. Can you comment on what your expectation are for next year for the rest of the year?
For the rest of the year in loan growth, We are maintaining our guidance, and I think the results we've seen this quarter Should be the same trend over the next quarter. We have seen this 5% increase in loan growth in the Q1, and We've seen this €2,800,000,000 growth, €2,300,000,000 more or less from Spain and almost €600,000,000 from Banquinta Portugal. And this growth has been also quite diversified between Corporate Banking and there are Commercial Banking. So we don't see why we shouldn't keep this loan growth rate.
We now move on to the P and L items. Let's Let's start with the NII and customer margins. Can you give us our view there for the rest of the year?
In terms of net interest income, once again, we are maintaining our guidance. We think that the customer margin is something that We might see with a very strong resilience at the levels that we have now. Cost of liabilities maybe will stay stable because it's quite difficult To reduce them again, however, the yield of the asset side, we think there is still room for improvement. And hopefully, there's still a little bit of repricing from the Euribor 12 months recovery that we've seen over the past year. So we can expect still some performance similar to the figures that we've In this Q1.
Okay. And in terms of customer margins?
Yes. Again, I mean, in terms of customer margin, I think that it's we have a quite resilient customer margin. We think we can Probably, it's going to be difficult to reduce the cost of the liabilities, but we think there is room to increase the yield of the asset side. We expect some help from a repricing of a Euribor in our mortgage book, which has not fully applied to the whole portfolio. And overall, we are positive on that side.
Okay. We have received on the same topic regarding NII, we have received a few questions regarding impacts that we might have seen in terms of IFRS 16 in our NII and also in terms of ALCO impacts or what's our strategy in terms of TLTROs?
Okay. You have too many topics here. IFRS 16, regarding our figures, for us, it's almost negligible The amount that will impact in our net interest margin. I can give us guidance that this figure It is close to 500,000 in the entire year. So for us, it's overall,
this is no impact. Okay. And then ALCO, how is that going to be?
Yes. In terms of ALCO, as we mentioned before, the contribution to net interest margin From the ALCO portfolio, it's slower and slower. This year, we'll see a slight reduction, and this is something that we'll see in the next quarter. And
the strategy regarding the TLTROs?
The strategy relating to TLTROs. For the time being, as you know, we have €6,500,000,000 in TLTRO's facility. We are Expecting some details of the new TRTRO program. Of course, I think this is a positive news. However, we don't have any indication about what the facility is going to be about and what will be the criteria to fulfill in order to apply to this TLTROs.
So in one hand, I think this is a good news. In the other hand, we Still some details to exactly provide you a better insight about this topic.
Okay. That was clear. Moving now on to the fee income. What are we seeing there? And specifically in terms of fee generating business such as AUMs and other businesses?
You mean in this quarter or back then?
In the quarter, I'm going forward.
Okay. In this quarter, what we've seen It's a very good commercial activity, commercial activity in payment and collections, connecting activity in fees related to Risk transactions in Structural Finance Operations, in syndicated loans, so anything related to International commerce, international business. So from the activity from the commercial activity, I think the fees had had a very, very good behavior this quarter. And this has compensated the negative behavior of all the fees related to market So we've seen that the year versus year comparison in terms of asset management funds have been negative, and this is due to the difference in the average Volume of mutual funds that we have this Q1 this year versus the last Q1 of last year. In addition to that, we have A lower average commission fee due to a different mix of the mutual funds.
Customers have been more conservative this year than they were last year. So there's an additional difference in fees in average fees from the mutual That's from the assets under management funds fees, sorry. Related to the brokerage and custody Fees also we've seen some sort of deterioration basically to market valuation, but also because last year, we had A fee related to some investment banking products related to private banking clients. So those fees that were recorded in the previous quarter last year of 2,500,000 Are not have not been in these 4 questions this year. We will see in the second quarter A good recovery in this type of fees.
Okay. Can you just remind us of the guidance for fee income this year?
Yes. I think we remain our guidance of mid single digit growth for the rest of the year. I think we are positive on this topic. We've seen a good recovery of markets the Q1 of the year. So we will see the benefit of it In the Q2 and hopefully, let's cross fingers, markets will stay or will remain as positive as they've been in this Q1.
Okay. What should we expect in terms of cost for the year? We have seen a more conservative evolution this quarter.
I think we should expect a similar trend this year. I think for us, the most important, Let's say, issue is to keep positive jaws. So for us, we need to and this is the trend and the guidance, we need to maintain positive BGOs. The Expenses are quite under control, and this is something that should stay stable around the year. Okay.
Still on the P and Ls. Cost of risk, what shall we expect for the rest of the year given the carbon levels.
In terms of cost of risk, we do not expect any relevant changes, Neither in the credit risk, neither in the litigation risk. As we mentioned before, the overall cost Of doing business, including both type of risk, should be around 35 basis points, and we do not foresee any changes in this topic.
Okay. We are also getting questions about updates on litigation risk, whether you can are there any news there?
There is no special news in this litigation risk. As you know, we provide a guidance of €20,000,000 to €25,000,000 cost of litigation risk every quarter. This, Of course, as you can imagine, might be a little bit higher or a little bit lower considering the FX Volatility, but overall, the we expect some sort of Stable cost of litigation risk over the next quarters.
Okay. Moving now on to the business. Could you please comment on the performance of Linea Directa in the quarter? And what shall we expect for the rest of the year again?
Yes. Again, Linea Directa is performing pretty well. Just a quick reminder Of the ROE of 38% and the solvency ratio of almost 210%. This quarter is comparing with a very strong Q1 of last year. And basically, the difference in the figures that we've shared with you today are in the claims cost.
So the claim costs of the Q1 last year were extremely low. And this Q1, we've seen Cost of claims is slightly higher than I would say normal. This is something that we do not expect To see in the following quarters. So this 1st quarter, we've seen, let's say, not recurring cost of claims. Anyway, the business is performing well.
It's growing well. As we've mentioned, there are still some pricing pressures in the market, Especially in the motor industry, however, we are growing quite above the industry average. So from that point of view, business is performing well, and we feel quite comfortable with this.
Okay. Moving now on to capital. Can you please comment on the performance of the quarter and specifically on the minus 7 points basis points that we highlight as other?
Yes. Once again, of the quarter, we have increased around 5 basis points the level of our ratio. And as I mentioned before, we have a couple of impacts. We have The IFRS 16 that reduced around 5 basis points. And then we have other impacts that I will mention.
Basically, the IRB shortfall And with increase in the insurance consumption, and basically, that's it. There's No specific or no relevant situation. Okay. Are we
expecting any regulatory impacts for the rest of the year? In the capital. In the capital, sorry, still. In regulatory.
Yes, any further? We do not expect any additional impact on capital. I mean, If your question is related to any potential, again, increase in NAMS rep requirements, no, No, no, we do not expect anything. We are at 8.20% right now, which is something that occurred not too long ago. And there is I mean, we are not expecting any changes in this requirement.
Okay. To finish off with capital, what is our target for CET1 ratio.
Yes. Again, our target is 11.5%.
Okay. And final question really. On the M On a front, any updates on the Evo deal?
On the Evo deal, we're still working on it. As you know, we are expecting these Special approvals from the authorities. And as we mentioned in previous conversations, we are expecting