Good morning, and welcome to Bankinter first quarter results presentation. Our CFO, Jacobo Díaz, will guide you through the results, and we will follow up with a Q&A session afterwards. Thank you.
Good morning, and welcome to the presentation of Bankinter's first quarter earnings in 2019. My name is Jacobo Díaz, and I have been acting as the group CFO since January 25th. Firstly, I would like to take a minute to thank my predecessor, Gloria Hernández, 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 eight years on the executive committee of the bank. As some of you already know, I also act as CFO from 2000 to 2008. It has been a long time. I hope I can catch up for the last 10 years pretty soon. 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 Bankinter corporate website. 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 three basis points quarter-on-quarter and by 53 basis points year-on-year to a record low of 2.87%.
Our net profit of EUR 145 million indicate increases of 18% from last quarter and 1.4% from last year. This figure sets, again, a new record high for our quarterly recurrent income. More significantly, our CET1 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 last year ROE is lower than the previous year, included an equity adjustment of EUR 172 million stemming from IFRS 9. Without that impact, the ROE from the previous year would have stood at 12.9%. Bankinter continues to pose one of the best ROEs among its European peers. This quarter ROE is clearly above our cost of equity. Our aim is still to improve ROE and total return to shareholders in the future. Based on our income statement performance, we feel quite comfortable with our guidance for the year. Our income statement for the first quarter 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 EUR 2.6 million in an exceptionally high first quarter 2018. Two important things to remember. First, the figures from the first quarter of 2018 are partially restated because of IFRS 16, particularly in terms of expenses. Second, 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. A small portion onto net interest income and the rest under NPL provisions. This shows a positive effect on cost of risk. This past quarter, only EUR 1.4 million in extraordinary recoveries are recognized as net interest income, as opposed to EUR 7 million in the first quarter of 2018.
With this in mind, 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 rate. It is up by EUR 3.5 million, or 1% from previous year. Nonetheless, the first quarter of the year is two days shorter than the previous quarter, and always shows some negative seasonality. Seasonality also affects commercial operations despite market shifts. We can see this in fee income, which is down by EUR 2.8 million with respect to the fourth quarter of last year. Year-on-year, fee income remains solid. It is up by 5%, owing to a strong commercial activity overall. Other operating income and expenses show a slight 1.8 decrease compared to last year.
This is mainly due to the performance of our insurance, Línea Directa, which I will discuss later. Gains on financial transactions are EUR 4 million higher than in 4Q 2018, but still remain very low. It has contributed EUR 17 million to earnings, 13% less than in the previous year. Exceptionally high for a quarter. Our total gross operating income sets a new record high in our quarterly series, with EUR 505.4 million, up 1% from 2018. Income quality remains the same, as the weight from extraordinary revenues is minimal. Our operating costs remain flat year-on-year, and decreased by 0.4% with respect to the previous quarter, mainly driven by a 3% reduction in Línea Directa's insurance costs. Our positive cost performance has allowed pre-provisioning profit to increase by 2% with respect to the first quarter of last year. This sets, again, a new high record figure for our quarterly pre-provision profit.
Loan loss 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 EUR 270 million, which can certainly cover all risk at this time. Finally, net profit has grown by 18% to EUR 145 million 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, second quarter and quarter four were single resolution fund and deposit guarantee fund payments every year. Last year of EUR 27.7 million and EUR 39.2 million. 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 EUR 2.2 billion in net new lending from the last 12 months. Net lending growth in corporate banking stands at EUR 900 million year-on-year, despite a nearly EUR 1 billion 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 EUR 300 million 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% in new mortgages and by 5% in corporate lending, according to Banco de España figures from February 2019. Our market share in lending keeps growing and now stands at 3.9%. In Portugal, lending is up by 12%, or an additional EUR 600 million.
This validates our ongoing business plan for Bankinter 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. The sector growth is at 6.1%, according to data from February 2019. In the first quarter of 2019, we have an additional EUR 1 billion 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 EUR 3 million less than the previous quarter, which is two days longer, which is a significant figure. In Portugal, net interest income remains flat compared to the previous quarter. It is down by EUR 3 million year-on-year due to a EUR 6 million decline in extraordinary NPLs recoveries. 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 five basis points, mainly owing to increasing yields with no variation in deposit cost.
Still, it has increased by four basis points year-on-year due to the gradual loan yield recoveries, up one basis point, and falling deposit costs, which are down by three 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 maintain our net interest income guidance for the group in 2019 at low single digits. 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 EUR 390 million.
The second 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 EUR 36 million, 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 first quarter performance a year ago. The second largest contributor is fees from payments and collections with corporates and SMEs. They continue to grow steadily, having added EUR 25 million, a solid 11% increase.
This likely offsets our more volatile sources of fee income, such as our brokerages and custody business, which have fallen by 20% due to market trends and the lack of a like-for-like comparison with last year, 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. 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 Línea Directa's insurance margin is 2% smaller. Línea 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. The quarterly increase in this line is minor, and we expect the 2% year-on-year decrease to rebound by the end of the year. Overall, our gross operating income stands at a record high of EUR 505 million, an increase of 1% from a year ago, and over 8% from the previous quarter.
In Portugal, the EUR 4 million drop in gross operating income from last year only relates to the EUR 5.6 million decrease in the contribution from extraordinary recoveries for NPLs. Like-for-like, gross operating income would be EUR 26.7 million versus EUR 28.6 million 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 the total. The contribution from other income and expenses, mainly Línea Directa, makes up 20%, and the contribution from non-customer operation has fallen to nearly 3%. I will now go through operating expenses. In total, operating costs amount to EUR 251 million this past quarter, down by 0.4% from the previous quarter.
Only 63% of operating costs correspond to banking, while the rest is from Línea Directa insurance business. There are some clear differences in growth rates. While Línea Directa's costs this time are down by 3% from last quarter as well as last year. The growth rate of banking costs is a modest 1% compared to the same quarter last year, and declined in the amount of EUR 1 million from last quarter. By tightening control on 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 technological and digital transformation, our banking cost to income ratio of 46.5% remains well below the industry average.
The first quarter cost of risk continues to fall to 16 basis points of total credit risk. Quarter-on-quarter, cost of risk stand at EUR 27 million, 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 cost 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. Non-performing 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 EUR 128 million in NPLs. The group's quarterly NPL stands at 2.87%.
It's split into 2.81% in Spain, and in Portugal, which stands at 3.4%, down from 6.8% a year ago. Total provisions amounts to EUR 1.02 billion, 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 EUR 70 million year-on-year. It now amounts to EUR 329 million. 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 is 11.8% at the end of the quarter, which is five 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 one and four basis points, respectively, is more than offset by organic capital generation of 22 basis points. On the other hand, the negative impact of five basis points owing to the new IFRS 16 standard and other charges related to IRB shortfall, insurance business, and valuation adjustments that overall accounts for seven basis points negative. Both our total capital ratio and our leverage ratio remain fairly stable, 14.3% and 5.1% respectively from previous quarter, as well within our guidance.
On your right, in regard to the new 2019 SREP requirement, our ratio is the lowest among all quoted peers in Spain, standing at 8.20%. These speak clearly about Bankinter's asset quality and a strong business model. Our gap 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 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 improve our funding gap, now clearly below EUR 4 billion. 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 two years with well over EUR 2.5 billion in liquid assets and our capacity to issue up to EUR 6.9 billion in cover bonds. In the first quarter of 2019, the MREL-eligible senior preferred debt we issue amounts to EUR 500 million in order to begin to offset maturity funding and TLTRO funding starting in June 2020. Furthermore, by year-end, we may carry out a small senior non-preferred bond issue around EUR 500 million to fulfill future MREL 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 for our five 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%. Bankinter Portugal's contribution now stand 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 EUR 23.9 billion. 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 EUR 1.4 billion. If we look at our corporate loan book for Spain, half of it 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. Small and medium enterprise at 23%, which is up again by 8% year-on-year. This improved asset mix preserves our average asset yield despite increasing competition in all three segments. 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 shows 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 these 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% and 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 EUR 1.8 billion in this first quarter, with a positive market effect of nearly EUR 1.2 billion. 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 EUR 15.6 billion or 42% of our managed assets, or EUR 0.7 billion 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 EUR 0.8 billion in the quarter, with positive market effect of EUR 0.5 billion. 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 two main products. On the one hand, payroll accounts balances are up by 23%.
On the other hand, new mortgages totaling EUR 621 million 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 environment in the last two quarters of 2018. As of March, total assets amount to EUR 27.9 billion, so 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 of on own funds managed as of March stands just over 70 basis points, down from six basis point a year ago with an improved asset mix. Average balances where fees or charges declined by close to EUR 1 billion from a year ago. Now I will talk about Línea Directa's first quarter result. It continues to perform well. Insured risk have increased by close to 8%. Línea 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% 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, Línea 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, Vivaz, 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 first quarter. This is due to the cost increase from net claims, which exceed the increase in the outstanding net earned premiums.
This bring its technical insurance result to EUR 34 million, a 3.4% decrease from a year ago, or EUR 1.2 million 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 the number of customers, which is now well over 1.3 million. The lending front book is up by EUR 196 million in the quarter of 35% year-on-year. Credit quality ratios remain reasonable. NPL stands at 8.6% and cost of risk at 3.6%. 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 Bankinter 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% of total portfolio of EUR 2.1 billion. Once the Avantcard deal is finalized next quarter, it will represent approximately an additional 16% of the total loan book in Irish assets, better diversifying our consumer finance exposure geographically. Let's move into Bankinter Portugal figures. Balance sheet growth is in line with our expectation. Our loan book in Portugal increased by a strong 12% with respect to the first quarter in 2018. Concentration in corporate loans is positive, having grown by 41% to EUR 1.4 billion. In commercial banking, both mortgages and consumer lending are up by 4%, accounting to EUR 4.2 million. Customer deposits are also up by a solid 12% year-on-year, while off-balance sheet funds, mostly unit link and mutual funds, have increased by 8% with respect to the first quarter of 2018.
As for earnings, the EUR 3 million decline in net interest income is only due to the EUR 5.6 million decrease in extraordinary NPL recoveries, which is basically EUR 1.4 in 2019 versus EUR 7 million in 2018. Otherwise, growth in recurrent net interest income would be 15% and 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 double 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% and 17% with respect to the same quarter last year. On the other hand, Bankinter Portugal cost performance is more constrained, dropping by 1% from the same quarter last year. Its pre-tax 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 through a good expense income management, a total cost of risk of doing business in the range of 30-35 basis points, and a capital CET1 ratio of 11.8% above our guidance. Now we are very happy to take all the questions that you might have. Thank you.
Thank you, Jacobo, for that highlighting all the details for the presentation. We now move on to the Q&A. Let's start with loan growth, given our recent performance there. Can you comment on what your expectations are for the rest of the year?
For the rest of the year in loan growth, we are maintaining our guidance. 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 the first quarter, and we've seen this EUR 2.8 billion growth, EUR 2.3, more or less, from Spain and almost EUR 600 from Bankinter Portugal. This growth has been also quite diversified between corporate banking and commercial banking. We don't see why we shouldn't keep this loan growth rate.
Thank you. We now move on to the P&L items. Let's start with the NII and customer margins. Can you give us a 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. We can expect still some performance similar to the figures that we've seen in this first quarter.
Okay. In terms of customer margins?
Yes. Again, in terms of customer margin, I think we have a quite resilient customer margin. We think 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 EURIBOR in our mortgage book, which has not fully applied to the whole portfolio. Overall, we are positive on that side.
Okay. 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. There are 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 is close to half a million in the entire year. For us, overall, this has no impact.
Okay. ALCO, how's the ALCO piece?
Yes, in terms of ALCO, as we mentioned before, the contribution to net interest margin from the ALCO portfolio is lower. This year, we'll see a slight reduction, this is something that we'll see in the next quarter.
The strategy regarding the TLTROs?
The strategy relating to TLTROs, for the time being, as you know, we have EUR 6.5 billion in TLTROs facility. We are expecting some details of the new TLTRO program. Of course, I think this is 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 these TLTROs. On one hand, I think this is a good news. On the other hand, we're 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.
Fee
in this quarter or guidance?
In the quarter, and going forward.
Okay. In this quarter, what we've seen is a very good commercial activity. Commercial activity in payment and collections, commercial activity in fees related to risk transactions, in structured finance operations, in syndicated loans. Anything related to international commerce, international business. From the commercial activity, I think the fees have had a very good behavior in this quarter. This has compensated the negative behavior of all the fees related to market valuation. We've seen that the year-over-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 first quarter this year versus the first quarter 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. There's an additional difference in average fees from the mutual funds. 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. Those fees that were recorded in the previous quarter last year of EUR 2.5 million have not been in these first quarters 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 first quarter of the year, we will see the benefit of it in the second quarter. Hopefully, and let's cross fingers, markets will remain as positive as they've been in this first quarter.
Okay. What are we expecting 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 a positive growth. For us, we need to, and this is the trend and the guidance, we need to maintain positive growth. The expenses are quite under control, and this is something that should stay stable around the year.
Okay. Still on the P&L's cost of risk, what are we expecting for the rest of the year, given the current 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. Are there any news there?
There's no special news in this litigation risk. As you know, we provide a guidance of EUR 20 million-EUR 25 million 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. Overall, we expect some sort of a stable cost of litigation risk over the next quarters.
Okay. Moving now on to the business. Could you please comment on the performance of Línea Directa in the quarter, and what are we expect for the rest of the year again?
Yes. Again, Línea 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 first quarter of last year. Basically, the difference in the figures that we've shared with you today are in the claims cost. The claim costs of the first quarter last year were extremely low, and this first quarter we've seen a cost of claims slightly higher than, I would say, normal. This is something that we do not expect to see in the following quarters. This first 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's still some pricing pressures in the market, especially in the motor industry. However, we're growing quite above the industry average.
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 seven basis points that we highlight as other?
Yes. Once again, over the quarter, we have increased around five basis points, the level of our ratio. As I mentioned before, we have a couple of impacts. We have the IFRS 16 that reduce around five basis points, we have other impacts that I will mention. Basically, the IRB shortfall and increase in the insurance consumption. Basically, that's it. There's no specific or not relevant situation.
Okay. Are we expecting any regulatory impact for the rest of the year?
In capital?
In the capital.
Oh.
In capital, sorry. Still.
Regulatory?
Yeah. Any further.
We do not expect any additional impact on capital. If your question is related to any potential, again, increase in our SREP requirements, no. We do not expect anything. We are at 8.20% right now, which is something that occur not too long ago. 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. Final question, really. On the M&A front, any updates on the EVO deal?
On the EVO deal, we're still working on it. As you know, we are expecting on these special approvals from the authorities. As we mentioned in previous conversations, we are expecting that over this second quarter, we should finish this deal.
Jacobo, thank you everyone for joining the call today. As usual, for any further questions, please contact our investor relations teams. Goodbye.
Thank you very much, and goodbye.