Revenues grew by 9% with respect to the same quarter last year. Non performing assets returned to levels prior to our acquisition of Banc Quinta Portugal. Net income continued on a positive trend, growing by 15% from a year earlier, a very sound capital ratio and finally, a record ROE at 13.3%. Banquinta Portugal's contribution to 1st net income was €19,000,000 5 times more than a year ago. This reaffirms the strength of our business plan for Bancinter Portugal.
I'll now go over Bancinter Group's financial results, credit risk and liquidity management, positive trends in net interest income, up 9.1% from the same quarter last year. Despite seasonal downturns, quarter on quarter net interest income also grew by 1%. I informed you that we have restated last year's NII to account for the contribution from Portugal's extraordinary net interest income after IFRS 9 was implemented. We will do the same for the remaining quarters in the year. Fee income performance was also very positive when compared to the same quarter last year, although it was 1% lower than in the previous quarter.
This was due to usual Q4 seasonality as well as the negative impact of Holy Week on this item in the P and L account. Our insurance business, especially Linea Directa is in very good shape as indicated by a 17% growth in other operating income item. It does not make sense to compare it to the previous quarter because of the contribution in December to the deposit guarantee fund. Trading gains were at all time loss, in line with previous quarters. Reaching a record high of €500,000,000 our gross operating income show a 10% quarter on quarter increase and also climbed 9 our our with a 15% year on year supported by a growing income contribution, up by 14%.
Banking costs showed a more moderate trend, up 6% within our full year expectations due to our ongoing strategic investment plans and some regulatory matters. Despite this growth, our pre provision profit this quarter due by almost 10% from a year ago and 16% with respect to the last quarter. Quarter and falling by 38% year on year. Finally, our net income this quarter grew by 15% from a year ago and by more than 20% from the previous quarter. The graph on the right hand side shows the positive trend in net income over the last 5 quarters.
In terms of volumes, the total loan book remained stable this quarter. This was decline in lending across Spanish banks, which was down 1.6% year on year as of February this year. In the last 12 months, bank inter continued to be the exception to other banks with a 3.3% loan book growth rate. Customer retail funds net interest income due by 7.6% with respect to the same quarter the previous year. Our.
The extraordinary net interest income in Portugal due to NPL recoveries in its corporate loan portfolio acquired from Barclays amounted to EUR 7,000,000 in the quarter, up from last quarter's EUR 6,500,000 and EUR 4,000,000 in the Q1 of 20 2017. Quarter on quarter, net interest income also remained resilient despite positive 4th quarter seasonality. All this confirms us confirms our yearly guidance for net interest income at a low single digit. As regards customer margin, the graph on the right shows that Despite another year of record low interest rate, it increased to 1.94%, up 5 basis points in the year and 13 basis points The yield improved by 3 basis points on the back of resilient credit spreads. Quarter on quarter, it rose by 4 basis points.
It stood at 8 basis points. Our time deposit back book continued to shrink in size and cost. It now represents only 17% of total retail deposits and its price stands at 19 basis points. Going forward, we expect our lending yields to continue to be fairly stable. We also believe the cost our retail deposits will remain very low with some improvement in wholesale funding costs throughout this year.
All of 2.7%, duration of 2.9 years and an average maturity close to 8 years. Acquisition. 69% of the portfolio consists of Spanish government bonds. We should expect a steady downward trend in its contribution to our net interest income in 2018. Unrealized capital gains increased to more than EUR 6 EUR 100,000,000 with maturities well spread out for the coming years.
Fee income, up 9% year on year, experienced robust growth due to increased operations and customer loyalty. Quarter on quarter fee income was affected by negative seasonality in the Q1 and the Holy Week holidays. Our. Bancinte Portugal's contribution to quarterly group fee income is close to €10,000,000 growing by 22% the last 12 months and 6% from the previous quarter. The graph shows the main contributors to net fee income.
As Today, fee income represents 22% of total group operating income. The positive performance during the Q1 inclines us to maintain the guidance of mid to high single digit growth for this year provided that the market environment stabilizes. This item mainly reflects revenues from our insurer, Linea Directa, up 14% year on year and now accounts for 21% our of the group's total operating income. Later, we will further analyze how our insurance company has performed in with respect to the same quarter last year and 10% more than the previous quarter. The customer business represents over The contribution of the group's total operating income is broken down.
The main contributor is net interest income with 50 4%, followed by fee income with 22% and other income from customer business at 20%. Lastly, non customer related income from trading and institutional activities remained at all time lows at 4% of total income. Our increasing operating expenses indicate positive sales trends in Linea Directa and our consumer finance business for which higher marketing and sales force expenses are necessary. In Linea Directa, since March of the last year, over 169 people have been hired, mainly in sales. Matters and our strategic investment in transformation and processes reengineering.
Banquinta Portugal's operating expenses fell by 4% in the quarter, but rose slightly year on year according to plan. Our Our cost to income ratio in Banking dropped to 46.9%. This includes the integration costs relating to our business in Portugal, which is a less efficient franchise. In 2018, the U. S.
Continued to widen. In the last 12 months, the increase in revenues more than doubles the growth in expenses. Thus, we will pursue our plans and always below income growth in order to maintain cost to income at around 46%. Therefore, a reasonable guidance Cost of risk has continued to fall steadily since 2012. In this first quarter, we hit a new low for this relevant indicator at 20 basis points.
Compared to previous quarters, we adjusted previous cost of risk calculations for reclassified provisions in Portugal after the implementation of IFRS 9. And accordingly, our cost of risk is down by 38% from the same quarter last year. As legal provisions for which the last quarter's impairments fell by EUR 17,000,000. The newly reclassified provision We now believe as a guidance for the next cycle that a midterm cost of risk will be closer to 30 rather than 40 basis points. Lastly, our annualized return on equity for the quarter exceeded 13%, beating all our peers in Spain.
We believe this outward trend will continue throughout the year, allowing us to meet our short term targets. It is important to point out our recently upgraded BBB plus senior rating and AA- our minus coverbond rating in Standard Ampers and our AA1 coverbond rating in Moody's. I will now provide you with the group's main solvency and risk management indicators, including credit and liquidity risk. Asset quality continued on a positive trend. Non performing loans decreased again with only EUR 11,000,000 in net new and non loans this quarter and a 10% decrease in early delinquency balances.
Our. Banquinta Portugal also reduced its NPL balance by 11% year on year and by 6% quarter on quarter. System as of February this year. Banquinta Portugal's NPL ratio also fell to 6.84% at the end of March 2018, well below the Portuguese banking system average. NPL provisions amounted to EUR1 1,000,000,000 up 16% from December, due in part to the implementation of IFRS 9 in the quarter.
Our foreclosed asset coverage has also increased to 46% from 44% a year ago. Our minimal problematic assets portfolio and its level of coverage make us feel comfortable going forward. The foreclosed assets portfolio, including Banquinta Portugal, shrunk in net terms by 22% from a year ago and 44% of the total was in residential properties, with 29% in commercial properties and 27% in land. All in all, total NPAs at EUR 2,390,000,000 price. This quarter, foreclosed asset sales amounted to around 9% of the portfolio by the end of December.
Our average our Moving on to solvency. Retained earnings in the period, along with the stability of our loan book and the impact of IFRS 9 on reserves allowed our CET1 to grow this quarter by a total of 54 basis points. Our our 12% fully loaded ratio is at the top of our guidance between 11% and 11.5%. I remind you that due to the IFRS 9 implementation, the capital ratio will see some volatility in the coming quarters. Our total capital ratio reached 14.8% as of March this year, up from 12.7 percent a our.
Finally, our leverage ratio remained stable at 5.4%. Our liquidity. Our total sorry, our loan to deposit ratio has remained stable since last year. This quarter, absent growth in our loan book and increasing customer funds led the ratio to rise by 170 basis points. Our Portuguese franchise's liquidity gap is now stable at a very modest level of around €900,000,000 Despite absorbing this amount, the group's total liquidity gap remained stable during the year.
The maturity profile of our wholesale financing remained unchanged with no concentrations in any of the coming years. There are no further maturities for this year. As regards new issues, the current plan is to issue around €500,000,000 of wholesale financing in MREL eligible instruments subject to market conditions. Banquinta's liquidity buffer on EUR 10,500,000,000 is quite substantial and has increased over the years. Additionally, our Cobrebon issuance capacity is large our Let's now have a quick look at our main customer business indicators for the quarter.
The contribution of to total income from business segments remained well diversified and balanced. Our main contributors continue to be Corporate and SME banking, closely followed by retail and commercial banking. Our 3rd major contributor to total income is Linea Directa. For the first time, Bancinter consumer finance contributed 10%, followed by Bancinte Portugal, which contributed 7% to total income. Accounted for another 7% of the group's total operating income.
Banquinter continued to our 73% of our growth came from midcorporate and SMEs. Only 20 7% came from large corporates that represent 52% of our corporate loan book. Quarter on quarter, our loan book remained almost flat. This indicates a mixed behavior. While our loan book in Portugal grew by 5%, In Spain, it decreased by over €250,000,000 due to the usual year in window dressing and incremental provisioning due to IFRS AS9 implementation.
Looking ahead, we are confident we will maintain balanced growth in the coming quarters of this year on top of our current business performance and our increased market share in new lending. Our enterprises of income in Corporate Banking is international trade business, which now represents 25% of our operating income in this segment. Approximately half of this comes in as fee income. Other sources of income include of our of balance sheet business, such as stand by letter of credits and beat and performance bonds, which reached an outstanding amount of €3,200,000,000 and grew by 8% from a year earlier. Moreover, we have our traditional collateral business in international payment and collections, which amounted to EUR 15,000,000,000 and grew by 15%.
And finally, working capital lending, which grew by 16%. All of this is thanks to increasing customer loyalty and our improved customer acquisition. Private Banking continued to perform extremely well in the quarter with net new money growing 50 percent more than in the same period last year. Despite the negative market effect in the quarter amounting to EUR 400,000,000, customer assets in Private Banking due by 2% to EUR 35,800,000,000 or 19% from the Q1 of 2017. What is much more remarkable, 78% of this growth advisory products that represent 43% of total assets.
In Personal Banking, assets under management grew by €1,800,000,000 in the last 12 months or 9%. Since December, despite a negative market effect of €100,000,000 customer assets grew slightly below EUR 400,000,000. Discretionary management and investment funds now account for 31% of the total customer assets, growing by 44% over the same period of the previous year. Our In our retail banking, growth continued in our better known products. We ended the quarter with more EUR 7,000,000,000 in payroll accounts, up 21% from a year ago.
This product is also performing very well in Portugal. Commercial operations were also very intense in mortgage lending, where new origination recovered double digit growth, pushing our market share up to 5.3%. 28% of new mortgages were fixed rate. Total of balance sheet funds continue to performed robustly. They grew by 1% with respect to December and by 9% from a year ago, reaching EUR 27,000,000,000 Most assets Under management are invested in mutual funds, which show a 2% increase in the quarter to EUR 20,400,000,000 assets.
Money market funds fell by an additional 26%. 3rd party funds accounted for close to 55 percent of the total in part due to the significant growth in profile funds. This reveals our better vantage point over most of our peers after the new MiFID II measures have been implemented. And now our usual review of our franchise in Portugal. Banquinta Portugal's contribution has been exceeding our expectation.
Commercial operations are according to plan. Corporate lending and mortgages have grown. Total loan book rose by 7% ending the year with a 19% increase in corporate lending. Customer funds increased in the quarter, although persistently falling prices led to a year on year decline in deposits. Still, the liquidity gap of this business is stable under €1,000,000,000 The 19% year on year increase in its of balance sheet business, such as customer P and L account compared to the previous year.
EUR 19,000,000 in profit before taxes for the quarter is more than 5 times the figure of March last year. Net interest margin grew by 38% and fees by 22% in a full comparison, while operating expenses stayed at EUR 22,000,000 with 5% growth. This quarter, only EUR 7,000,000 our in revenues resulted from nonrecurrent credit loan recoveries versus EUR 4,000,000 in Q1 of last year. Finally, cost of risk is positive due to the new IFRS 9 accounting standards. These four graphs in this page fully compare the quarterly changes in different components of Manquinta Portugal's P and L account.
Recurrent NII and fees are on upward trends, operating costs are mostly controlled and profits before taxes are growing with some hikes due to extraordinary recoveries. Now Banquinter Consumer Finance. Consumer Finance maintained robust growth, having attracted 82,000 new customers in the Q1 to reach EUR 1,100,000, an increase of 23% with respect to March last year. Lending balances increased by 43% year on year to EUR 1,600,000,000 Cost of risk and NPL ratio performed according to plan, remaining at 7.5% and with a coverage rate of 118%. All in all, risk adjusted returns continue to be above 10%.
In the quarter, Banquinter Consumer Finance launched Isbanquintercar in Portugal, where we expect to grow by €60,000,000 in the year. Now a brief review of the quarter in Linea Directa. Linea Directa continued to be one of the most consistent and profitable direct insurance companies in Spain. The Q1 saw similar trends to previous quarters. Sales and premiums continue to grow by high single digits, business lines performed very well, the results from home insurance were particularly satisfactory as premiums grew by almost 4 times the industry average.
Motor insurance business was more affected by increased competition in the market and renewed pressure on prices. Its new health insurance arm, Vivas, performed according to plan with more than 8,000 risk insured at the end our March. We are expecting it to experience a strong growth for the year. Cross selling to assisting motor insurance customers is the main entry point and over 60% of customers are new to this health insurance product. Our.
The positive impact of the Varemo allowed for a reduction in our combined ratio. This is difficult to maintain going forward because claims cost will increase. Nevertheless, Linea Directa continued to maintain a positive gap with the sector in this significant ratio. Finally, here is Linea Directa's standalone P and L in accordance with insurance accounting regulations. Its underwriting result continued to show the strength of this business, growing by 13% from the Q1 last year.
At the same time, intensified commercial operations led to increases in operating expenses, mainly in terms of marketing and sales force. Financial income continues to fall by 8% year on year, owing to the ultra low interest rate environment and represented a minor contribution to the total income. All in all, LDA's net income climbed by 7% to EUR 28,000,000. It reached an outstanding ROE of 36%, while maintaining a Solvency RCT2 ratio at 2 23%. In this last slide, you have a brief recap of Bancinter Group's main figures for this quarter.
That is all on my part. Thank you for your attention. I will now take any questions you may have.
Thank you, Gloria, for the detailed explanation. Let's start, for example, With volumes growth, we haven't seen much of that in the quarter. Can you comment on your expectations for the next Few quarters, loan volumes.
Okay. Thank you, David. Well, as you I've seen in the presentation, in the quarter, the group balance sheet has remained flat, almost flat. But We posted 2.4% annual growth. Looking at the loan book, Well, the industry has continued to shrink by 1.6%, and We have been able to grow by 3.3% with respect to the same quarter last year.
It's certain that in the quarter, the loan book was stable, but this is normal due to the last quarter seasonality our and window dressing. And to one factor because the figure that we post It's the net investment, the net loan book. So that it is affected by the increase in the provisions due to the IFRS 9 implementation. And this impact has been around €135,000,000 in the quarter. That's EUR 35,000,000 in the quarter.
That is the main reason for the loan book to our stability. We expect in this sense that the rest of the year will be positive In terms of growth, we'll be able to get our guidance. Year on year, growth This is an organic growth, as you know very well. In Spain, the growth was 4.3%, while the our average of the sector continued to go down by 3.6%, so the gap with the industry It's widening. And in Banquinte, in Banquinte, Portugal, it grew to EUR 1,000,000,000, Our consumer finance loan book continued to grow, in this case, 7% quarter on quarter, but 43% year on year.
In terms of The mortgage book here, the book has remained stable in the period, but the new lending is growing by 10% in the last 12 months. So and more than almost EUR 600,000,000 in the quarter. Finally, customer deposits grow by 4% in the last 12 months. So we continue gaining market share. In Portugal, However, deposits remain stable year on year.
But in the last quarter, we have experienced our growth in this part of the balance sheet. And finally, our balance sheet items that amount now to EUR 27,000,000 are growing. And particularly interesting to comment, the increase in mutual funds, 2% in the quarter, but 15% in the year.
Thank you, Gloria. On the credit deals, are we seeing any news there or any difference from previous quarters?
Well, what we have appreciated in the last quarter is that margins have improved a little bit. And this is the result of positive asset mix because volumes are stable in the quarter. So we have better credit yields because of this reason. Our The new production in companies lending is our back book because some of them, 30% of them are fixed rate mortgages. So the new production is our better spread.
And finally, we are growing in consumption financing, in consumer financing, which is Saying that these trends will maintain stable in the next quarters, and we consider that the customer Margin will be very stable also, very resilient around the current figure, 1.94, 1.95 0.95 or something like that.
Okay. Moving now on to the P and L. We've been asked whether you can confirm the guidance on NII and fee
Yes. Our guidance for NII continued to be low single digits for the year. And our guidance for net income is mid to high single digit based on the performance of this Q1.
Perfect. Any impact from TLTROs or any changes there on the NII expected? We were already accruing for the 40 basis points as a reminder?
Well, the numbers now are very close to the previous one from 12% to 15% of net interest income is coming from Kari trade. So no changes in the
Okay. Moving now to cost. Could you please put some color on the cost trends in the quarter? And also what's how we expect going forward
Okay. First of all, we confirm our guidance cost in the quarter. The figure is not good really. It's a very high figure. But this conceals different our and the insurance business growing at 15%, which is in line with our guidance also.
Banking cost in Spain grew by only 3% on the quarter. That means EUR 4,800,000, which is really a very small amount. And by EUR 10,000,000 in the year, 6 point 8%. In Portugal, cost grew by 4.9% in the year, almost 5%. But in the quarter, Cost went down by 3%.
Going now to the explanation for these increases This relates to new staff to meet the growing commercial activity in bank inter consumer finance. The people hiring regulatory matters such as IFRS 9, MiFID II, data protection regulation, all Moreover, cost increases were also due to investment in our new IT platform and the reengineering of our processes to be more efficient. It's clear that most of these expenses are going to be incurred over time because they can be activated, but some of them are expenses of the period. In the case of acquisition costs, including marketing as well as the increase in sales force. In fact, 169 people were hired in the period.
In any case, banking efficiency has improved by 100 basis points in 12 months. We are now in 46.9%, including the less efficient franchise of Portugal. And finally, what is for us very relevant or very important is 46% level. That's the reason why we, I insist, maintain the mid single digit range for this line.
Okay. On cost of risk, we get questions on how sustainable is this level that we have seen In the quarter. You commented already on that.
Yes. We had guidance for Having analyzed the impact of the first application of IFRS 9 and the impact of these new standards on new lending, We are closer to 30 than to 40 basis points as our guidance for long term, Okay. And concerning the last performance of this Indicator, I have to mention here that impairments have been very positively impacted by 2 reclassifications. 1 of them took place last year in December and consisted of reclassifying some provisions from impairment losses to legal provisions. As you remember, it was EUR 17,000,000 our And this reclassification is the reason why in the last quarter of last year, the cost of risk is so low.
So the comparison with the last quarter is not worthwhile because of this reclassification that took our It's been observed this year and has to do with the impact of IFRS 9 in the extraordinary recoveries in Portugal that some of them have been reclassified as provisions when previously they were recognized as NII. So this has been done in all the series of last year and we will now can compare on different from the one that we made public last year because of this reclassification. And taking all this into account. We are now in 20 basis points, which is 38% less than a year
Okay. Perfect. Just a quick one on TLTRO2. Whether you expect any changes On the size of the €6,500,000,000 that we are holding, are we planning to repay that earlier?
Well, no change our this will mature between 2020 2021. What I can tell you is that we have a liquid asset discussion about EUR 10,500,000,000. So we don't anticipate any problem to pay back these facilities when they come to maturity. Apart from this, I Remember you that we deposit back in the ECB around 5 EUR 1,000,000,000 of this amount. So the net amount that we owe to the ECB is EUR 1 point EUR 5,000,000,000.
So with a cash of EUR 10,500,000,000 no problem to pay back this.
We had a few questions on capital on the ratio of 12% that we have now and how much of that CET our ratio is now made of unrealized gains. And also we get questions on whether we have a target for capital our Now that we have reached that 12% figure.
Okay. Well, in the presentation, we saw the with 23 basis points. The IFRS 9 implementation that added 42 basis points, this is a net And the reclassification of the available for sale portfolio that added 52 basis points. So the net being 42 basis points. And finally, the risk weighted assets consumption that took away 5 basis 12%.
Our guidance continued to be 11% to 11.5%. But you have to Take into account that due to IFRS 9 standards, capital ratio is going to be more volatile now than it was used to be in the past. So the fact that at this quarter the level is at 12% doesn't 12% more or less. Looking at the unrealized gains In the presentation, you have the total amount of the unrealized gains is in the ALCO portfolio is around EUR 600,000,000 portfolio. As you know very well, the unrealized gains in the amortized cost portfolio are not taken into account in the ratio.
So this EUR 300,000,000 have are not been are not included in the 12% ratio. This is my first comment. The second comment is that the part or the unrealized gains that our in the ratio are around 70 basis points more or less. And clearly, they are unrealized gains, this amount will be gradually absorbed through the NII in the future. In this aspect.
So this is more or less the Okay.
Moving on to Businesses now. We get questions on how strong or how the performance going forward should be in Linea Electa and our And Banquinta, Portugal, given the past quarter.
Okay. In Linea Directa, we saw a very positive our satisfactory quarter, showing a solid performance. Despite the growing price pressures in especially in motor insurance from some of our main competitors. But we continue to outperform the industry, more than doubling the peer's average growth in policies and premiums. We continue to be very efficient in customer acquisition and very flexible in rate changes.
So in this Our expectations continue to be that the year is going to be a very positive one. In the quarter, the average cost of claim continued to reduce because almost known high severity claims was produced and we have provisions, a much lower amount on less severe claims because of the new Baremo requirements. This is the main reason why the claims ratio improved. It's 80 basis points better than a year ago. Although during the quarter, it has worsened A little bit because the cost ratio worsened and this worsening was higher than the improvement of the claims ratio.
The technical result shows a 13% growth over the Q1 last year. So the performance in terms of the P and L is also very, very good. And finally, we still expect 36% or around 36% ROE during the year. Concerning Portugal, here, the business plan is ahead of our expectations in this quarter, showing positive results in terms of balance sheet. And our balance sheet that good the increase in our balance sheet, assets under management and unit links, but also very remarkable, the growth in our corporate lending, 19% as well as in retail lending mortgages, 5%.
Our customer deposits have been stable in the year because we Our main target here was to reduce the cost, and the cost was reduced, in fact, by 33% in the last 12 months. So this has been a target for us. Continue to grow according to plans, 22% growth year on year the fee income, 28% year on year on the recurrent NII. So all of them of the revenues lines performing very well And the operating expenses under control. We have very good quarter when compared with the last one the last one of the last year.
And efficiency has improved portfolio to Barclays because this figure is going to be lower than the figure of last year. And at the same time, part of this figure, approximately 2 thirds of this is going to be reflected as less provisions and not as more NII. So this is going to be this is going to do more difficult the comparison, but we will try to give you some light every quarter just to be sure that you understand the differences between this year and last year.
Okay. And last few questions. Also get a couple of questions on litigation. Whether you had any comments on the latest Supreme Court rulings that we have seen The sector? And also what sort of impact shall we expect for bank interim?
Okay. Thank you. Well, as you exception to that. We have preferred stock, litigation mortgage floors, mortgage expenses, etcetera. Bank is exposed to a much lesser extent to customer claims, but we have seen a number of lawsuits in the last few years.
Given our customer affluent profile, as you know, they were mainly related to Lehman latest current rulings by the Spanish Supreme Court made it clear that banks are not always liable for any product sold in the past. On case by case basis and how transparent was the selling process to clients. In short, Similarly to previous years, we will continue provisioning adequately for future litigation risk based on the numbers of lawsuits that we may get and the success rate on those issues. This process or this methodology that we use to calculate the provisioning is in line with our external auditors and the regulator.
Thank you. And the very last question, do we expect any changes on our dividend policy?
Our? Not. Clearly not.
Clear. Well, thank you. That was all from us. As usual, the IR team is at your disposal
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