Good morning from the Bankinter team, and welcome to our third-quarter results presentation. As usual, our CFO, Gloria Ortiz Portero, will summarize the details, and we'll follow up with a Q&A session at the end. Thank you.
Thank you, David. Good morning, and welcome to Bankinter's 2017 third-quarter results presentation. The related financial statements were filed with the Comisión Nacional del Mercado de Valores before market open. You may access several related documents and files on our corporate website. I'd like first to summarize the quarter's main financial indicators. Gross operating income reached EUR 1,394 million in the first nine months of the year, up 10% from the same period last year. Without Portugal, gross operating income growth would have been 6%, a higher rate than in the first half of 2017. The group's NPL ratio has fallen by two basis points to 3.72%, and by 47 basis points since September last year, or 11%. Minus Portugal, our NPL ratio stands at 3.33%.
The group's net income stood at EUR 376 million, down 6% year-on-year, due to EUR 124 million in extraordinary goodwill included in the income of the same period last year. Factoring out Portugal's total contribution in both years, net income would have been grown by 15% from the same period of 2016. The fully loaded common equity Tier 1 ratio at 11.5% has grown since June by 19 basis points, considering risk-weighted assets performance and dividend distribution in the period. The group's annualized ROE climbed 1.6 percentage points from a year ago to 12.3%, and is best in class among listed banks in Spain. We will start by seeing Bankinter Group's financial results, as well as its risk management performance. I will conclude with a quick review of the performance of our various strategic business lines.
Here we present Bankinter Group's total P&L figures, together with a like-for-like comparison, not including our franchise in Portugal. Because, as you know, it has only been part of the group since April 2016. Net income in the first nine months totaled EUR 376 million, down 6% from a year ago. On a like-for-like basis, that is, without Portugal, net income would have been EUR 358 million, up EUR 46.1 million, or 14.8%, with respect to last year. In the last 12 months, the group's net interest income has increased by 10.8%. On a like-for-like basis, this would become a 5.3% increase in the same period. For another quarter, our net interest income has remained resilient despite the low-for-long interest rates environment. Year-to-date, fee income was up 14.2% from the same period last year. Minus Portugal, fee income growth was still strong at 11.5%.
This continues to demonstrate the solid performance of our corporate banking business. It also reveals a favorable market environment for our assets under management that has contributed to this growth. Including LDA, other non-interest income from customers is accelerating its growth rate up to 7.3% without Portugal. Trading income was close to EUR 50 million, down EUR 6 million from a year ago, holding at record low levels. All in all, Bankinter Group's total gross operating income amounted to EUR 1,394 billion, up by almost 10% year-on-year or a very resilient 6.2% without Portugal. Costs continue to grow, although at a slower pace than income. This growth is still mainly due to strategic investments. Operating expenses increased by 7.4% year-on-year or 4.9% without Portugal, both according to plan. Cost of risk fell by 3.7% in the last nine months, amounting to EUR 157 million.
Without Portugal, cost of risk decreased by 7.8% from a year ago. Finally, in the first nine months, the tax profit fell by EUR 30 million, offsetting most of the extraordinary goodwill from 2016. Without Portugal, net income would have increased by 15% from a year ago. On a quarterly analysis, our P&L account shows positive income trends. Net interest income this quarter reached EUR 260 million, EUR 12 million less than the second quarter, mainly due to a smaller contribution from Portugal's extraordinary NII. In a better comparison, NII grew by 4.3% from the same quarter last year. Fee income was down 5.3% from the previous quarter due to the summer seasonality, as usual. However, it was 10.4% higher than the same quarter last year due to improved business performance.
Other operating income increased by 46% in a non-comparable quarter-on-quarter due to the resolution fund contribution in the second quarter, and by 8.9% when compared to the same period last year. Third quarter gross operating income increased by EUR 16.6 million or 3.7% from the previous quarter, and by 8.5% versus the same quarter last year. Operating expenses for the period went down from the previous quarter and up from the same quarter last year, allowing pre-provision profit to grow by 10.1% and 14.5% respectively. Provisions and cost of risk continue to diminish both quarter-on-quarter and over the same quarter in the previous year. Quarterly net income grew by almost 16% from the previous quarter and more than 18% over the same quarter of 2016. Excluding the extraordinary goodwill, each and every quarter's recurrent net income has been below this third quarter figure.
Bankinter Group's volume targets for the year are still on track, despite the negative seasonality of the third quarter and continuous decreases in lending across Spanish banks, down 2.2% year-on-year as of August this year. Bankinter continues to be the exception to this trend, and its loan book grew by almost EUR 2 billion or 3.7% in the last 12 months and EUR 200 million in the last quarter. Customer retail funds decreased by EUR 1.2 billion this quarter, mainly in term deposits, as a result of our close to zero rate policy following the summer and the gradual transfer from deposits to mutual funds. In the last 12 months, Organic growth remains at over 4% year-on-year, outperforming the sector and increasing our market shares both in Spain and Portugal.
As of the week of October the 16th, customer retail deposits were back at EUR 47 billion, following two strong weeks of growth in light of recent market movement. Despite negative Euribor rates, net interest income continues to show positive trends, growing by 10.8% year-on-year in the last nine months, and by 4.3% if we compare this quarter to the same quarter last year. These growth rates would be 5.3% and 4.2% without Portugal. The quarter-on-quarter comparison still shows resilience at 1.1% growth. In the graph at the bottom left, you can track Portugal's recurring contribution to net interest income. This quarter, 73% of total net interest income came from recurring business in Portugal. The rest came from NPL recoveries from the corporate loan portfolio acquired from Barclays.
This extraordinary net interest income in Portugal is seeing a downward trend, but will continue throughout the rest of the year, as well as the following year. With all this in mind, our full year guidance continues to be of mid to high single digit net interest income growth for the group and mid to low single digit growth for Spain. The graph on the right reveals that for another quarter, and despite record low yield curves, our customer margin, excluding Portugal, with high quarterly volatility, remains at 1.85%, down two basis points regarding June, but with a positive trend year-on-year. Notice that the inflated contribution to credit yield from Portugal's non-recurring NPL recoveries is trending downward.
Customer margin is resilient despite the reduction in credit yield, down 15 basis points from the last quarter, 11 basis points in Portugal and four basis points in Spain, and only seven basis points down from a year ago. This is thanks to the reduced cost of liabilities by one basis point quarter-on-quarter to a record low, and by 16 basis points year-on-year. Our time deposit back book continues to shrink in size and cost. It now represents less than 20% of total retail deposits. The back book price stands now at 21 basis points, the same price as the front book. Mortgage and corporate financing credit yields continue to be under pressure by increased competition, with a very low and stable cost of retail deposits and improved cost of wholesale funding at around 20 basis points.
All this leads us to believe that our customer margin will remain somehow resilient in the coming quarters. Our ALCO portfolio's contribution to net interest income continues on a slow downward trend. The total ALCO portfolio amounted to EUR 5.8 billion, with an average yield of 2.7% and an average duration of 2.8 years, being the average maturity of these bonds 7.6 years. 66% of them are Spanish government bonds. Due to this portfolio's long-term maturity profile, we should expect a 15% trending to 12% contribution to our net interest income in the next two years. Unrealized capital gains total approximately EUR 500 million. Mostly in the held-to-maturity portfolio, still with an average maturity of 5.5 years and a 3.7% yield. Net fee income continued to show strong quarterly and annual trends, growing by two digits year-on-year.
The 6 million reduction in group fees for the previous quarter is only due to summer seasonality in corporate and transactional fees. Overall, the group's total 9-month fees, excluding Portugal, reached EUR 287 million from EUR 257 million a year ago. This is an organic increase of EUR 30 million or 11.5%. Portugal continues to register between 8 million and 9 million per quarter contribution to fee income. Fees from assets under management, the largest contributor to net fee income by over a third, increased by an excellent 20.5% year-on-year. This is due to the strong volume growth in mutual funds, managed portfolios, and the extra quarter with Portugal. Payment and collection fees, the second-largest contributor, were up 13% from a year ago, thanks to higher corporate customer activity. Equity brokerage and custody fees both increased by almost 13% year-on-year.
Insurance fees also grew by 24% from a year ago, owing to new mortgages and the contribution of Bankinter Portugal. Finally, fees paid to our independent financial agents and partners grew by 13% year-on-year, showing continued potential for both additional distribution channels. Since 2013, when our new business model of private banking and corporate banking took off, fee income has grown at a cumulative average annual rate of 13%. In the third quarter of 2013, fee income represented 17% of total operating margin, while today it represents close to 22%. This positive fee income performance clearly points us towards the mid to high single-digit guidance growth in 2017, provided that the market environment remains stable. Other income increased by 6.3% from a year ago.
Línea Directa's insurance margin once again proved to be the largest contributor here, up 11.8% in the last 12 months, thanks to a good performance in motor and home insurance. This accounts for 21% of the group's total gross operating income. The chart also highlights the recurrent 20% increase in regulatory charges during the period, which includes the second quarter contribution to the resolution fund. All in all, gross operating income at EUR 1,394 million is up 9.7% from September 2016. The main contributor here is net interest income at 56.7%, followed by fee income at almost 23%, and other income from customer business at 17%. Lastly, non-customer-related income from trading and institutional activities remains at its lowest levels in years, with a mere EUR 50 million in the first 9 months or just 3.6% of total income.
Total customer-related business in both Spain and Portugal has grown by 11% in the last 12 months, showing the improved quality and recurrence of our earnings. Our operating costs have increased by 3% from the same quarter last year. In Bankinter Spain, costs have gone down by 3% in the quarter and are flat year-on-year. In Línea Directa, the increase in marketing expenses and sales force, growing by 6% to handle the sales growth, has led to a 10% increase in expenses year-on-year. Lastly, operating costs at the insurance franchise are also flat from the previous quarter and up by less than half a million from a year ago. Compared with last quarter, total operating expenses in the group fell by 2.2% or EUR 5.3 million. Finally, the jaws ratio has widened by 15% year-on-year. The cost-to-income ratio in our banking activity remains at 46.8%, including amortizations.
Our guidance for the yearly group cost continues to be in the low- to mid-single digits based on our stable cost control between quarters. This slide shows Bankinter Group's quarterly performance in terms of cost of risk, which has continued to fall. The way Bankinter calculates cost of risks includes all impairments as well as foreclosed asset sales. At 32 basis points, the quarterly cost of risk decreased by three basis points, exceeding our expectations. Nevertheless, going forward, we continue to consider 40 basis points as a medium-term guidance for our cost of risk throughout the cycle. Finally, our annualized ROE grew again, reaching 12.3%, up from 10.7% a year ago, up from 10.9% in December 2016. It continues to be best in class among listed banks in Spain. We will now analyze the main risk management indicators, which cover credit and liquidity risk, as well as solvency.
Asset quality maintains its downward trend. Non-performing assets have decreased due to small NPL entries and much lower early delinquency balances, down 23% year-on-year. Portugal also reduced its NPL balance by 15% year-on-year, remaining flat quarter-on-quarter. As of September this year, the group's total non-performing loan balance amounted to EUR 2.15 billion, down 8.6% from a year ago, maintaining previous quarterly trends. Our NPL ratio continues to decrease and stands now at 3.72%, down 47 basis points or 11% from a year ago. Bankinter Spain's NPL ratio fell to 3.33%, less than half the NPL ratio in the Spanish banking system. NPL provisions remained at EUR 1 billion, holding our coverage ratio very stable. Our foreclosed asset coverage has increased to 45% from 38% a year ago. Lastly, our total problematic assets coverage make us feel comfortable ahead of the new cycle.
Our foreclosed asset portfolio, including Portugal, shrunk by 16% from a year ago. Almost 15% corresponds to residential property, while the rest is evenly split between commercial and land property. Asset sales in the last nine months accounted for just about 30% of the portfolio at the beginning of the year, with average discounts improving from 39% a year ago to 36% today. Our fully loaded CET1 ratio increased to 11.5% from the previous quarter and has increased by 35 basis points year-to-date. Capital generation through retained earnings was 61 basis points during the period, almost tripling the capital consumption due to the loan book growth. The fully loaded ratio is still within our guidance of around 11%, well above regulatory requirements for 2017. In phasing-in terms, the CET1 ratio stands at 11.8%, with a total capital ratio of 14.4% as of September this year.
Lastly, our leverage ratio remains very stable. In short, Bankinter continues to be comfortably capitalized considering its risk profile and growth patterns. The loan-to-deposit ratio has maintained very stable year-on-year, but improved 110 basis points since December. The liquidity gap of our Portuguese business decreased by almost EUR 2 billion since it was acquired. It is now stable at a very modest level of EUR 600 million. Even in absorbing this amount, the group's total liquidity gap fell by EUR 500 million during the year. The maturity profile of our wholesale funding remains unchanged, with no concentration in any of the coming years. Maturities next year account for just EUR 600 million from a covered bond in February 2018. Following the success of our subordinated debt issue in the first quarter, we do not have any plans for additional wholesale financing for the rest of the year.
Bankinter's liquidity buffer is quite substantial and has increased over the years. Now, liquid assets amount to EUR 10.6 billion, with an additional EUR 7.5 billion in cover bond issuance capacity. We will now look at the main customer business indicators from the last quarter. The contribution of various business segments and non-customer areas to total income remained clearly diversified and balanced in the period. Main contributors have been corporate and SME banking at 30%, and commercial banking with individuals, including private and personal segments, at 27%. Bankinter Consumer Finance contributed 8%, while 7% came from Bankinter Portugal. Lastly, corporate centers, treasury capital markets, ALCO management, and other non-customer business only accounted for 7% of total operating income.
Bankinter's corporate and SME lending continues to outperform other Spanish banks, with 5.3% net growth year-on-year, a 4.3% increase in Spain, despite a 3.7% decrease in loan book across the banking system as of August this year. Not only the quantity, but also the quality of such growth is reflected in our loan book distribution. Almost 80% comes from mid-corporate and SMEs, growing at 11.6% and 6.2% respectively. Only 22% comes from large corporates, growing at 2.1%. At the same time, sight and term deposits grew by 15% in both mid-corporate and SMEs at cost of one or two basis points, and decreased 7% in large corporates.
The leader has muted your line.
Introduced. We believe that we can maintain or improve this growth rate in the last quarter of the year based on our current pipeline and our increasing market share in new lending, now close to 6%, well above our natural market share in this business. Our corporate and SMEs banking business model focuses on building long-term relationships by offering value-added products and services to our more than 90,000 corporate customers. This transactional business generates fee income, liquidity, and greater customer engagement. Some key indicators in this business, such as tax payments, direct debits, and SEPA transfers from companies, grew in the period by high double digits. I would like also to remark the growth in corporate customer acquisition at plus 9% over the first nine months. The main contributor to the gross operating margin in this segment is our international trade business, growing by 21% from a year ago.
It reached EUR 103 million in the first nine months of the year. Private banking business continued to perform extremely well, with net new money growing by EUR 2 billion year-to-date. Including market effect, customer assets in private banking grew by EUR 3 billion in these nine months. More importantly, 90% of this growth relates to advisory products that now represent 42% of total assets. Customer acquisition at 16% in the period continues to be one of the main drivers of the growth in this business segment. Assets under management and custody in personal banking reached EUR 20.5 billion, up 15% over the third quarter last year, with EUR 1.5 billion in net new money in the period. Discretionary management and mutual funds still constitute 31% of total assets in this segment.
Customer acquisition in the nine-month period grew by 27% from a year ago, a robust performance that shows the success of the business plan for this segment of customers. Adding both businesses, private and personal banking, we are now managing around EUR 55 billion from our customers. In retail banking, we continue to grow with regards to our better-known products. Payroll accounts now stand at EUR 6.4 billion, up 26% from a year ago, and now growing in Portugal as well. In mortgage loans, we see levels of new lending that are similar to the previous year, despite falling total loan book figures across the banking system. Thus, we continue to hold a relevant 6.5% market share in new mortgage lending in Spain. Fixed rate mortgages continue to represent close to 20% of new mortgage lending, which is still below the market's average at 38%.
Total off-balance sheet funds performed well in the year, rising by 10.2% year-to-date to almost EUR 26 billion and by 13.4% against September of last year. Most assets under management and mutual funds up 16.5% year-to-date and 22% year-on-year. Overall, this growth is concentrated in equity, long-term fixed rate, and guaranteed funds. Money market funds diminished 7% in the year. Third-party funds accounted for 57% of the total portfolio, a very different profile to most of our local peers. Now a quick review of Bankinter Portugal. Its loan book grew by 7% year-on-year to EUR 4.7 billion. Its commercial banking loan book, mostly in residential mortgages, amounts to EUR 3.9 billion or 1.6% growth year-to-date. Corporate lending stood at EUR 850 million, growing by 11% since December and 41% in the last 12 months.
Our market share in total lending in Portugal is 2.4%, with an outstanding presence in new residential mortgage loans, where our market share is close to 6%. Bankinter Portugal's retail deposits grew by 8% thanks to our new product offering in Portugal, including payroll accounts and treasury accounts for corporates. Our market share in deposits in the Portuguese market stands at 2.3%. Concerning the new production, it is 3.8%, while in corporate deposits, it has reached 7.5%. Bankinter Portugal's P&L account shows a pre-tax profit of EUR 24.8 million in the last nine months, with incomes at EUR 102.3 million and operating expenses at EUR 64.1 million. Still, 36% of the incomes have resulted from non-recurrent credit loan recoveries. cost-to-income stands at 63%, including extraordinary income. Going forward, costs should remain mostly flat, while recurrent revenues should be expected to rise due to increasing volumes.
Therefore, in the near future, Portugal's efficiency level should improve to a cost-to-income more similar to that of Bankinter Spain. Bankinter Consumer Finance maintains robust growth, attracting 218,000 new customers in the last nine months, 25% more than a year ago. Lending balances have increased by 41% year-over-year to EUR 1.3 billion. At the same time, cost of risk and NPL ratio, both crucial KPIs in this business, have performed according to plan, standing at 1.9% and 7.3%, respectively. As regards to Línea Directa, the last nine months saw similar trends to the previous quarters, as policies and premiums continued to grow by high single digits, almost 9%. Total policies reached EUR 2.7 billion. Both motor insurance and home insurance sales outperformed sector growth, rising by 7.4% and 14.4%, respectively. Total issue premiums climbed 8% from a year ago.
Motor insurance premiums increased by 7.1% over the sector average of 3.6%. Home insurance premiums increased by 14.9%, despite 3.4% growth across the sector as of August 2017. Our combined ratio improved once again during the quarter and the year. This is mainly due to some delays in the Baremo full implementation, particularly in high-severity claims. The increased requirements for the less severe claims have helped reduce fraudulent claims and related costs by more than 15%. LDA's combined ratio at 81.1% continues to be second to none in an industry with an average combined ratio well over 90%. This strong combined ratio represents an opportunity to increase growth in new business and continue to gain market share.
In this last quarter, LDA announced the launch of a new line of health insurance products called Vivaz, with a view to increase both the number of customers and cross-selling among existing customers. LDA has now more than 2.74 million customers. The impact of such an initiative this year is minimal, within yearly expenses at approximately EUR 2.5 million. Here is Línea Directa standalone P&L in accordance with insurance accounting regulations. Its underwriting results continue to show the strength of the business, growing 20% in the last 12 months. The increase in operating expenses, mainly marketing and sales force, reflected the growth in the number of policies sold in the period. Income fell by 5% year-over-year on the back of the low for long interest rate environment. Its technical coverage ratio remained stable at 135%, with its Solvency II ratio at a reasonable 221%.
Línea Directa's net income climbed 8% to EUR 76.9 million, reaching an outstanding ROE of 35%. In this last slide, you have a brief recap of the main figures this quarter. That is all I have for my part. Thank you all for your attention, and I will now take any questions you may have.
Thank you, Gloria, for that summary. We can start with a few questions you want on income related items. For example, could you please elaborate on our NII dynamics on the quarter, given the recent volatility that we have seen, especially on the Bankinter Portugal business?
Okay. Thank you, David. Well, the quarter has been another quarter defined by resilient net interest income with a 4% small reduction quarter-over-quarter, this reduction has to do with the volatility in Bankinter Portugal that I have mentioned during the presentation. Excluding Bankinter Portugal, we can observe a 1.1% growth quarter-over-quarter and a 5.3% growth year-over-year. This is a very resilient NII. This resilience is based mainly on a stable growth in volumes in the loan book, with somehow a stable spread, - four basis points in the period in Spain, and stable growth in our customer deposits at better cost. At the same time, the resilience is based on the reduction in the wholesale financing costs. We expect this trend will continue this year, we will maintain our guidance of low to mid single digit for Spain.
Probably in the next quarter, the volumes will increase the growth because of the positive seasonality, and this is what make us believe that this guidance is going to be certain. Concerning Bankinter Portugal, it's very difficult to predict the NII. They have a recurrent part, which is growing as the commercial activity increases. In this point, we are confident on the increase in this recurrent part this year and next year, clearly. The non-recurrent part, which is related to the extraordinary recoveries from the purchase portfolio, is now close to half the NII. It's very volatile. Every quarter, the amount is extraordinary, we cannot plan what is going to be the recovery for the next quarter. What we know is that it has a clear downward trend. Finally, I have to remind you that we have this year one more quarter in Bankinter Portugal.
This is another factor contributing to the final guidance for the Bankinter Group that we are waiting now, which is mid to single-digit growth in this year. In absolute terms, around EUR 1 billion. For the next year, it's very early to say anything because we are now in the preliminary stage of our budget, I cannot give you a proper guidance yet.
Okay. Just a very specific one on, if you could remind us of the ALCO portfolio strategy. We have seen a little increase in volume there in the last couple of quarters.
Okay. Well, the ALCO contribution to total income continues to be very stable, around 10% more or less. The size is around EUR 5 billion in the quarter, could have increased a little bit, but it's because in some cases we are advancing the maturities. This is a very transitory increase. We have 42% of the assets in the held-to-maturity portfolio. As I mentioned, the unrealized gains are EUR 500 million. The average life is around three years, but the average maturity is longer, 7.6 years. The average yield is 2.7%. I don't know, the coverage rate, for example, continues to be more or less at the same level as the previous quarter, 12%-15% of the NII. I remind you that this will have a downward trend in the following quarters.
Okay. Thank you. We move to fee income now. Given the recent seasonality that we have seen in the last quarter, which is normally the case, can you comment on your guidance for year-end?
You mean the net-
Fee
fee income. Well, we maintain our guidance of mid to high single digits. The reason is that we continue observing the upward trend that has been constant during this year, that is due to the favorable market conditions on the one hand, the continued volume growth both in assets under management and in the business transaction with our corporate customers. That has a lot to do with the increasing commercial activity in Bankinter. The third quarter figures have been negatively affected by the seasonality of this quarter, when we compare on a year-on-year comparison, fees grew by more than 10% with respect to the same quarter last year. Excluding Portugal, the organic growth was 11.5% in this nine-month period. Including Portugal, the growth is 14.2%, but I remind you that we have one additional quarter in Portugal.
That means that as Portugal quarterly contribution is around EUR 9 million per quarter, this is more or less the impact that this inclusion has in the total figure.
Okay. Moving now downwards to cost, staff and expenses. What are we expect on the next few quarters there?
Well, as you know, the costs are following a downward trend in the year because of the fact that this year includes one more quarter from Portugal. When this situation disappear, we will have the clear vision about the cost in the group. What I can anticipate to you is that we are waiting for a guidance of low single digit for the year. If you analyze the cost increase quarter-on-quarter, the figure is 3%, which is a more comparable figure than the year-on-year. Excluding Portugal and LDA and concentrating on the cost in Spain, in the first nine months, this cost have increased by 3.4%, that means EUR 14 million. Most of this growth is related to staff increases in Bankinter Consumer Finance, and above all, in our digital team. The staff increases in Spain is around 3.4%, or 160 people.
At the same time, the second driver of this increasing cost is the updating of our IT platform, although it is clear that most of these expenses are going to be incurred over time and will be activated. In Portugal, quarter-on-quarter, cost increased by 2%. We expect that in the fourth quarter, this will have a better performance. Finally, LDA operating costs are growing by 10% year-on-year. This is related to the marketing expenses and the sales force expenses related to the growth in sales, in policies and premiums.
Okay. Thank you. We now move on to cost of risk. We are getting questions on whether you are foreseeing any impacts coming from IFRS 9 or the new regulations, and whether that is going to impact our guidance for cost of risk, given the fact that we are already running on low 30s.
Okay. We are now in low 30s. Our guidance continues to be 40 basis points through the cycle. Perhaps we are being a little bit pessimistic. We maintain this guidance because we are prudent. So far, the impact of IFRS 9 is maintained at the same level as we anticipated last quarter, around 10 to 15 basis points in the fully loaded capital ratio in January next year. A very, very small impact. If we consider the new addenda that is now announced in the ECB, we consider that the impact will be almost zero, because the provision that we have now constitute at our balance sheet, or the provisions that we are doing are above the levels of these prudential provisions that are included in this addenda. We are not expecting, at this stage, any additional impact.
I would like to mention that this is a draft, and we do not know how this will be the final version. Taking into account the draft, this is what we have seen.
That's clear. Thank you. Moving on to the insurance business, Línea Directa, whether we expect any changes there, whether we see the combined ratio on the high 80s as stable, as something that we can maintain, and whether we see any impact coming from the new health insurance franchise.
Well, Línea Directa has had a very good performance in the year, every quarter improving with regards the previous quarter. We have observed that some price pressures are reappearing in the market, but so far, the impact of these price pressures is almost zero. At the same time, the frequency continue to increase because of the growth in the car sales and because of the new Baremo. Again, the impact in Línea Directa performance is being very reduced, because we have been able to compensate this negative impact by increasing our efficiency. That's the reason why the combined ratio has improved in the quarter, has remained very stable, but has improved more than one percentage point in the year. We plan to maintain this gap with the sector.
We will continue to increase in the number of policies sold and maintaining also the gap with the industry so that we will increase our market shares. Finally, regarding the new business line, Vivaz, and the impact in our net income this year, this is going to be a negative impact coming from the marketing expenses, but very small one, EUR 2.5 million. The sale of policies is going according to our plan or even above our expectations. Most of these policies will enter into force the next year. That's why we are not seeing now the revenues, but only the cost.
Okay. Thank you. Last couple of questions. Given the buildup in capital in the last quarter, what shall we expect in the next few quarters there?
Well, as you know, because I have mentioned it to you before, the capital creation in the nine first months has been almost triple. The consumption by the increase in the loan book, this has to do with both things. The organic capital creation related to the net income growth, which is really very good in Bankinter. At the same time, it has to do with the fact that the loan book is growing slightly below the plan that an increase in the volumes, this will probably mean that the capital ratio will reduce a little bit against the current level. Again, above our target or our guidance of 11, which is the ratio that make us feel comfortable, taking into account our sound balance around asset quality.
Okay. Any final thoughts on the political environment and any impacts we have foreseen on the business or on our balance sheet? You already commented something there.
Well, I have to mention that our presence in Catalonia is very small. We have a very reduced market share of around 2% in deposits, even below 2% in deposits, and below 3% in credit. We don't expect to have a high impact in Spain. We wait that all what is happening there is going to reduce or to improve in the following weeks or months. No, not too much to say. No, anything to say.
Okay. Thank you for your comments. Thank you everyone for joining us today. That's all for now. As usual, the investor relations team is at your disposal for any further questions you might have. Goodbye.
Goodbye.