Thank you, David. Good morning, and welcome to Bankinter's 2017 half-year results presentation. The financial statements we are presenting today were filed with the CNMV before market opens. You may access to the various documents and files on our corporate website. I'd like to begin by quickly summarizing the main financial indicators on the quarter. Gross operating income reached EUR 922.3 million in the first half, up 10.4% from the same period last year. Without Portugal, gross operating income growth would have been 5%. The group's NPL ratio fell 51 basis points year-on-year to 3.74%, and minus 21 basis points since December 2016. Without Portugal, NPL ratio stands at 3.34%. The group's net income stood at EUR 241 million, down 15.7% year-on-year, due to extraordinary goodwill of EUR 131 million included in the income of the same period last year.
Factoring out Portugal's total contribution in both years, net income stands at EUR 227.4 million, up 16.4% from the first half of 2016. The fully loaded common equity Tier 1 ratio remained stable at 11.3%, despite the assets increase and dividend distribution during the period. The group's annualized ROE reached 12.2%, up 1.7 percentage points from a year ago, and second to none in Spain. I will now discuss Bankinter Group's financial results and risk management, and conclude with a quick review of the performance of its business lines. In this slide, we present Bankinter Group's total P&L figures, together with a like-for-like comparison, not including our franchise in Portugal, since it has only been part of the group since April last year. Half-year net income totaled EUR 241 million, down 15.7% from a year ago. The more comparable like-for-like net income was EUR 227.4 million, up 16.4% from June last year.
In the last 12 months, the group's net interest income has increased by 14.3% to EUR 530 million from a year ago. On a like-for-like basis, this indicates a 6% increase. All in all, net interest income remains very resilient despite persistently low interest rates. Half-year fee income amounted to EUR 209.5 million, up 16.2% from the first half of 2016. Even a strong 11.8% without Portugal. This indicates the good performance of our corporate banking business and a better market environment for our asset management franchise. Other non-interest income from customers, including LDA, amounted to EUR 149 million. Trading income reached its lowest point at EUR 34.2 million, a EUR 15 million decrease from a year ago. I remind you that in the same quarter last year, we registered the extraordinary profit from the Visa Europe deal that amounted to EUR 16 million.
All in all, Bankinter Group's total gross operating income amounted to EUR 922.3 million, up 10.4%, or a very resilient 5% not including Portugal. Bankinter Group continues to invest in growth and strategic businesses with operating expense increases of 9.8% year-on-year or 6% without Portugal. Still, the group's banking activities are able to hold its cost to income ratio at 46.6%, including Portugal, a somewhat less efficient franchise. Half-year total cost of risk fell 9.2%, amounting to EUR 108 million or EUR 53 million in the quarter. However, without Portugal, half-year cost of risk actually decreased by 18% from a year ago. Finally, in the last six months, profit before tax decreased by EUR 70 million to EUR 331.7 million, offsetting more than half the EUR 131 million in extraordinary goodwill. Excluding the Portugal effect, its EUR 227.5 million in net income represents a 16.4% increase from a year ago.
Overall, excluding the negative impact of extraordinaries on the quarter, the resolution fund, and on the previous year, Portugal goodwill, our P&L accounts shows very positive income trends. Net interest income this quarter reached EUR 272 million, up 5.5% from the first quarter and 11.7% from the second quarter of 2016. In the same terms, fee income grew by 9.2% and 15%, respectively, due to improved business performance. Other operating income increased by 17% in a comparable year-on-year. Total operating income for the second quarter only decreased by 2.7% from the previous one, or EUR 12.5 million, despite the resolution fund cost of EUR 21 million accounted for in the period, while in 2016 was charged in March. Still, total income grew by 7% year-on-year. Operating expenses went up 3.5% from the same quarter last year, allowing pre-provision profit to grow by 11.3%.
The continued reduction in provisions and cost of risk helped offset the quarterly charge of the resolution fund, as well as half of the extraordinary goodwill. Bankinter Group achieved volume targets as of June 17, despite the seasonality of the first quarter and the continued decreased lending all across Spanish banks. It continues to be the exception to this trend, as its loan book grew by 773 million, or 1.5% from last quarter, and by 3.6%, or almost 2 billion, in the last 12 months. Customer retail funds increased by EUR 1.4 billion this quarter and EUR 5.1 billion year-on-year, continuing an impressive organic growth rate of 12.2% year-on-year, underscored by our increased market shares in Spain and Portugal. It's worthwhile to highlight the outstanding growth in Portugal deposits since the acquisition that has allowed us to reduce strongly the liquidity gap, as we will see later on.
Despite the impact of negative Euribor rates, net interest income continues to show positive trends, having grown by 11.7% year-on-year and 5.5% quarter-on-quarter. These growth rates would be reduced by almost half without Portugal, but still showing strong resilience. In the second graph at the bottom left, you can see Portugal's recurrent quarterly contribution to NII. Just over half of its quarterly NII came from the franchise itself and is recurrent. The rest is due to recoveries of corporate NPLs sitting the portfolio purchased to Barclays. This extraordinary NII in Portugal will continue throughout the year, but on a downward trend. With all this in mind, a full year guidance of mid-to-high single digit NII growth for the group and low single digit growth for Spain is adequate.
The graph on the right reveals that for another quarter, and despite our record low yield curves, our customer margin grew to 1.94% on a continued positive trend. However, it is inflated by almost 10 basis points from Portugal's non-recurring NPL recoveries. Excluding this effect, our quarterly customer margin stood at a resilient 1.84%, thanks to the stable credit yield, up two basis points from the last quarter, and only down two basis points from a year ago. In the same period, the cost of all liabilities still decreased seven basis points quarter-on-quarter and 25 basis points year-on-year, increasing our customer margin by 23 basis points in the last 12 months. Our time deposit back book shrunk in size and cost and now represents less than 20% of total retail deposits.
The back book price stands now at 22 basis points, with new deposits at 26 basis points, marginally higher than the previous quarter because of the new production in USD deposits. Mortgage and corporate financing credit yields continue to be very stable, and the cost of wholesale funding continues to improve, what leads us to believe that our customer margin will remain very resilient in the coming quarters. The ALCO portfolio's contribution to net interest income remains very stable. The total ALCO portfolio amounted to EUR 5.6 billion at the end of June, with an average yield of 2.8% and a duration of 2.7 years. However, the average maturity of these bonds is 7.3 years, 66% of them are Spanish government bonds. Due to this portfolio's long-term maturity profile, we should expect a recurrent 12%-15% contribution to our net interest income in the next few years.
Unrealized capital gains totaled approximately EUR 400 million, mostly in the hold-to-maturity portfolio, with an average maturity of 5.7 years and 3.7% yield. Net fee income continued to show strong quarterly and annual trends, growing at 9% and 15%, respectively. Portugal continues to register EUR 8 million-EUR 9 million in net income per quarter. Overall, the group's total half-year fees increased by 16.2% from a year ago to EUR 209.5 million, a figure that represents an historical maximum for Bankinter. Fees from assets under management, the largest contributor to net fee income, increased by 18.2% year-over-year due to volume growth in mutual funds and managed portfolios and the extra quarter with Portugal. Payment and collection fees were up 15% from a year ago, thanks to a higher corporate customer activity. Equity brokerage and custody fees increased remarkably by almost 25% year-over-year.
Insurance fees also grew by 27% year-over-year, owing to new mortgage sales and the contribution of Bankinter Portugal. Finally, fees paid to our independent financial agents and partners grew by 16% year-over-year, showing greater potential for both distribution channels. This excellent fee income performance gives us confidence that we will see the mid to high single-digit growth in 2017, if the market environment remains stable. As regards other income, it increased by 4.7% from a year ago to EUR 148.9 million. Línea Directa's insurance margin, once again, proved to be the largest contributor here, up 11.1% from a year ago, thanks to our very good performance in motor and in home insurance, which accounts for 20% of the group's total gross operating income. The table also highlights the 20% increase in regulatory charges during the period.
Gross operating income, at EUR 922 million, is up 10.4% from June 2016. The main contributor is net interest income with 57% share, followed by fee income with almost 23%, and other income from customer business such as LDA technical insurance margin at 16%. Finally, non-customer related income from trading and institutional activities remains at its lowest levels in years, with a mere EUR 34 million in the first half or just 3.7% of total quarterly income. Total customer related business in both Spain and Portugal has grown by 10% in the last 12 months, showing the improved quality and recurrence of our earnings. At EUR 238 million this quarter, our operating costs have increased by 3.5% from the same quarter last year. EUR 150 million correspond to Bankinter Spain, due mainly to staff increases in our consumer finance business and new digital transformation team.
EUR 60.6 million correspond to LDA's operating expenses, up 11% year-on-year, due to a 6.1% sales force increase and rising marketing and acquisition expenses in connection with higher premium and number of policies growth. Finally, EUR 21.5 million correspond to our Portugal franchise, down 14.2% as a result of our plans to improve efficiency. Compared with last quarter, this quarter's operating costs grew by 2.3%, 90% of which corresponds to Bankinter Spain, and includes the group's IT expenses related to our platform upgrade, as well as any remaining integration expenses. Despite the annual increase in operating costs, the gap between cost and income has widened by 11% year-on-year, and the banking activity has held a 46.6 cost-to-income ratio, including amortizations. Our guidance for yearly group costs continues to be mid-single-digit, based on our stable cost control between quarters.
This slide shows Bankinter Group's quarterly performance as regards to the cost of risk, which has continued to fall. When calculating cost of risk at Bankinter, we include both all impairments and the results of foreclosed asset sales. Quarterly cost of risk decreased by 16% from a year ago, when we had to bear an extraordinary charge of EUR 8 million due to the Visa Europe stake revaluation. Without Portugal, quarterly cost of risk also continued to decrease by 32 basis points at June 2017. Based on our track record and business model and the regulatory environment going forward, we see 40 basis points as a medium-term guidance for cost of risk throughout the cycle. Still, we anticipate a slight improvement by the end of this year. Finally, our annualized ROE grew to 12.2%, up from 10.5% a year ago and from 10.9% in December 2016.
Again, best in class among listed Spanish banks are in line with our business plan for 2018 and onwards. We will now analyze the main risk management indicators, which cover credit and liquidity risk, as well as solvency. Asset quality continues to improve. Non-performing assets have again decreased due to continued negative NPL entries and much lower early delinquency balances, down 13% year-on-year. Portugal has also reduced its NPL balance by 1.7% quarter-on-quarter and 15% year-on-year. At June 2017, the group's total non-performing loan balance amounted to EUR 2.17 billion, down 9% from a year ago. Our NPL ratio continues to decrease and stands now at 3.74%, 51 basis points down from a year ago. Bankinter Spain NPL ratio fell to 3.34%, well below the Spanish sector NPL ratio of 8.74% as of May 2017.
NPL provisions amounted to EUR 1 billion, setting our coverage ratio at 48%. Our foreclosed asset coverage has increased to 44% from 38% in 2Q 2016, at the same time that the average discount on the price of asset sales in the quarter has gone down to 34%. Finally, our 47% NPA coverage makes us feel comfortable in face of the new real estate cycle. Our foreclosed assets portfolio, including Portugal, shrunk by 10% from a year ago to EUR 498 million. Almost 50% of it is residential property, with the rest evenly split between commercial and land property. Half-yearly asset sales accounted for 19% of the portfolio at the beginning of the year, and the average discount on asset sales prices improved from 40% for the first half of 2016 to 34% today.
Our fully loaded CET1 ratio remained at 11.3% from the previous quarter and has increased by 16 basis points year to date. Capital generation through retained earnings was 39 basis points during the period, more than offsetting the 23 basis points consumption by the risk-weighted assets increase. The ratio remains within our guidance of around 11%, well above regulatory requirements for 2017. Our fully loaded leverage ratio remains very stable at 5.2%. In short, Bankinter continues to be very well comfortably capitalized given its risk profile and current growth pattern. The loan-to-deposit ratio improved by 1.4 percentage points in the quarter and almost eight in the year, standing now at 106.8%. The liquidity gap of our Bankinter Portugal business decreased by almost EUR 2 billion since its acquisition, and now stands at EUR 325 million.
Even absorbing this impact, the Bankinter Group's total liquidity gap fell by half in the last 12 months to EUR 3.6 billion at the end of June. The loan-to-deposit ratio improved owing to the strong organic growth of retail deposits, up 12.2% year-on-year, with lending volumes continuing to grow steadily at 3.6%. This growth positive behavior was the main reason behind our rating upgrades by Standard & Poor's and DBRS in the last six months. The maturity profile of our wholesale funding remains unchanged, with almost no concentration in the coming years. Following the success of the recent subordinated debt issue, 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 in the period. Now the liquid assets amount to EUR 12.2 billion, plus EUR 7.4 billion in covered bonds issuance capacity.
We will now take the usual look at the main customer business indicators for the last quarter. The contribution of our various business segments and non-customer areas to total income was clearly diversified and balanced in the first half of 2017. The main contributors, corporate and SME banking, along with individuals, mainly private and personal segments, represented 58% of total revenues. 20% came from Línea Directa's insurance business. Bankinter Consumer Finance and Bankinter Portugal each contributed 8%. Finally, corporate centers, treasury capital markets, ALCO management, and other non-customer areas only account for 6% of total operating income. In short, a well-diversified financial group. Bankinter's corporate and SMEs lending performed well with 6.1% net growth year-on-year, despite the 2.3% decrease in this type of lending across Spain.
We are confident that we can maintain this growth rate in coming quarters given our increasing market share in new lending, now at 6.1%, well above our natural market share in this business. In terms of product type, we are seeing better behavior from working capital lending with an increase year-on-year of 18% and with better revenues. Our corporate and SME banking business focuses on value-added products and services that contribute to total income in a diversified manner. Thus, our transactional business generates fee income, liquidity, and greater customer engagement, and the contribution from this business grew by close to double digits up to June, along with customer acquisition. The gross margin of our international business grew by 20% from a year ago, reaching EUR 69 million.
Private banking customer assets performed also very well, with net new money growing by EUR 1.7 billion year to date without considering the market effect. 46% of this total growth relates to advisory products, up from 11% last year. Discretionary funds now represent 43% of total assets. Customer acquisition at 20% 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 20.3 billion, up 70% over 2Q16, with EUR 1.3 billion of net new money in the period. Discretionary management and mutual funds still constitute 30% of total assets in this segment, with room for future improvements. Now, with regard to retail banking, we continue to grow on our better known products. Payroll accounts now stand at EUR 6.3 billion, up 30% from a year ago.
In the mortgage market, we see similar new production levels to previous years, despite falling figures across the sector. Our fixed rate mortgages stood at 20% of total new mortgages this year, five percentage points above the level of the previous year. Thus, we continue to grow our market share in mortgages, with 6.1% of new lending in Spain. Total balanced funds performed well this quarter, rising by 12.8% from a year ago to EUR 25.2 billion. Most assets under management are investment funds totaling EUR 18.5 billion, up 21% year on year. Overall, this growth is concentrated in equity, long-term fixed rate, and guaranteed funds, with a 35% decrease in low added value money market funds in the year. Third-party funds account for 56% of the total portfolio. Some color on our Portuguese franchise. Its loan book grew by 4.3% year on year to EUR 4.6 billion.
Its commercial banking loan, mostly in residential mortgages, amounts to EUR 3.8 billion. Corporate lending stood at EUR 800 million, growing almost 26% in the last 12 months. Bankinter Portugal's retail deposits grew by 35% to EUR 4 billion, thanks to our unique investment grade rating in Portugal, in addition to its payroll accounts, treasury accounts, and other new products the franchise has launched. Portugal P&L accounts shows a profit before tax of EUR 18.8 million in the last six months, with an income of EUR 75.3 million, part of them resulting from non-recurrent credit loan recoveries, and operating expenses of EUR 42.6 million. Going forward, we expect costs to remain very stable while loan and deposit revenues rise to new volumes together with its off-balance sheet business. Portugal's current efficiency levels should improve to a more comparable cost-to-income ratio in the near future.
Continuing in this slide with the Portuguese business, in these graphs, you can appreciate the positive trends of both NII and fee income, up 31% year on year. This is adjusted for loan recoveries and 10% year on year in the case of the fee income, as well as the slight downward trend in expenses. Bankinter Consumer Finance experienced a strong growth, capturing 150,000 new customers in the last six months, 31% more than a year ago. Its lending balances increased 43% year on year, totaling EUR 1.2 billion. Its cost of risk and NPL ratio, both crucial KPIs in this business, also perform in accordance with the plan at 2% and 7.1% respectively. The loan portfolio is well-balanced between Bankinter customers at 38%, served customers with partners at 35%, and finally, its own customers at 27%.
As regards Línea Directa, the last six months revealed similar trends to the previous year, as policies and premiums grew by high single digits at 9%. Total policies reached 2.7 billion. Both motor insurance as well as home insurance policies outperformed sector growth, rising by 7.6% and 14.7% respectively. Total issued premiums climbed by 8.7% from a year ago to EUR 394.5 million. Motor insurance premiums increased by 7.9% over the sector average of 4.1%. Home insurance premiums increased by 15.5%, despite a growth of 3.3% across the sector as of May 2017. The combined ratio experienced some downturn in the quarter, mainly due to some increase in claims in the last three months. Still, at 89.2%, Línea Directa continues to be second to none in an industry with an average combined ratio in the highest 90s.
At 69.4%, its claim ratio registered a two percentage point decrease in the last 12 months due to a decline in average claim cost. Its expense ratio worsened as a result of increasing commercial activity and marketing expenses. Its strong combined ratio presents an opportunity to maintain growth in a new profitable business and continue to gain market share. Finally, we will present the standalone P&L of Línea Directa in accordance with insurance regulations. Its underwriting result reached for EUR 46 million, a gain of 18%. Net earned premiums grew by 8%, and operating cost rose by 16% from a year ago. Financial income fell by 6% year-on-year on the back of ultra-low interest rates. Its technical coverage ratio remained stable at 133%, with a Solvency II ratio at a comfortable 231%.
All in all, LDA's net income climbed 3% to EUR 46.9 million, reaching a standalone ROE of 33.9%. Finally, in this last slide, you can have a brief recap of the main figures of the quarter. Just a comment on the last bullet point concerning the impact of IFRS 9 up to date. Taking into account that we are working on a draft of the final regulation of Bank of Spain, we have now an estimated provisional net impact of the full implementation in CET1 fully loaded ratio, which is in the range of 10-15 basis points. That's all for me. Many thanks for your attention, and I'm now ready to take your questions.
Okay, Gloria, thank you so much for that detailed explanation. As usual, we will now follow up with the questions coming from investors and analysts alike. Starting with the income components of the P&L account. First, probably more general view on your expectation for NII trends going forward.
Okay. Thank you, David. As you have seen in the presentation, we have had another very good quarter in terms of NII, this is the first fully comparable quarter. In any case, as I have mentioned to you in the presentation, the peculiarity of Portugal's NII made me to analyze better the NII performance separately, Spain, Portugal, and LDA. Spain, the growth year-over-year has been 6.6% and has been based in volumes in the loan book, mainly in corporates, because the new production in mortgages has diminished. Growth in deposits, mainly in sight accounts, and stability in margins. At the same time, we have been observing an ever-growing contribution of Bankinter Consumer Finance. The third driver for this NII has been the reduction in the cost of retail deposits, as I have mentioned before, the increased weight of sight accounts.
Finally, the reduction in terms of the amount and in terms of cost of the wholesale financing. I would like to highlight one fact is that we are not taking advantage now of the 40 basis points paid for the ECB in the TLTRO II, because we have an excess of liquidity around the same amount of this money coming from the TLTRO. For that reason, we have to redeposit this money in the ECB, we are paying the same amount that the ECB is paying to us. Please don't consider in our NII the impact of the TLTRO II. Taking all this into account, we have confirming our guidance for this year of mid to low single digits without including Portugal. Concerning Portugal, we have seen very positive trends in the year.
Considering only the recurrent NII, the growth has been year-over-year 31%, which is a very good rate of growth. Analyzing the quarter-over-quarter, the growth is also very good, +8%. I would like to remind you that part of the NII is coming from the non-recurrent component, which has to do with the recoveries of the purchase portfolio to Barclays, which were very well provisioned. This year, this component is being registered in the NII and amount to EUR 32 million, more or less. The following quarters, this component will be lower than this one because this quarter we have had some extraordinary repayments from customers that we hadn't expected, and this is not going to happen in the following quarters.
I would like also to remind you that next year, this income coming from these recoveries will be registered in the impairments line because of the IFRS 9 regulation. Finally, LDA NII. In this case, the evolution has not been good because the NII or the portfolio of LDA is being very negatively impacted by the negative interest rates, and that means that the margin, the net interest income from LDA is going down by 10%. Adding all this up, we can conclude that the NII for this year, including everything, will be above EUR 1 billion.
Okay. That's great. More specifically on the contribution to the NII, you already explained obviously the LTROs net impact, and also on the Portuguese. Can you comment on the ALCO contribution more specifically?
Okay.
What's our respect there?
Okay. Well, the ALCO contribution to total income, as you have seen in the presentation, is very stable, because both the size and the quality of the portfolio is also very stable, has been also very stable in the last few quarters. We are now in a portfolio size of EUR 5.6 billion. The yield is 2.8%, and the duration is 2.7 years. More or less, a little bit worse than the last quarter because of the time passing. 46% of the portfolio sits on the hold-to-maturity portfolio, and the total unrealized gains are around EUR 500 million, and most of them sits on the hold-to-maturity. 66% of the portfolio are Spanish government bonds. Finally, the carry rate of this portfolio is around 12%-15% of the NII, with a slight downward trend as in the last three years.
Concerning the trading income, its contribution is very limited, less than 4% of total income, although logically, it shows some volatility in the quarters. For example, this was the case last quarter when the contribution was exceptionally larger than the average. I remind you that it was 5.1%. Well, this is all.
Okay. Thank you. We now move on to the fee income. What's our respect for the next few quarters, given the good behavior on the last quarter? Is there any one-offs that we would like to mention or just the recurrent incomes?
Okay.
Thank you.
No, in terms of fee income, there is no one-off. Thank God, it's all recurrent. As you have seen, this line of the P&L maintains an upward trend in the last few quarters, thanks to favorable market conditions, but above all, to the increase on our commercial activity, both in the corporate business, particularly in international business, but also in our private and personal banking franchises. All this translates into increased volumes and fee income. As a result of all this, fee incomes are growing at 9% quarter-on-quarter and 15% from the same period last year. This is an historical maximum for Bankinter. Concerning Portugal, the contribution is really very low, yet EUR 8 million-EUR 9 million per quarter, but growing, as I mentioned to you in the presentation, by 10% in the year-on-year.
The main contributors to the fee income are the asset under management fees that reflect the good tone of our private banking and, of course, the improved market environment. The second contributor is custody and brokerage fees, which are also very related to the market environment, and they are going up by a stunning 25%, which is really impressive. The third contributor, very relevant also, is the payments and collections fees, up 15%, in this case, due to our transactional business with corporates, which is in very good shape in the last few quarters and years. Finally, I would like also to remark the performance of insurance fees, up 26%, as a result of the mortgage business, but also as a result of the commercial activity of Bankinter. We expect that all these trends will maintain throughout the year.
If market stability remains, we maintain our guidance of mid to high single-digit growth for the year.
Okay, excellent. Moving further down now on the P&L. We have some questions on the cost of risk. What's your view for the remaining of the year? We have the cost of risk of 40 basis points through the cycle. We are below that.
Okay.
Any comments on that?
Well, the cost of risk is really very low in Bankinter when compared with our peers, 35 basis points now. I remind you something that is important, is that we, in this cost of risk, are including not only the impairments on our portfolio and our assets, but also the losses due to foreclosed asset sales. This is not comparable with the average of the rest of the sector. Having said that, I would say also that the Spanish cost of risk is even better than this. It's 32 basis points. We have had another good quarter in terms of NPLs, net new entries, and sales of foreclosed assets. The cover rates remain very stable despite the new regulation of the Annex IX of Bank of Spain.
Looking at the rest of the year and through the cycle, I would say that 40 basis points guidance for the cost of risk could be a good guidance for the group going forward.
Okay. Very clear. Moving on, capital now. You have mentioned already some impact coming from IFRS 9. Could you just clarify the impact and when that will arise? Also, you can elaborate on the quarter, on the dynamics on capital.
Okay. Well, in relation with the estimate, I have to say that it's a provisional estimate that is being checked by our validation unit internally. It has not been yet reviewed by this unit, it has not been reviewed by the internal as well as external auditors. This is just a provisional estimate that we have preferred to offer to the market, because this is a figure that you are asking for during the last few months, or even quarters. This is very provisional. What this figure means is that, taking into account the CET1 ratio of June 2017, 11.3, and based on this rate, this ratio, the impact would be between 10 and 15 basis points less in January. This is what I have to say about this.
This is a net impact, taking into account the increase in provisions in the credit portfolio, as well as the rest of the components of our balance sheet that we have that are going to be affected by the regulation. Finally, as regards capital ratio, well, the performance has been very good according to our view, because we continue growing in volumes in the loan book. This logically worsens the capital ratio. But at the same time, we continue to be a very profitable bank. For that reason, we generate organically capital enough to compensate for this growth in ROEs. In short, in the period, we have increased our capital ratio by 16 basis points, which is, I think, a very good level.
Thank you. Moving on to business. Can you just elaborate a little bit on the trends that we have seen in Portugal, especially on the lending?
Okay. First of all, in Spain, as we have seen in the presentation, we have observed in the period very good performance in terms of corporate lending, growing by more than 6% year-on-year. This is the same in Portugal, where the growth in the year has been almost 26%. This is not the same that is happening in mortgages, where we have seen a reduction in the new production in the period when compared with the same period last year. I have to say that even reducing the new production, Bankinter is outperforming the sector, which is also reducing the new production by a number much higher than ourselves. Having said that, we feel very comfortable with the growth both in Portugal and in Spain.
In Portugal, we have been observing some volatility in corporate lending in the quarters because as the size of the portfolio is small, a particular repayment or a particular maturity of the portfolio makes a lot of noise in the growth rate. That means that perhaps in the last quarter, the evolution has not been as good as we expect because of this volatility. Year-on-year, the performance is being really very good. We feel very comfortable with this growth.
Okay. Thank you. Just to finalize, on Línea Directa dynamics, what are we seeing there? How do you expect the year to evolve?
Okay. The Línea Directa performance has been very good in the quarter, even better than the previous one, which confirms, as we mentioned in the last quarter, a change of cycle after four years of downward trends in premiums in Spain. I have to say, sorry, that in the last months, we are seeing some price pressure from some competitors. We don't know if this will maintain in the future or not. In any case, the quarter has been, for Línea Directa, very good. We are suffering, as every company in the sector, the impact of economic expansion in frequency because the car sales are pushing, the oil consumption is growing, and of course, the new Baremo is also impacting in the cost of claims. That has led to an increase in premiums in the sector.
Even though Línea Directa has outperformed the sector, growing at higher rates, both in policies and premiums, and offsetting the negative impact in the claim cost by reducing the average claim cost. The claims ratio has improved in the quarter. Year-on-year, the combined ratio improves by almost one percentage point. Year to date has worsened slightly, although continues to be below 90% in an industry whose ratio is above 100%. Concerning the operating cost, they have grown as a result of the increase in volumes, but they are within our plan for the year, so no worry on this point. Finally, although the investable income has reduced because of the low interest rates environment, this has not affected the PBT, the profit before tax. That has increased by 9%, thanks to a very good insurance technical result in the quarter.
We expect these growth rates to maintain in the following quarters, and ROE will stand at 34% or 33%, which is the case now.
Excellent. Thank you. Just a final word from myself because there are some questions on this topic. Gloria has commented a few times already the impact coming from IFRS 9. This is on a fully loaded basis, and this is our estimate, obviously, as of January next year. This is all from us. If you need any further clarifications or explanation, the IR team is at your disposal. Thank you and goodbye.