Good morning, everyone, and welcome to Bankinter Q2 2023 earnings call. As usual, our CFO, Jacobo Díaz, will now guide you through our figures, and we will follow up with the usual Q&A session. Thank you.
Good morning, everyone. Welcome to this presentation of Bankinter's earnings for the second quarter of 2023. The related financial statements were posted on the website of the CNMV a few minutes ago before market opens. All related documents can also be found at this time on the Bankinter corporate website. Despite the challenging market circumstances of the first part of the year, the Bankinter Group has been able to close another very strong quarter and first half of 2023. This is the fourth year in a row with persistent macroeconomic uncertainties that makes very difficult to anyone to predict how the near future is going to be.
What is crystal clear to us is that, once more, the strong commercial performance in this second quarter is clearly reflected in balance sheet volumes growth, more relevant, in our income and pre-provisioning profit extraordinary growth, that allow us to achieve record figures, as we will see in this presentation. In bullet points, some of the main highlights of the first half: the group's net profit closed at EUR 418 million. Return on equity reaches almost 16%. We have a strong income growth supported by a positive rate environment, not only, also the improved customer activity is reflected in differential volume growth in loans, deposits, and off-balance sheet products, will most probably continue to post Bankinter as an outlier in our domestic sector.
With costs under control and efficiency improved despite the inflationary environment, and with stable asset quality and solvency indicators. Now, this is a brief comparison against 2022 of the first half. Group's total loan book started to grow in the year to reach EUR 75 billion, up 3% from June 2022, thanks to a recovered corporate and consumer finance demand that has been more than enough to offset the lower mortgage production in Spain. It also helped the very positive evolution of other geographies in the corporate, consumer, and mortgage loan book. Customer deposits at EUR 78 billion grew by 1%, reverting the first quarter trend, and at the same time, off-balance sheet customer asset manage of EUR 41 billion grew by 12%.
Gross operating income at EUR 1.278 billion grew by 33% with respect to June 2022, showing the strong performance in the main component of our income from the customer business, the Net Interest Income. Together with a resilience fee income, in particular in this quarter, more benign other expenses due to a new reduction of the regulatory charges for the Single Resolution Fund, supports the strong income growth. After the seasonal cost increase of second quarter, we have been able to keep operating expenses under our growth guidance and control. Thanks to this, pre-provisioning profit reached EUR 826 million, an improved growth rate to 54% year-on-year. NPL ratio shows a small deterioration in line with stable asset quality indicators and loan growth, particularly in our Consumer Finance business, as we will see later.
It is up 11 basis points from a year ago to 2.22%. Coverage ratio keeps improving, now at 66%. Profit before taxes went up by a remarkable 67% over last year to EUR 625 million. Group net profit stands at EUR 418 million, of course, including the banking tax. CET1 fully loaded ratio stands at 12.3%, a small increase in the year, and up 40%, 40 basis points from June 2022. LCR ratio as of June stands at 184, and the 12-month average at 201%. Return on equity reflects this improved performance and shows a best-in-class 15.5%, clearly ahead of last year and the cost of capital for the sector. We will now follow the usual agenda.
Here we have the P&L of 2023, of the first half of 2023. Group's net interest income maintained a strong upward trend, but in the case of Bankinter, it's relevant to highlight that the NII growth is not only due to interest rate increase. In our case, and most probably very differential from the rest of the sector, it also reflects the loan book growth, together with a very good client margin management in both sides of balance sheet, assets yield, and liability cost. It is up by 60%. As I have already mentioned, fee income remains resilient at just over EUR 300 million, flat from last year and supported by our commercial activity in mutual funds at record levels, but impacted by lower average fees due to the weight of money market funds in this first part of the year.
Also relevant is the support of the corporate banking fees growing at double digit. Other operating income and expenses was EUR 88 million lower than a year ago, mainly due to the extraordinary banking tax paid in the first quarter of the year. Just remember, this is the full amount for year 2023. Total gross operating income at EUR 1.278 billion went up 33%. The quality of our operating income remains very high, with an increased contribution from Portugal of EUR 148 million, growing by 81%, and the Avant Money and EVO contribution, EUR 46 million and EUR 31 million, growing at 28% and 66% respectively from last year. Group operating costs at EUR 452 million remain under our guidance of controlled growth. In Portugal, costs are contained, growing by EUR 3 million or 7%.
Costs from Avant Money were less than EUR 1 million higher, or only 5%. In EVO, they were up by EUR 3 million or 13%, despite the necessary investment to cope with the relevant increase in mortgage production and customer acquisition in the year. Group's total cost grew by 6% in the first half, mainly from personal expenses that went up by 5.7% due to the salaries, annual review, and performance incentives in the first half. At the same time, general expenses went up by 5.8%, showing a good control in overall expenses in this hyperinflationary environment. This increase in income, clearly above the cost increase, allowed pre-provision in profit to reach a new half-year record of EUR 826 million, growing 54%. Loan loss and other provisions are up 24% or EUR 39 million from 2022.
Cost of risk allowances of EUR 155 million are up 34 from 22, still below our guidance of cost of risk for the year, and other provisions of EUR 46 million in the period are flat. After provisions, profit before taxes stands at EUR 625 million or 67% above first half of last year. The EUR 251 million increase in our profit before taxes includes EUR 77 million of the banking tax paid in the first quarter. Profit before taxes comes mainly from recurrent customer activity in the new interest rate environment, with almost negligible contribution from ALCO portfolio, TLTROs, and other capital market activities during this first half. In our view, this clearly shows a success performance toward our objective of diversifications of sources of revenue coming from customer business in different geographies and business line.
After taxes, the group posted a net profit of EUR 418 million, a new all-time record of recurring profits at mid-year and 54% above last year. Should you exclude the extraordinary new banking tax, that is on a like-for-like basis, the increase in net profit of 83% from a year ago. After the close of the first half, we believe that these results show, with no doubt, a very strong performance, clearly above our initial expectation. We will provide later on a fine-tune upwards of our guidance for the year at the end of the presentation. Moving into the next slide, on a quarterly comparison, we also see a very positive evolution of NII, growing 5% in the quarter, or 58% in the year.
On the contrary, fee income is down 1% in the quarter and less than 4% year-on-year, mainly impacted by the reduction in average fees in mutual funds. We expect a better evolution of this on the second half. All in all, operating income shows growth of over 7% quarter-on-quarter and over 43% year-on-year. Seasonal operating costs increased by less than 6% quarter-on-quarter, and also 6% of the same quarter last year. Finally, quarterly net profit came at EUR 233 million, up 26% from the previous quarter, and EUR 116 million above, or 2x that of the same quarter of 2022. Moving to the loan book.
The group's loan book grew by 3% from a year ago, bringing EUR 2.2 billion in net loan growth to reach EUR 74.6 billion. Growth in the quarter comes from every geography, +EUR 1.2 billion, including EVO Banco in Spain, EUR 119 million in Portugal, and EUR 162 million in Ireland. Our consumer finance business, standalone, grew by EUR 158 million. Although second quarters also always shows growth in lending from increased activity, the EUR 1.5 billion net increase in this quarter is impacted by the continued slowdown in mortgage lending in Spain that we will comment later. On the contrary, consumer loan book is picking up in all geographies, and a restored corporate loan demand in Spain had made possible to post a first half total loan book growth.
Retail deposits continue to perform very well in Spain and Portugal, growing at 0.5% year-on-year and over EUR 0.4 billion- EUR 78 billion. They were up by 0.4% in Spain from a year ago, while the market is now largely contracting by 1.2%, bringing Bankinter market share on domestic deposits close to 4%, with the last available data of May. In Portugal, deposits grew by 9% in the period and also by 6% year-on-year. The transformation of some interest rate sensitive retail deposits into other intermediation products, like money market funds or fixed income government debt, continue in the quarter, at a much lower speed.
In both quarters, customer deposits are up by EUR 2.8 billion year-to-date, and at the same time, the inflows in investment funds have been EUR 2 billion, and in fixed income products managed and deposited with us, EUR 3.9 billion, mainly in government debt. All in all, the new money that our customers have brought to the bank in the first half amount to EUR 8.7 billion. Also, in this quarter, we have maintained this graph of the retail deposits evolution over the last 10 years, almost multiplied by two or 7% cumulative annual rate. Net interest income, in the next slide, continued to show a very positive trend following the continued interest rate increase in the Euro area. It grew close to 5% over last quarter and 58% from same last quarter.
This is mainly due to the repricing of our corporate loan book in the quarter and the continued repricing of our mortgage book at higher rates. In Bankinter, it is also important, and most probably different from other peers, that a relevant proportion of the growth comes from the balance sheet growth in both loans, mainly in the corporate and consumer loan book, and retail deposits from corporates and individuals. In Portugal, NII income in the first half grew by EUR 63 million, more than double the year-ago. The solid trend in our interest income during the first half has been driven by loan growth, but also in a relevant manner, by a strong improvement in the customer margin.
Customer margin improved by 3 basis points from last quarter, thanks to 47 basis points increase in credit yields and 44 basis points increase in cost of deposits, marking another quarter of customer margin expansion. Cost of deposits increased to 74 basis points at the end of the quarter, and the transfer to term deposit and treasury account continues steadily, but slowly, with no relevant signs of changing pattern. The 110 basis points customer margin increase year-over-year has been outstanding, and has to do with our good management of the spread between the positive repricing of arrival rates in our loan books, as well as the increase in lending rates in the production of mortgage, corporate, and consumer finance, and of course, at the same time, the contained cost of customer deposits in the rate-sensitive ones. For another quarter, we continue to show positive customer spread delta.
This, together with a higher for longer interest rate environment, make us believe that the positive trend of NII will continue strong going forward. Let's talk about the ALCO portfolio. The group's ALCO portfolio showed a small increase in the quarter to EUR 11.1 billion. 83% of the portfolio remains under amortized cost, with no impact in capital ratios, and the rest in fair value. After a stable bond markets, unrealized gains before taxes stayed at EUR 101 million in the fair value portfolio, with a small few basis point impact in our CET1 capital ratio. The portfolio's characteristics improved in the quarter, with an average maturity of eight years, average duration 4.2, and an average yield increasing at 2.0.
ALCO portfolio remains at comfortable levels of around 10% of our total group assets and 2.2x the equity of the group. Distribution by sovereign risk continue being around 72%. Moving into fees. Fee income performed below our guidance during the first half, despite higher assets under management in the period, but at a lower average fee. Fees are supported by a good corporate activity, growing by 12%. Gross fees received are up by 2.3% in the period, fees paid are up by 9.8% to an increase in the fees paid to our partners for the strong operating income growth they have enjoyed during the first half.
We believe that in the second half, fee income will show better comparison, mainly in mutual funds fees that will start to show growth from the previous year. Fees from asset management were 23% of total fees and have decreased by 4%. A strong commercial activity during the first half, reflected in volumes, has not been able to offset the 6 basis points reduction of average fees. Fees from payments and collections performance has continued strong. They have been growing by 16%, mainly in corporates. A less positive trend in client trading and custody make fees grow by only 2%. Risk-related transactions are up 10%, also related with the corporate activity. In other operating income and expenses, the main components are EUR 48 million of trading income and dividends, with a decrease of 23% due to the lack of Línea Directa dividend.
Other financial income from equity method at EUR 16 million, a decrease of EUR 4 million due to Bankinter Logística and Bankinter Vida reduced contribution. On the negative side, EUR 138 million in regulatory charges, showing a 99% increase due to the impact of the new banking tax, and despite all small decrease in the Single Resolution Fund contribution. Gross operating income for the first half stood at EUR 1.278 billion, an increase of 33%, as I mentioned before. Quarterly comparison is less relevant due to the banking tax and Single Resolution Fund. Group operating costs in the first half total EUR 458 million. They are under control so far in the year, up 6% from the previous quarter. Our efficiency continues to improve strongly quarter-on-quarter and year-on-year.
The group's cost to income of 12 months ended as of June, the first time below 40% at 39.3%. It dropped 640 basis points from June 2022. The continued improvement in efficiency in all our businesses and geographies make us think that the group's cost to income will remain very low 40s over the next years. As an example, in this first half, Portugal, with an efficiency ratio of 32%. Avant Money is at 45%. EVO, for the first time since the acquisition, has come to a negative efficiency, bringing the ratio to 99%. Of course, Spanish business, very efficient at 33.4%. With all this, pre-provision in profit for the first half show EUR 826 million or 54% up.
Very strong performance coming from our core customer business in all geographies. Cost of risk in the quarter finished at 37 basis points of total credit exposure, with 2 basis points down from the first quarter. Here, I remind you that it was impacted by one-off in the IRB model update in the first quarter. First half cost of risk ended at 38 basis points or EUR 155 million, 8 basis points higher than a year ago, only 1 basis point over 2021. As of today, we still see no evidence of relevant negative impact in asset quality indicators in Spain, Portugal, Ireland, or our retail and corporate business. We expect this stable behavior to continue during the second half of the year.
All this will make us believe to maintain the cost of risk around 40 basis points level at the year-end. On provisions for litigation, the ones from FX mortgages portfolio continue to fall to a very low level, with other miscellaneous, mainly in consumer finance, are on the rise. A very small reduction year-on-year. We still think that for a full 2023, we will see a downward trend to be maintained around 10%-20% lower effort in the year. Our profit before taxes, which is EUR 625 million. Group net income reaches EUR 418 million. As you know, including the EUR 77 million banking tax.
At the end of the first half, Group's return on equity stands at 15.5%, clearly above June 2022, with a strong progression shown in the graph. We expect return on equity to remain above the 15% level in the future, and clearly above the cost of capital. Excluding intangibles, the Group's ROTE is at 16.4%. Tangible book value plus dividends went up by 6.7% from first half 2022 to EUR 5.54 per share. I will now go to the management of credit risk, liquidity, and solvency. Total NPL went up by EUR 148 million, or 8.7% from last year. With respect to last December, up EUR 118 million, to a total of EUR 185 million.
It is relevant to highlight that out of the yearly growth in NPLs, close to two-thirds come from our consumer finance business, or EUR 100 million approx, in Spain and Portugal. Outside of this, small business increase NPLs slightly, and mid corporates less than EUR 50 million. Two things are relevant to know. First, that the growth was almost offset by reduction in two business segments: household mortgages and large corporates, and in other geographies like Ireland. Second, that over 90% of the new NPLs from small and medium enterprises are coming with ICO lines, which are covered by 80% by the guarantee of the government. The group's NPL ratio is up 22% from lowest point since 2008. It is 11 basis points from a year ago, due to this almost stable NPLs, while increasing loan book.
As shown in the chart on the right, the NPL ratio in Spain remains stable at 1.9% for households, including some consumer finance at 4.95% from last year, and it has increased by 40 basis points for corporates to 3% from June 2022 at 2.6%. Total provisioning for non-performing assets keeps increasing to EUR 1.229 billion, an 11% increase from last year. All this has a positive impact in our provision coverage, which now it stands at 66%, 2.5% more than a year ago. Coverage for foreclosed assets were also improved to 58%. Let's go to the capital ratio. Our fully loaded CET1 ratio stands at the end of June at 12.25%.
Since December, retained earnings bring an increase of 64 basis points, taking into consideration the accrual of 50% of earnings. Capital consumption of risk weight assets and other adjustments has been a small negative impact of 3 basis points. All of these bring our CET1 ratios of June to 12.47, before valuation adjustments of the period and the banking tax. Valuation adjustments brings, again, a negative impact of 11 basis points, coming mainly from our remaining participation in Línea Directa, and banking tax remains deducted 11 basis points. The Línea Directa impact is, in the quarter, 8 basis points, and in the year is 10 basis points. Taking these two extraordinaries in consideration, our CET1 ratio closed the first half of 12.25, comfortably ahead of our regulatory requirements.
Total capital ratio remained at 16.24%, a very comfortable level over the minimum regulatory requirement. Leverage ratio up to 4.9%. Capital requirement on the Pillar 2R for 2023 is 1.29%, the fifth lowest among the European banking peers, and MREL ratio stands at 21.95%. Next slide. The increase in our customer deposits keeps improving our funding gap. Those EUR 2.2 billion in December is now EUR 4.4 billion, approaching to a commercial gap of past years. This negative gap in Spain, more deposits than loans, is enough to offset the gaps coming from Portugal and Ireland, both having higher lending than deposits. As a result, loan to deposit ratio reached again comfortable levels of 94.8%, below 95%, thanks to the consistent growth in deposits since March.
At the wholesale funding maturities are well spread through the coming years without any stress. As of the TLTROs, and after the EUR 5 billion June repayment, total take now is at EUR 4 billion, with two more maturities to go, one in September and the other one in March. High liquid assets and total liquid assets stand at EUR 21.3 billion and EUR 25.6 billion. Our issuance capacity at close to EUR 5 billion and LCR ratio average of the past 12 months at 201, very comfortable levels, and the LCR of June, after the repayment of TLTRO, stayed at 184.4, quite above the average of the industry. Let's review the performance of our main business lines.
Moving into corporate banking, the corporate loan book in Spain and Portugal showed a growth of 0.5% year-on-year or EUR 0.2 billion. It decreased by 0.5% in Spain, while the sectors shrinks by 2.2%. That means that there's an increase in market share. This recovery from the first quarter of the year has been mainly in working capital financing due to the pickup in internal demand, the increase of raw materials and supply chain finance needs, and despite the interest rate increase and financial tensions. In Spain, in this second quarter, loan book increased by over EUR 1 billion. This growth has made us to increase our market share from 5.7% to 6%. New production in the period has been over EUR 5.3 billion, 8% up.
At the same time, we have been improving the quality of our corporate portfolio. Total ICO loans with a state guarantee as of June stands at EUR 5.5, NPL ratio stands at 5%. Other activity indicators for the corporate segment, in this quarter, we can highlight again, international banking, its loan book by 3%, reaching above EUR 8 billion, with supply chain finance growing EUR 460 million or 3x from December. In wealth management, another strong business for us. Wealth management customer assets keep growing in a particularly good year for customer acquisition, growing by double digits. In patrimonial banking, the addition of all private banking and personal banking, assets under management have increased by EUR 5.3 billion in the year, or 11%, and in retail banking by EUR 3.1 billion, or 7%.
Total assets under management have reached the relevant size of EUR 99.5 billion, 10% more than a year ago. The strong commercial activity during the first half, measured by net new money, shows a total close to EUR 7 billion in increase between EUR 2.5 billion in patrimonial banking and EUR 1.5 billion in retail banking in net new money, and the positive effect in addition to that. Our asset management business increased since the beginning of the year in all the categories by EUR 4 billion. EUR 4.4 billion from a year ago, by categories of assets, and particularly in our case, well balanced between our own managed funds and third-party managed funds. Total mutual funds managed reached EUR 41.2 billion.
Activity, in the next slide, activity in retail banking during the quarter has been slowing down in salary account balances and in mortgage production. Salary account balances lost EUR 2.4 billion, following the transformation trend to other term deposits and intermediation accounts. It's still new accounts increased by 5% to over 480,000 accounts, where we keep around EUR 14 billion in a very sticky product. Mortgage origination in the period of EUR 2.9 billion was 16% below last year, the strongest one half ever, and similar to the first half of 2021. This is holding up thanks to the increased contribution of Ireland and Portugal in this business. In Spain, our market share in new mortgage origination is at 6%, slightly down from 6.5%.
Despite the reduction in the front book, the mortgage back book keep growing and reached EUR 34.4 billion, an increase of 0.4% in Spain, while the rest of the market now shrinks at -2.4%. Moving on to Portugal, total loan book grew by 14%. Retail funds at EUR 6.9 billion, up 6%. Growth in loan book was in both corporates, 13%, and in retail lending, 14%. Off-balance sheet at EUR 3.9 billion remains stable. Income statement, operating income from the business grew at stunning 81%, and cost show 7% increase. Finally, after EUR 15 million of normalized loan loss provision, Portugal, before taxes, posted EUR 85 million, 184% increase. After seven years since the acquisition, when efficiency ratio was 100%, Bankinter Portugal shows an efficient ratio of 32%.
Consumer finance. On consumer finance, our subsidiary, Bankinter Consumer Finance, reached, at the end of June, a new record level of EUR 6 billion loan book, 39% up from a year ago, and where EUR 1.7 billion were Irish mortgages, growing at 92%. The new production in first half was EUR 1.2 billion, little bit lower than a year ago, 14%. Geographically, the total loan book includes EUR 1.7 billion from Ireland Avant Money, growing by EUR 860 million, and EUR 435 million from Bankinter Portugal, growing by EUR 82 million, and the rest is EUR 3.1 billion in Spain, where the loan book grew by EUR 646. You can see in the graph, the breakdown by type of financing.
Personal loans represent 49%, growing by 33%, transactor credit cards 16%, and revolving credit cards reducing again to 7% or EUR 438, so EUR 433 million. Household mortgages in Ireland were EUR 1.7 billion, 28% of total. Knowing that the early indicator of consumer finance are the first to deteriorate in the recession cycles, we continue to feel comfortable with asset quality indicators. NPL ratios of June stands at a reasonable 5% NPL ratio. Regarding Avant Money, it is remarkable that since they have started the mortgage lending business in late 2020, they have been able to reach over 10% of new market production in the country.
Plans are to keep growing the current EUR 1.7 billion mortgage book, together with the customer finance book, today at EUR 758 million, up 23%. This activity, together with the recovery of the consumer finance, mainly in personal loans, up by 8%, has made the total loan book to increase to EUR 2.5 billion. Very low NPL, very low cost of risk. At EVO, during the first half of the year, they have increased mortgage origination and the new personal loans activity with a relevant operating income increase. New mortgages granted from December were EUR 536 million. This is 15% more than the origination of last year. Subsequently, net interest income jumps by 83%.
Consumer and personal loans came slightly up to EUR 113 million, represent only EUR 3.7 million of the book. Liabilities, EVO has EUR 3.7 billion, and client acquisition has been of 33,000 clients in the period. In P&L terms, for the same time, for the first time since the acquisition, the EUR 31 million in operating income was enough to cover the EUR 30 million of operating expenses. We're running a little bit short of time, related to the ESG strategy, here's the summary. I leave it just to you to focus on the end of the presentation. To finish, a brief recap of the quarter. We have a new outstanding set of management ratio, return on equity at 16%, efficiency below 40, NPLs at 2.2%.
Strong commercial activity with differential loans and deposits growth, and continued market share gains over the peer group. A resilient and comfortable asset quality and solvency indicators, keeping a strong buffer from regulatory requirements. In short, a great financial performance that more than offset the old Línea Directa insurance income, thanks to our business growth and increased diversification of the footprint. All the above make us feel confident that the outcome of the results of the new stress test performed by the EBA and the ECB, that will be made public at the end of July, most probably again, Bankinter will continue to stand second to none in capital depletion in the adverse scenario, well ahead our peers in Spain and in Europe, as in the last test.
Now, after closing a very successful first half in commercial activity, income performance, and asset quality, and in view of a better interest rate scenario going forward with the impact, the ambition of keep growing books in market share, et cetera, I am going to provide to all of you our best guidance for year-end 2023. First, growth will continue in all geographies: in Portugal, in retail and corporate loans, and in deposits, and with a very good prospectus for new consumer partner with Sonae in Portugal. Ireland will grow again in mortgages with our new direct channel production and improved consumer finance demand in that country. We do expect growth in mortgages and consumer finance in Ireland. In EVO Banco, we will keep the strong mortgage production and customer acquisition.
In Bankinter Spain, we expect for the rest of the year that corporate loan demand and consumer finance, and also non-mortgage retail lending, should continue increasing after the summer to be able to more than offset the slowdown in new mortgage lending, with a yearly total loan growth for the group staying at mid-single digit, clearly differential from the rest of our peers. With interest rate curve and futures above of what we all expected at the beginning of the year, NII should move more positively than previously expected at the end of March, where rates were quite below where we are now, and where the expecting rates were also quite below where we do expect now.
Now we see the NII growth somewhere between 35% and 40% growth, depending on the final interest rate curve behavior and thanks to the impact of the steady and positive repricing of the mortgage and corporate variable loan book that will last at least until mid-2024. Increased activity in corporates and individuals, together with more stable market and higher volumes in mutual funds, should provide fee income support to grow by low to mid-single digit, with some downside risk attached to market negative evolution. We are still positive on the growth of fees for the rest of the year. The group cost growth has been under control and will remain clearly under our income growth, providing extraordinary efficiency improvements in the year. We should stay around the current figures of growth.
Finally, cost of risk, as I did mention, we continue to see stability despite a slight upward trend, asset quality, but clearly benefiting of the absence of additional provisions, thanks to the quality of our loan book in the small and medium-sized companies, together with the help of the government guarantee attached to the ICO liquidity lines. All of this supports our confidence that cost of risk should be maintained at 40 basis points. Now, I'm open to questions. Thank you.
Thank you, Jacobo. As usual, we had a few questions received. Let's start for example, with balance sheet and volume expectations for the remaining of this year. What would you say that are we expecting in terms of loan growth and the mix also? Thank you.
I'm sorry, I think you didn't hear me well. Sorry, I will repeat the answer. Sorry, I got my microphone on mute. I was mentioning that we do expect positive loan growth. As I did mention in the speech, we do expect a positive guidance. I think I did mention low to mid-single digit growth. Portugal is behaving very well, and we do expect a very positive growth. Ireland is behaving well, expecting growth. Evo Banco, of course, is still behaving very well. For Spain, as I mentioned, except for the mortgage lending, the remaining businesses, consumer finance, corporate banking or whatever is non-mortgage businesses, we do expect positive growth.
I was also mentioning that, bear in mind that normally the third quarter of the year, there is a negative seasonality here in Spain, and we do expect a strong end of the year. For the time being, we are positive on that.
Excellent. Moving on to the liability side. We had a few questions regarding what are wholesale funding plans for the next few quarters.
That's it? Okay. For the rest of the year, we still do have some wholesale funds to be made. We do expect probably EUR 1 billion by the end of the year. We have some still MREL wholesale fundings related to MREL requirements. Therefore, 2024, we do expect probably somewhere between EUR 1 billion and EUR 2 billion of new wholesale issues, plus short-term funding that also is always a variable to consider.
Thank you. In terms of customer deposit now, what dynamics do you expect in the coming quarters, after the increase in this second quarters? Whether you can put some color on the deposit mix and the pricing?
Okay. We have seen a positive behavior in customer deposits. We mentioned we have a very good profile of clients that are able to bring every year relevant amount of new money to the bank, and I think this first half of the year has been a very good representation of that. We do think there is still new income or new flows in terms of deposits for the rest of the year. We are targeting to keep reasonable levels of loan to deposit or deposit to loan ratio. Loan to deposit's always below 100%, and deposit to loan always above 100%. We do expect that the flows of deposit will stay there.
We do have a mix today of around 20% in deposits and the remaining inside accounts. We expect that there will be a continued increase in the term deposit shares compared to overall deposits. Of course, the cost of the liabilities will continue to raise, but we have demonstrated that the cost of deposit is increasing at a lower path that we were expecting at the beginning of the year, and we do not expect any change in that trend.
Okay, to finish off with the funding questions, what are we expect in terms of after the repayment of all these, the LTROs, what are we expect in terms of the cash outstanding on the balance sheet and also on the, in terms of the mix with the deposits from credit institutions?
... After the repayment of this EUR 5 billion that we have in June, there is only EUR 4 billion to go, that I did mention. I think there is EUR 2.8 billion in September, and the rest in March. We've seen that we have a gap, more deposits than loans, and that in this quarter, we have increased even more than EUR 2 billion, probably almost EUR 2.2 billion of commercial gap. This is something that we will keep expecting in the coming quarters, commercial gap that will provide the enough volume of deposits versus loans that will provide excess cash.
These are combined with the mentioned wholesale funds issues that will cover the volume that is still pending of debt repayments, which, as you can imagine, is much, much lower than what the effort that we've done up to now.
Understood. Moving on to the NII. Obviously, quite a few questions on that topic. Let's start with the customer spread that we are expecting on, for this year, and obviously, what the normalized rate we will expect in this rate cycle.
This is the 1 billion question. We do as you've seen, we have delivered a good customer spread in this quarter, even better than the first one. We do expect, I mean, good, very high levels of customer spread in the coming quarters. We do expect that at the end of the year, in average, the customer spread might be somewhere between 2.90% and 3%. I think that is the average for the entire year. I think we are managing very well the beta of the deposit and, of course, the yield of the assets, which is also very, very, very, very important. I think that I've answered.
Sure. Now, we're obviously breaking down this question because, obviously, we have follow-up questions on the expectations of loan yield, and where do you expect it to peak?
Yes, I think that probably the third quarter is gonna be probably the one that we will see the peak. As you can imagine, the expectation of Euribor rates is the one that delivers that, the answer to that questions. Euribor's been stable in these two, three first weeks of July, somewhere around 4.10, 4.20, and of course, I mean, these figures are very related to the expectation of Euribor. If we think that we can see some stability in this level of Euribor, I think that the yields and that I mentioned, the spread, the average spread across the year might be somewhere between 2.90 and 3%.
You mentioned in the future, I think the future, the level of the customer spread is gonna be much higher than what we saw in the past with negative rates. We are positive on that in the coming quarters or in the coming future.
Okay, given these much higher rates, than we were expecting originally, how much repricing do you expect from the mortgage book on the total loan book?
I think there are still, I mean, as I mentioned, there are still repricing to come until mid-June next year. There is still a lot, a long, long way to have the full book repriced. Just bear in mind that, for example, in July, in July last year, Euribor or in June, in June last year, Euribor was even below 1? There's still a lot of room to reprice the mortgage book.
Okay, moving to the other side again, cost of deposits, what are you expecting in terms of, you know, cost of deposits for this year, end and, or even the beta, for 2023?
I think that, we are demonstrated that, we have a lower beta than expected. In the original guidance, we always mentioned somewhere between 20- 25. I think we are definitely in a lower range of that range, or much more close to the 20s.
Can you give us any color in the differences between the cost of deposits in households and corporates, the dynamics that we are seeing there?
I think the way to see it is, you know, that all our deposits, we are around 2/3 are in households and 1/3 are in corporates. In fact, the most sensitive businesses are the large corporations and the private banking business. These are the main, let's say, businesses, which are accumulating the highest beta. The others, that accounts for almost 2/3 of the overall, are the ones that are achieving a much lower beta than expected.
Thank you. Very clear. Moving on to fee income. What is your outlook for full year 2023?
We still expect a positive growth in fees. I know that we are sharing today a flat increase in fees, we are positive on the second half of the year. There are many business which are in the pipeline. There is plenty of opportunities, of course, we are positive in terms of the average fee of the assets under management of the funds will probably go up again after there is more a change in the mix towards more risk-propense type of investment funds. we are in record high levels in asset under management in funds. As you've seen, we have almost reaching the EUR 100 billion in customer patrimony in wealth management, so there is a excellent opportunity to increase our fees in that business.
Very clear, thank you. We had a question regarding the equity accounted and also the dividend income. Why is it down year-on-year?
Yes, the equity method is registering or recording a reduction, basically, because last year, in the second quarter, we have a strong income from the Bankinter Logística , which is the vehicle that invest in logistic parts across Spain. We have extraordinary high valuation that year, that's why we recorded an income that this year we don't have it. Relating to the dividends, is basically that last year we have dividends from Línea Directa, this year we are not having dividends from Línea Directa.
Thank you. In terms of expenses, what sort of expense growth for full year 2023?
I think I mean, we are not expecting any surprise. We are, as you see, around 6% the growth of the expenses, so the end of year should be around there. We are dealing with plenty of pressures because the, a hyperinflationary environment is hitting everybody, and we are not an exception, but we do expect to end up the year in similar figures.
Okay, regarding now, cost of credit risk. Can you give us any color regarding the NPL trends in the quarter?
Yes. As I did mention, the increase in NPL is mostly due to the increase in the consumer finance book, because the remain SME and other corporate, et cetera, the growth is very normal. The increase in the consumer finance book has to do, first of all, with the growth of the book, and the mix of the growth. We are growing much more in loans, in non-Bankinter clients, and that makes, which is a higher return business and also higher risk business. For the time being, there's nothing that we are concerned, and everything is on track.
Can you confirm then that we are keeping to our 40 basis points guidance?
Yes, we are stick to our 40 basis points guidance.
Okay, still on credit risk, regarding our CRE portfolio, we had a question, whether, you know, we are being asked whether we are seeing any trouble on that portfolio, and whether we see any correlation with the small increase in NPLs in the quarter.
No. Again, I like this question because I always like to clarify this. The CRE exposure of the bank is extremely limited. It's around EUR 500 million, EUR 600 million, it's very, very limited. We are not perceiving anything around this portfolio. It's a very small activity for Bankinter.
Thank you. Moving now on to capital. We had a question regarding the change in the risk weight assets that we are seeing in the CET1 ratio. Why are the risk weight assets growing faster than loans in the quarter?
Okay, yes. Basically, all the data that we share with you is always preliminary, because all the prudential information is an estimation, as we do have to close all these figures some weeks after this presentation. Anyway, we decided to change our criteria in the way, in a credit risk mitigation technique, in order to be more prudent and to avoid any potential volatility on that. There's no major issue. I think this is a great year with such an excess of capital for the time being, to do this adjustment in the criteria.
Thank you. Also on capital, given the current capital ratios that we are presenting today, can we expect any changes in shareholder remuneration going forward?
No, we are sticking to our 50% payout. As you see, we are growing, and this is our ambition, to keep growing in all geographies, in all businesses. This is where we will allocate the excess of capital.
Now a few more questions on different topics. Liquidity, liquidity coverage ratio, whether you can confirm the figure for June, a spot at the end of the quarter?
Yes, I do confirm, 184 LCR for June. The average, for the 12 months is above 200, and the average of the last three months is even higher.
Thank you. Can we comment on the expectations of the LCR after the TLTRO payments in September?
LCR will be at very comfortable levels, above 180%. We, it's, we are very comfortable with this.
Okay. Regarding the contribution that we make every year to the insurance deposit funds, are we expecting the contribution to the Single Resolution Fund to go significantly down next year, and also any decline on the contribution to the domestic Deposit Guarantee Fund for this year?
yes, for both, we do expect a significant reduction in next year, as we have reached the ceiling that was stated in both in the Single Resolution Fund and in the Guarantee Fund. The coming years, the effort will be just for the growth of the resources, of the deposits. There is no effort to reach any ceiling. That means that we do expect a relevant decline in 2024 in both funds.
Thank you. Very clear. Regarding the stress test results that are due to be released next week, do you have any comments there, any expectations?
As I mentioned, we do expect to be, again, an outlier with one of the best capital depletion, if not the best, in Spain and in Europe. I think this is again, a great opportunity to demonstrate that the risk profile of Bankinter is one of the best, even in adverse scenarios.
Excellent. Very clear. A few final questions. Whether you expect any changes on the ALCO contribution going forward to the NII?
No, I don't expect anything.
Okay, we had a question regarding the guidance on fees, whether you can repeat that?
Yes, we stick to our guidance on fees. It's, a low mid-single digit. Within the second part of the year, it's gonna be much better than the first one. We are positive on that.
Okay. Last but not least, what is our deposit beta implicit on the NII guidance?
As I mentioned, we do expect a low range of 20% in our deposit beta for the year, for the average of the year.
Excellent. Thank you so much. Thank you, everyone. As always, Investor Relations team is now available to take any further questions you may have. Thank you and goodbye.