Good morning, welcome to CaixaBank's Results Presentation for The First Quarter of 2020. Let me start by hoping that you and your families are well and in good health. With us today is our CEO, Gonzalo Gortázar, and the CFO, Javier Pano, who will be joining us from our Madrid office. If you are a first-time viewer, please note that we plan to spend around 30 minutes for the presentation and 45 minutes for the Q&A, and you should have received instructions for that via email. Let me just state that my team and I are available after the call for any questions that you may have after the event. Without further ado, let me hand it over to our CEO.
Thank you, Eddie. Still good morning to all of you. Hope you're healthy and stay that way during this difficult period. Thank you for your time again, and we'll move on directly to our presentation today. Obviously, the crisis has changed things radically. I think the first thing is that we have stayed operational at every single moment, and from that point of view, complying with what is our mission in this crisis. Our branches have been open. On average, 90% of our branches have been open, with approximately half the branch employees, so approximately 50% have been working, and the other 50% in branches working from home. Headquarters and subsidiaries, the working from home is around 98%. This has worked well. It's obviously been a challenge technologically to move from physical to remote in one given day, but it's worked well, and I guess that is important.
It's worked well for us and generally for the whole industry, which is good news. We have been active in supporting our clients. Obviously, we have liquidity and solvency and our ability to react quickly. We had a very strong month of March in business loans, with almost EUR 5 billion of loan growth only in March to businesses. Year to date, that figure is 3.1%, and the figures we are publishing today about the ICO loans that we have processed so far are of EUR 11 billion, so quite a significant amount. We are discussing today also the amount of the moratoria we've given to individuals. EUR 8.5 billion is a significant number. We'll discuss about it later, but we feel good about the moratoria, and we do not feel that moratoria is going to convert into non-performing loans. 95% of the moratoria that we have granted was actually performing.
Many clients are just making sure they have liquidity for the next few months. Credit quality, solvency, and liquidity, you have the figures there. We're happy that we're entering this crisis with that balance sheet strength. It's obviously a result of the work of many people for a long period. We feel we have a financial position that is very strong. It's going to allow us to help our clients, and it's going to allow us to come out stronger. Every single crisis that we have faced, we have come out stronger. This is not going to be different, I'm convinced. Stronger also means, in due course, good news for shareholders. Obviously, before the lockdown, we had a pretty good quarter. Core revenues are up almost 1% with two weeks of lockdown. It's a good result.
The final results are affected in a big way by these EUR 400 million extra provisions that we have booked related to the change in economic scenario associated to the virus. Net income is down 83%. We have decided to formally suspend guidance and targets for both 2020 and 2021, which is, I'm sure, no surprise to you. Obviously, in this new environment, the guidance and the targets are no longer relevant. I spent some time in section one describing the situation of the bank and the preparedness for the crisis, and then leave for Javier, our CFO, to get into the first quarter results. Firstly, as I said, fully operational. Obviously, thanks to our technology and our people, we can continue to be fully operational for as long as we need. Hence, from that point of view, there's no problem.
We have decided to maintain most of our branches open. Obviously, as you know, we're present in approximately 2,000 different towns in Spain. We have actually managed to keep branches open in 97% of these towns. We have had some infections, logically. Today we have more people that have recovered from COVID than people that are actually currently with the disease. From that point of view, our situation, the workforce is improving. It's never been of concern from the operational point of view. It's always been a concern from a management point of view to make sure that our people are in good shape. They have received appropriate protection measures, sanitary, and also have changed protocols and ways of doing things to make sure that we will stay healthy and safe.
We have experienced a significant growth. Digital activity is no surprise, including activity inTouch, in our remote phone channel, where we have 1.3 million clients already. We have been seeing growth of 35% calls per week. Obviously this is a business that was very attractive for us, and is going to continue to grow faster going forward. Connections to our digital channels have increased, everything that you expected. Transactions, cash transactions, and balances have been reduced by three-quarters, 75%. ATMs have been operational at all times, but also activity has been reduced by around 60% in terms of drawings, and monetary balances withdrawals by around 40%. This is a time of crisis. You know that banks in Spain and many other places have had a difficult reputation.
We feel this is the right time to make sure we do the right thing, and that we tell the society that we're doing the right thing, and that they perceive it. It's not just about propaganda, it's reality. I think this is important. This is something that generally I see our peers are very keen to do. The sector is reacting in the right way. As we have so many bad news in this crisis, I think this is one piece of hope. It's a great opportunity to prove to society that banks are good, and we're behaving in a way that clearly prove that. That is perfectly consistent, obviously, with trying to protect our results, our solvency, and in reality, to making sure that in the long term, we have better returns because society feels that we are owed these better results, no?
Some of the figures of what we're doing for individuals, for businesses, for society, obviously, the ICO applications with EUR 11 billion and the moratorium of 220,000 moratorium requests that we have received are very visible in our data. What we've been doing in terms of advancing pension payments and unemployment payments to our clients, which is obviously financially attractive for them, but also has allowed us to make sure that there was no one-day queue for getting payment for pension or unemployment subsidy. We've been calling clients to make sure that they don't come to the office. If at some point there's one that feels because they're not digital and have a need, they have a previous appointment, and hence we can make sure that everybody's safe, which has been clearly achieved for us. We have granted over EUR 14 billion of non-ICO business loans, since mid-March.
It's obviously a record in our history, EUR 14 billion. These are good transactions, no guarantee. We have good clients. They have a higher need of cash now. We have capital, we have liquidity, and we have the ability, because we know our clients, to know which credits are going to continue to be credits that will pay us. Hence, we have been able to be with our clients immediately when they needed us, which has always been something that society or some sectors of society have blamed us for not doing. This is not the case. We have undertaken many other actions, and we'll continue to do so. We'll continue to do so in a responsible manner.
Working for society here, because of the magnitude of this crisis, is also working for the benefit of the long-term future of this bank and for the returns of the bank. You have some data here on the moratorium. Is, as I said, EUR 8.5 billion requested so far, most of it in terms of balances and in mortgages. For that, we just want to make sure that, and I will elaborate on that whatever the statistics of our mortgage portfolio, which are very good, and hence is a very defensive portfolio where this moratorium is not going to be a problem. Obviously, also on the consumer side, up to EUR 1.1 billion. Both cases, you can see that practically 95% of the requests are coming from situations where the loan was performing, which is also a good indication of a credit quality going forward.
There will be some, no doubt, that will have payment problems in the future. The vast majority of them are going to be okay. That's our view. ICO loans, you have the data here. Clearly, we have this substantial demand, and the portion that has been already released and allocated to us. I am very comfortable that in the next few days, the government will continue to increase the amount of the guarantee so that we can actually satisfy the demand we have for this part of the business. Some data of relevance in terms of our credit card level. You know we're the largest player in Spain by far, hopefully this is quite representative of what's going on in Spain.
Evidently, in mid-March, you have the big drop, and obviously lesser in e-commerce, It's also somehow comforting to see that even though we're still in lockdown, the trend is positive, and it is somehow improving in the last couple of weeks. We're going to come back to normality or to a new normality in a gradual manner, but it's already happening, and hopefully will continue to be that way. There's very different degree of behavior depending on the sector. There's no surprise that supermarkets and pharmacies are doing well, and that hotel, restaurants, et cetera, being actively closed have had a major drop. Petrol stations, big drop. Also, you can see that the last couple of weeks, there's some growth. That's, I think, the beginning of the return to normality has already started. It's going to be a long trip, and we all know.
In terms of the macro views that we have, that I think they are relevant per se, but also relevant for the decisions we've taken in terms of provisioning. We have no crystal ball. Everybody knows that the visibility now is very limited. We had to put some numbers. We have a base case, which you see here, for a drop in GDP this year of 7.2% and an increase next year of 6.9%. That's the blue line there. Obviously, well below the pre-COVID line, but a significant recovery in 2021. We have also considered an adverse scenario, in which the fall this year is as high as 15%, and then when we have a recovery that is closer to 10%, a bit below that, and hence we end up in 2021, exactly 7 percentage points below where we were in 2019.
I think, as you know, when we estimate provisions, we have to play with a number of the scenarios, macro scenarios, and we have considered also this adverse scenario, to make sure that we have overaction in this crisis that is front-loaded. We all know we're going to have significant loan losses going forward compared to what would have been before this crisis started. Our view is to front-load within reason and, obviously respecting accounting principles at all points in time. As we gain more visibility, we will see how things evolve. Beyond the GDP trajectory and what it does for unemployment and house prices, which you have obviously a big drop in house prices this year and increase in unemployment, this will reverse next year.
Beyond that, I think, I've mentioned this in the past, it's very relevant to see the level of leverage that our businesses and families have now. It is completely different to what it was 12 years ago when we started with the previous crisis, completely different. It's a big improvement, the reality is that, even comparing to the Eurozone, now we are well below in terms of leverage for our business sector and slightly below in terms of our families. We haven't had a house bubble. You see what house prices are compared to where they were before the previous crisis. I think we have much more resilience. Obviously, we have much more resilience in the banking sector. You know that well, you have a stronger economy as well as more resilience.
Businesses and families and the state are going to end up with a higher level of debts. The fact that we start from a relatively low level is quite relevant to see that we actually have the capacity to deal with this without a major crisis in the medium and long-term. Some considerations about our loan book. Obviously, as we do not have the visibility of what exactly is going to happen in the next quarters, what we are trying is to be as transparent as we can, and proof of that is the data offered on moratoria and ICO loans, et cetera. Continue to be as transparent as we can also on how we see our loan book and how resilient it is. It's diversified, obviously. Big proportion of residential mortgages, very defensive. You can see that on the right-hand side.
EUR 76 billion, the average loan to value is below 50%. I don't think it's here, but the average loan to value of the moratoria we have requested is 51%. It's basically in line. Majority of that is with loan to value below 80%. Very defensive. We're feeling fairly good about our mortgage portfolio. We have been quite conservative the last few years. If anything, you know that we've been losing market share on the mortgage side. We've always said that it's a matter of price and conditions, and we have not granted risky mortgages. House prices are going to suffer somewhat, but not like last time, and hence we feel pretty good about our loan book on that front. If you look at the rest, we have obviously consumer lending, 6% is a profitable part of our business but small part of the book.
We feel obviously that we'll have higher losses from consumer lending. There's no question, but that those will be contained, and we are taking the necessary actions to make sure that these losses are not a problem going forward and that we obviously have to tighten criteria. When we look on the corporate side, you see we have provided some detail on various sectors, high, moderate, and low impact. It's self-explanatory. Obviously, it's very relevant, not just how much exposure we have to high, moderate, or low impact, but what names and specific situations we have in each of these sectors. We have been very focused on lending to some of the best companies in each sector. You can guess, as the portfolios have been weighted to downstream, when we talk about oil return, especially we have is downstream, is refining, is marketing, et cetera.
I think it is both in terms of the distribution of the book and the specific criteria in the book, we have kept very conservative lending principles. We have not been active in LBO, specialized asset in any significant manner. We expect to be resilient. The fact that we are making a very important provision is not a result of specific concerns in our lending. It is a view that we have to front-load and deal by the bullet sooner rather than later. Obviously, it's going to take a few quarters until we have a full view of the impact of all this on us. As I said, not before the launch of our rainbow levels. Liquidity very high. You can see both LCR and actually, Net Stable Funding Ratio are at very high levels. This is a great advantage at this point.
We have no concern about liquidity. Obviously, we have the ECB there. Javier will surely expand on it. In terms of CET1 , we have a higher buffer than ever, with EUR 5.8 billion, 392 basis points. Yes, there will be volatility around capital this year. We have plenty of cushion. This is going to be very important for us to be able to capture and put this capital to work properly. This is the best we can do in a crisis like this, is find good uses for this capital. We are on that program. In terms of resilience, given the lack of visibility, just a few considerations on history. You have PE, provision for bad debts, for the last eight years and 11 years in this graph. What has been the cost of risk.
Pre-provision profit obviously has a big room to absorb provision losses. Some comparison on what has been the worst three years for cost of risk in the previous crisis, where obviously the situation was much tougher than now. Even if we selected three worst years in history, what happened in the recent history, obviously 154 basis points. We look at the EBA last stress test that we did, the average cost of risk was 82 basis points, approximately half of our pre-provision profit. On top of that, we have this MDA buffer. The resilience of a bank is very clear to us, and we are going to make sure that we use that for the benefit of our clients and our shareholders. I would now leave the floor for Javier, who is, I guess, ready and move on. Thank you.
Thank you, Gonzalo. I am ready. Good morning to all of you, and my best wishes also for you all. Let me now give you the figures for the first quarter, although at the same time, I will try to offer some insight into the trends since the start of the lockdown. Well, first, a few key messages on the balance sheet. On the loan book, as the CEO has already commented, we have had a strong first quarter. Our performing loans up by 1.7%. Clearly, very two differentiated periods. The first part of the quarter, I would say at least until the month of February, with the usual impact in the first quarter from seasonality. From March, I would say that we have had a strong growth from businesses. In many cases, we spoke liquidity facilities for large corporates.
Please note that in the figures by the end of the period of the first quarter, still does not include the pipeline of loans with government guarantees, ICO loans, thus this new production of loans will come into the second and probably the third quarter. A look into the ALCO book. You know that we were running a comparatively smaller ALCO portfolio, but this time we have taken advantage of the widening of sovereign spreads during the last part of the quarter to add to the portfolio significantly Spanish and Portuguese government bonds with maturities from 3-10 years. Here you have the complete breakdown of the portfolio. On average, I would say that the purchases have been six years, six-year maturities. The yield of the portfolio now is standing at 0.6%, and the average life is slightly over four years. Now continuing with our customer funds.
We have had a relatively stable quarter if we exclude market impacts. Excluding those market impacts, our customer funds are up by 1%. Also here, two very differentiated periods. In the first two months, I would say, strong inflows into long-term savings, as you see, EUR 1.4 billion up to February. Then with the correction in markets, we had some outflows, but the net on this front for the quarter is positive, EUR 600 million positive. During the last part of the quarter also, we started to have, again, inflows on balance sheet inflows. In the right-hand side chart, you may see the evolution of our AUMs. Market impacts obviously have had here an impact of EUR 11.5 billion.
If we take as a reference the average AUMs for 2019, we see that on average, during the first quarter, we have been up by 2% compared to this average of last year, and clearly higher than the average of the first quarter of 2019. This is why we have had year-on-year very positive results on this front. Obviously, this large market impact has impacted the balances by the end of period. We are down now by the end of period by 6% compared to the average of last year. In recent weeks, as you know well, markets have been recovering. As recent as April 23rd, we were down only by 4%, and as recent as of today, probably we are closest to minus 3%. Despite these market turbulences, we have continued to gain market share in mutual funds, up by 25 basis points.
Of those, 19 basis points in March and February. With this, let me now shift to the P&L to give you an overview. Despite March impacts, we have had solid operating performance. Core revenues are up by 0.9% year-over-year. Our core operating income is up by 4.2%. We see an impact from lower yields in net interest income that year-over-year is down by 3%. On the contrary, on fees, we are clearly up compared to one year ago by 8%, and even the first two months, we're doing better, running at a pace around 10%. Our life risk business continues to recover as sales build on the recurrence of MyBox. In this item, we are up by close to 16%. Also, I would like to mention the negative impact we have in trading. In this case, the widening of credit spreads impacting our credit valuation adjustments from derivatives.
On costs, you know that we have on this front, savings from the restructuring of last year. Well, as of today, we've formally revised our guidance for this year. We expect now our operating costs to be below those in 2019. Below the line, sorry, we have those loan loss provisions. This reserve build for COVID impacts, EUR 400 million, and without those impacts, cost of risk on a 12-month trailing basis would have been 15 basis points. A lot of uncertainty, but as of today, our best estimate for cost of risk is for it to be between 60 and 90 basis points. Remember that other provisions include a one-off for the early retirement, slightly north of EUR 100 million. With this, our net income falls to EUR 90 million, 83% down compared to last year.
Let me now give you some color on BPI, where core revenues continue to support net income. Net interest income in Portugal is doing well, up close to 10% year-on-year, thanks to strong growth in the loan book in the past. We have in Portugal the help of loan loss provisions. Here, we have released EUR 45 million from the PPA, EUR 140 something still left. You see here the business volumes. Portugal continues to do well. The country also suffering the lockdown. Our expectation for the GDP growth in this year and next are pretty similar than the figures we have for Spain. 68% of the employees working remotely. There are also some, let's say, programs in Portugal quite similar than those in Spain. We have EUR 4 billion in new moratoria, and there are also some public lines that now amount to EUR 1 billion.
Let me now enter into the usual details of the P&L and the balance sheet. First, net interest income, we are down by 2.5% quarter-on-quarter. In this case, lower yields affecting mainly on the loan book. Also, maturities on the ALCO portfolio in the fourth quarter affecting quarter-on-quarter. Those negative impacts are partially offset by ECB actions, TLTRO and ECB funding. You may see on the right-hand side chart, our margins, the book yield of our loan book falls six basis points to 215 basis points. We can discuss this in more detail in the Q&A, but mainly, lower Euribor resets and some other factors. Going forward, what we see on this front is that we have a very strong pipeline in new business lending. Those state-warranted new loans.
Also, we expanded the ALCO portfolio by the end of the quarter, and probably a lower impact of Euribor resets. We expect that NII will have some support or additional support in coming quarters. On fees, we have had a strong quarter compared to the first quarter of last year. You remember that the first quarter always affected by seasonality, and fees are up by close to 8% year- on- year. You see here the breakdown across different segments. All of them have done well. I would say that probably the line that has been more affected by the start of the lockdown has been in non-life insurance distribution. In the right-hand side chart, you see the evolution of our insurance revenues. We have already commented on premia from life risk.
I would only like to add here that on our equity accounted from SegurCaixa Adeslas, the company has had some small market impacts that have affected this performance. I would like here to give you some insight into what's going on since the lockdown. What we are seeing is that in life risk insurance revenues, the pace of those revenues is approximately 10% below the pace of those revenues before the lockdown during the first quarter. For recurrent banking fees, what we are seeing is that those revenues are approximately running at a pace that is 15% below the pace of the first quarter before the lockdown. Of those, I would remark, I would say the area that is more affected, which is e-payment fees, which are running down by around 14%. The CEO already disclosed some charts with evolution of credit card traffic, et cetera.
Those fees account for approximately 15% of our total fee revenue pool. Let me now continue with costs. On this front, year-over-year, we have negative growth by 1.3%, clearly, having the benefits from the restructuring implemented last year. You may see personal costs down, also general expenses. We have growth in amortizations because of strong CapEx last year. You know that we have an early retirement that with 229 departures as of April the 1st. This will allow for close to EUR 30 million of annual cost savings going forward. It's time for additional cost savings to be implemented, and we are working on those in order to drive our operating cost base below the levels of 2019. Finally, on the P&L loan loss provisions, we have this reserve build for COVID-19, EUR 400 million. You have here the breakdown across different stages.
We have used here a top-down approach based on a weighted average of different macro scenarios. In this case, following the supervisory and other accounting authorities' recommendations. As for the rest of the year, as I commented before, it's still uncertain times. Our best estimate as of today is that the cost of risk will be in the range between 60 and 90 basis points, and this upper range of guidance already taking into consideration a more adverse scenario than what is our current base case. With this, a few comments on the balance sheet. NPLs. The NPL ratio remains stable at 3.6%. We have a slight increase of NPLs in absolute terms. This is mostly reflecting the temporary pause in recoveries during the month of March.
Obviously, during the lockdown, the recovery process has been more difficult, and this has resulted into a slight increase of NPLs. I will not read more than this on this. Obviously, in coming quarters, this is something we will follow very closely. On our REO exposure, stable, less than EUR 1 billion. I would only like to add on this slide that our coverage ratio now with this extra provision, it's at 58% with very sound coverage ratio of our uncollateralized part of the portfolio. On liquidity, we have a very sound position. We have further reinforced our liquidity position, adding further collateral to our ECB facilities. Liquidity coverage ratio ending the quarter at 234%, and Net Stable Funding Ratio of 129%. As you see, ample room on this front. We have used new ECB facilities by around EUR 23 billion, also some U.S. dollars.
Those facilities are maturing in June, then we are planning to make a substantial use of the TLTRO III, EUR 39 billion additional borrowing capacity we have. On the right-hand side chart, some color on our undrawn corporate and SME credit lines. I would say that not much use of those credit lines. Generally speaking, large corporates are rather preferring tailor-made loans instead of using credit lines. As you see, we have a comfortable position in terms of wholesale funding maturities. Thus, we don't have a need to tap market for funding. On solvency, finally, we have, as the CEO commented, a solid position. The last public figure you have in mind is this 12.35% CET1 ratio after the significant event when we announced the reduction of the FY 2019 dividend. Since then, we have opted for transitional IFRS 9.
This is adding 13 basis points to our regulatory capital ratio. Then we have negative impacts in the quarter. First, we have negative organic capital generation this quarter. This is a combination of, first, low profitability in the quarter after the loan loss provisions, and second, strong risk-weighted asset growth, as we have expanded our loan book. This is minus 10 basis points. Then we have market impacts. On those, basically, the well-known impact from Telefónica, and also we have adjusted the fair value of BFA. Then we have other smaller impacts, mainly fixed income-related impacts, that make up to those 37 basis points. We end the quarter with this 12% CET1 ratio. This is well above our 8.1% CET1 SREP requirement. Almost four percentage points over this level.
Remember that we revised the CET1 internal target to 11.5, and we keep an ample MDA buffer at 350 basis points. Loan growth will be mainly coming from this government guarantee scheme. Thus, we expect that this will mitigate credit risk-weighted asset growth. With this, I would only make some final remarks. We feel that the value of the franchise remains intact. The bank is being fully operational. We have continued to gain market share in those times. In January and February, we were performing above our expectations. Now, obviously, things have changed dramatically, but we are ready and prepared to support our clients and the economic recovery. We can do so as we face this crisis from a strong financial position with capital and liquidity that have been recently reinforced.
Thank you very much, and I think that with this, we may be ready to take questions.
Okay. Thank you, Javier. As you say, it's time to proceed to Q&A. I would just like to remind everyone, if you can keep your questions brief for the interest of everyone who's lining up, and we'll try and do the same. Operator, let's have the first one.
Thank you. Ladies and gentlemen, if you wish to ask a question, please press star and one on your telephone. Our first question today comes from the line of Ignacio Ulargui from Exane BNP Paribas. Please ask your question. Your line is open.
Yes. Hi, good morning. Thanks for the presentation, I wish you as well all the best for you and your families, hopefully fine and healthy. Javier Pano, three small questions. One is, what kind of initiatives on the cost side are you planning to take? Are they focused on administrative expenses mainly or also in personal costs? The second one is, where do you see NPL going, and when we should start seeing some inflows? Just finally, a very quick update on what's your view on the dividend policy of the bank for 2020, and what have you done with the dividend so far? Thanks.
Thank you, Ignacio. I'll start with personal expenses. We're not expecting any further action to reduce headcount. We have these early retirements that we agreed in the first quarter in Barcelona associated to the discussion we had last year. We are not, therefore, going to have a lower number of employees going forward.
Obviously, there will be an impact as our financial objectives are not going to be met, our old financial objectives. There will be an impact in per capita compensation, but that will not have a cost for shareholders. It will have, obviously, just an impact in the P&L. With respect to dividend, Bank has approved a change in the dividend policy for 2020, so that payout can go up to 30%, but no more. Because of the current rules with that, we are accruing the average of the last three years, basically, which is a 33% dividend. Is consequence from the rules, we have said it won't be higher than 30, but at this stage, the ECB requirement is the average payout ratio of the last three years. In this quarter, given the limited profitability, obviously it has had very limited impact.
At this stage, we're not planning to change that policy, and hence, we have the ability to pay up to 30% of dividends. We have capital, we have a good condition. Obviously, this decision will have to be made almost a year from now, it's not something for now. There's some additional question I would like Javier maybe to answer, if you can.
Hi, Ignacio. I think there is a remaining question on the evolution of NPLs. Well, it's early times, obviously. We think that those measures that are in place, mainly moratoria and those state warranty credit lines, that as you may see, we have a very large pipeline. This will obviously help to cushion the downward impact of this downward trend in GDP on borrowers. In any case, obviously, our NPL ratio is going to go up in coming quarters. It's going to be over 4%, for sure. According to our estimates, in any of the scenarios, it's going to be higher than 5%. I would say that somewhere between four and five will be the place where we will land, probably. This will depend a lot on the evolution of the situation, the final impact on the economy, the length of the lockdown.
I'm sure that is something on what we would be able to provide you more visibility in coming quotes. According to our initial estimates, we should be well below the 5% mark. Thank you, Ignacio. I don't know if this answers all your questions.
Thank you very much.
Thank you very much.
Yes, thanks.
Thanks, Ignacio. Let's move on. Sorry.
Sorry. Your next question comes from the line of Carlos Cobo from Societe Generale. Please ask your question, your line is open.
Hi. Thank you for the presentation. Carlos from Societe here. Three quick questions as well. One will be on your consumer lending book. If I'm not wrong, you've been launching some JVs and agreements with third parties to do some more point-of-sale lending. If you could elaborate a little bit on that, how big it is, what's your outlook for that non-payroll clients-oriented business. Also, on the 9% of other individuals lending, could you please also elaborate on that? You don't classify it as pure consumer, so is that purely personal lending, unsecured, or do you have some self-employed lending there which could be similar to SMEs, and your outlook for lending in consumer, if it's going to contract or is it going to remain strong?
Second, on IRPH, just hearing your latest thoughts, and if there's nothing else to add, don't really worry, but we're starting to hear some sentences, which are ruling against the banks. That kind of contradicts the market initial thoughts on the European Court of Justice ruling. What's your view there? Should we expect this case to go finally back to the supreme court again? What do you think? What do you expect on provision impacts, while you have some negative sentences? Lastly, a very theoretical question. Would your worst case be discounting or incorporating any kind of new outbreak sort of after the summer, forcing a new lockdown? Would that be something that is consistent with your worst case or that is clearly something that is too unlikely that you don't want to incorporate?
Just to understand how sensible the 90 basis point worst case cost of risk would be to that potential scenario. Thank you.
Thank you, Carlos. I'll give a few comments and then Javier can elaborate. We will try to have enough time. On IRPH, there's no real change. We are satisfied with the ruling from European Court of Justice. We have obviously had different reactions in different courts, most recently from the Audiencia Provincial de Barcelona, a very clear one that is just confirming what the European Court of Justice said, the transparency of the index, et cetera. Our conviction is that, in due course, the Supreme Court will make sure that everyone is aligned with that decision. No particular worries. Obviously, the press will always pick on that sentence from a local court that is against the banks, but there's no real change. Quite the opposite, we have good news on that front.
In terms of the macro scenarios, I wouldn't directly translate one sort of sanitary scenario into one macro scenario. We feel the way out of the lockdown is obviously going to be asymmetric, and it may not be linear always to a better place. We certainly can have bad news at some point. If they happen, what we are expecting is they will be contained. It won't be a general resurgence of the problem, because now we have obviously, a different vigilance on this, and it'll be more local, possibly, and certainly not generate the same problem that the last did. Obviously the whole world is speculating about how things can develop. In a very prolonged lockdown, obviously our adverse scenario will be more likely. Our adverse scenario is also associated to whether the right public policy measures are put in place.
If they are put in place, even if we have problems, I don't think we're going to end up in that adverse scenario. The adverse scenario means higher degree of problems and also inability from public measures to get them sorted out. We have no claim to try and predict the future. At this point, it's very difficult. What we think is that 60- 90 basis points is fairly conservative, and it is consistent with a deterioration of the economy of up to 15% this year and a gradual recovery. What we think is we actually have resilience to deal with this. We have good capital. We can focus on our business. Obviously, if this ends up earlier, we'll have lower credit losses, and it would be better news for shareholders than if it takes longer.
Javier, there were some questions on consumer lending as well that you can address, please.
Absolutely. Hi, Carlos. On the consumer loan book, probably I can give you some color on some metrics, and probably this may help you. You mentioned the part of the portfolio that is from those agreements with major merchants. This is now approximately one quarter of the portfolio. You know that we have been commenting in the past that we are very happy with the performance of precisely this part of the business, and I can give you some metrics. The overall non-performing loan ratio of the portfolio stands at 4.4%, but this sub-part of the portfolio stands at 3.9%. That's below the average. This already tells you that the underlying quality is sound. You know that we have put in place an origination criteria that is very strict on this front.
With the help of all the data we gather from our payments business, we have been able to originate a very sound portfolio. I would also add that, and I remember myself commenting this in the past, that we were monitoring very closely vintages, and the performance of every vintage has been progressing as we have been obviously fine-tuning and refining, to some extent, the origination process. We are quite confident. This is not a kind of consumer loan book where we have been advertising consumer loans in our website and first-in, first-served. It has been done very carefully, mainly with our own clients. As the recent vintages have performed better than the previous ones, you know that the delinquency ratios usually accelerate in recent vintages.
As we see that the performance has been better every vintage, we are quite confident that the resilience of this portfolio is significant. You have a question on other credit to individuals. Of this, well, there is a little bit of everything here. Approximately there are around EUR 5 billion, I give you the numbers in euros, of self-employed, in this case, in this area. We have also loans related to housing rehabilitation, to some pension repayments. You have here a broad spectrum. In some cases, we have collateral on those loans. Well, we are quite confident that, with also in the case of self-employed people, with those state warranty credit lines, also this will cushion the situation. I think that I'm not missing anything else, Carlos. Thank you.
No, that was very complete. Thank you.
Thank you. Your next question comes from the line of Sofie Peterzens from JPMorgan. Your line is now open.
Hi, here is Sofie from JPMorgan . I was wondering if you could give an update on how we should think about the moving factors on your Equity Tier 1 in coming quarters. How do you view the treatment impact? How do you view the IT software intangible benefits from Europe, SME supporting factor, the lower market risk multiplier? If you could just discuss how these are evolving or what is on your core Equity Tier 1 and how we should think about it. My second question would be, the EUR 400 million of COVID-19 provisions that you took in the first quarter, how would you split this across the different product segments? How much is for large corporates? How much is for SMEs? How much is for self-employed, mortgages, and consumer? Lastly, you guide for 60- 90 basis points of cost of risk, in 2020.
How should we think about the cost of risk impact in the next quarters? Will it be largely stable, or should we expect a significant upfront loading in the second quarter, or how do you think about it? If you can make any comments on 2021 cost of risk, how you see that evolving. Thank you.
I'll make a comment on the last one and then let you, Javier, do the others. Very difficult to give you guidance for 2021 on cost of risk. Obviously, we're going to need more time to see how things evolve into 2021. There's not enough visibility. We've made an effort to measure what we think is 60-90 basis points. We expect, obviously, 2021 to be a better number, but it is difficult at this stage to be more specific. In terms of the evolution quarter by quarter, I would be also reluctant, Sofie. I don't seem to be very helpful here, but I'm sorry. It's a bit complex to now see exactly how this is going to play out quarter by quarter. Anyhow, the annualized cost of risk this quarter is 84 basis points. We're expecting 60-90 basis points.
I would say we are likely to be within that range in every single quarter. Depending on how the economy and the situation evolves, we will sort of gravitate towards the one point or the other. I am not sure that there will not be potentially ups and downs in this trajectory. Javier.
Thank you. Hi, Sofie. You had this question about these new European Commission measures. Well, we expect that those changes will proceed fast, potentially during the second quarter. This is obviously good news. It shows an alignment of all international bodies to support banks and their lending capacity. This is positive news. More specifically, on IT software, we are reporting, as probably you may see from our annual report, slightly more than EUR 600 million of software intangibles. Probably not all this amount may be eligible for this perimeter that will no longer be deducted. It is still uncertain if there will be some kind of risk weighting or not. In any case, we estimate that if this goes ahead, the final figure will be north of EUR 500 million. It is easy to do the numbers. It is around 35 basis points.
Hopefully, this will come soon, but obviously, with those issues, we need to wait until the final papers. Finally, on the SME and infrastructure supporting factor, this may have a positive impact on risk-weighted assets. According to our initial estimates, it's not going to be large. Obviously, we can further update you in the next future. For the market risk multiplier in our case, is having an almost a non-relevant impact. You had a question also, Sofie, about the breakdown across different sectors of this provision. I can give you some general comments on this front. It's approximately around 45% to SMEs and corporates. Obviously, more to SMEs than to corporates. There is also around 40% to the mortgage portfolio.
It may surprise you, while considering those combination of scenarios, you see that in our base case, also we consider a negative impact on real estate prices. As a consequence, the value of the collateral of the mortgage loan book is affected. Actually, approximately one-quarter of those provisions come from this effect. The rest is mainly for our consumer and other loans to other individuals. I think that with this, I have answered your question, Sofie.
Yes. Thank you very much.
Thank you. Your next question comes from the line of Stefan Nedialkov from Citi. Please ask your question, your line is open.
Yeah. Hi, guys. Good morning. It's Stefan from Citigroup. A couple of questions on my side. On the macro assumptions, just to get some more color here. Believe your scenario weight before was 30, 40, and 30. How have these changed under your new macro assumptions? Also related to that, what are you assuming for the default rate on the payment holidays that you have granted? My second question is on fees. In your slides, you talk about how fees are down 10%-15%, and especially e-commerce payment fees are down around 40%. How should we think about fees for 2020 generally, given these trends, and obviously your expectations for how the infection curve develops over the next few months? The last question is on capital. Right now, you are down to around 11.5% as an internal target. That's around 305 basis points above your CET1 SREP.
If we get more forbearance going forward, should we think about your target as a buffer above your SREP, or is it something that kind of stays at 11.5%? Thank you.
Well, on the later question, Stefan, I would say, at this stage, we are obviously very comfortable. Depending on how things evolve, 11.5 may appear even as too high a target, but that is something that has to be considered by the board. Capital is not, at this stage, a problem. We have plenty, and obviously, we'll see how things settle down, and particularly if there are new initiatives like the ones that Javier mentioned, and after the question of Sofie, we'll have to adapt. Clearly, we have a very large CET1 buffer or MDA buffer, and that gives us a margin to deal with the volatility that is likely to be ahead of us. Not have to manage the business in a way that we have to be concerned permanently about capital.
That's why we had already a high level of capital, and we're expected to maintain it that way. Javier, please, if you can please get the others.
Absolutely. Hi, Stefan. On the macro assumptions, I think that here we need to differentiate the situation as of today with the visibility we have today and how this situation may evolve. In order to calculate the provision for the first quarter, we have considered different scenarios, and we have given a larger weight to our base case, which is close to -7% GDP growth, plus close to 7% next year. You know that also other scenarios have been considered, including a more adverse one, but also a longer-term, let's say, scenario, a more stable scenario. Following those supervisory and accounting authorities' recommendations.
Going forward, we know that probably this will move, and we will have more visibility in order to assign different weightings to those scenarios. Obviously, the upper bound of this cost of risk guidance is already taking into account a very large weight in the most stressed scenario, which is this scenario that in a chart in the slides presented by the CEO, you could see this -15% for this year. This is how we are calculating our expectation for cost of risk for the year. We need to take into account that with the moratoria and the government warranties, we assume that the impact from the downturn on borrowers will be softened, and that, as a consequence, this situation will not entail a significant increase of the credit risk. As a consequence, a huge transfer between stages. Obviously, this is the base case.
This is why all governments, the ECB, and all banks, we are at the same time facilitating this liquidity needed across the economy. Obviously, this has been a top-down approach. As the year progresses, we will be able to do a more bottom-up approach, assessing the creditworthiness of all borrowers, to what extent the situation is affecting them. Probably, this will affect ratings of some of them. This will affect some shifts from stages. All this is already taken into account in our numbers. When we give you this upper bound of 90 basis points, is because this is what is going to happen in coming quarters. Obviously, our loan loss provisions will be adjusted accordingly. You had a question on fees. Well, precisely, we try to give you some color on what's going on after the lockdown. You have the figures in the presentation.
We are seeing our life risk insurance business resilient. I would say here that probably, those are not strictly fees, but you know that is probably in the back of, let's say, those revenues. We had quite an upbeat view for this business for this year. You know that we changed our commercial offer. We have this commercial offer based on this MyBox product, et cetera. To put it differently, our internal view is that we were going to do better than consensus. Obviously now, those revenues are going to be affected. This is no doubt. Are running at a pace for this part of the business, approximately 10% below the pace of before March 15.
This, depending on the assumption you make on the length of the lockdown, you can extrapolate, but as of today, if I am being able to give you some kind of soft guidance on this part of the business, we expect that this will be flattish compared to last year. This is for premia from life risk. Let's go to fees. Here we have other moving parts. First thing is AUMs. We displayed this chart with the impact on average balances. As of today, we are approximately 3%, 3, 4%, probably more close to 3% as the market has clearly done well during this week compared to the average of last year. Thus, it is quite easy to do the numbers, depending on your assumption on the evolution of markets.
I would mention here something positive in our case, which is that we have not had outflows at all. I think that here is where we see that the model is working. Our model based on advice, on the proximity with clients, financial planning, et cetera. This has played extremely well in this correction. Obviously, we are close to clients, explaining everything, but we are not facing redemptions at all. This is positive for the business. For the rest of the fee pool, which is probably the larger one, it depends a lot on the length of the lockdown. So far, our recurring banking fees are running those days, more or less 15% below the pace before the lockdown. You can do your own assumptions. E-payments obviously are more affected, but in recent weeks, it's improving slightly. Here you can make your own assumptions.
Probably, it is going to be difficult to avoid a negative number. Very much will depend on the length of the lockdown on the evolution of markets in this front. I think that, Stefan, I am not missing any of your questions. Thank you.
Thank you. Thank you so much, Gonzalo. Thank you, everyone. Stay safe.
Thank you. Your next question comes from the line of Mario Ropero from Fidentiis. Please ask your question, your line is open.
Hi. Good afternoon to everyone. My first question is, can you comment how much unwinding, if any, of the negative capital market impact you expect in the second quarter? The second question would be, if you could give, please, extra color on Adeslas in the quarter, P&L market impact, which you referred to, but also on the combined ratio evolution. If I may, if you could give us an update on revolving cards, the total size, also the book size with average yield above 20%, and legal provisions made so far. Thank you very much.
If I may just give a color on the second one in terms of Adeslas. It's been stable in terms of, obviously, higher claims from COVID-related systems, but lower claims from other kind of diseases. The main impact on Adeslas has been, as I said, the financial part, no? Javier, if you want to respond to the others.
Absolutely. Hi, Mario. On the impacts we are seeing in April so far in capital, while the main one from market is on Telefónica, I would say that on this front, no major changes. You can follow perfectly the share price. On the other hand, we are having a slight widening of sovereign spreads during the month. This is marginally affecting negatively, although obviously a large part of the portfolio, and you have all the data, is accounted, let's say, held to maturity. We have, indirectly in capital, in trading, or related to market is the CVA valuation, which is, in this case, is being positive in the quarter. As in this front, we are seeing a tightening of credit spreads, and we are recovering a little bit on this front. So far, no major changes, I would say, quarter to date.
You had a question on revolving or, well, on credit cards, no? We have a portfolio on this front of slightly above EUR 2 billion. If you consider also those delayed payments or payment delay of part of the portfolio, not only revolving. On average, the portfolio is around 20%. Obviously there are some parts that may be higher. In general, we are not much worried about the litigation we may have on this portfolio. Thus, we have not provided any specific for it. Time will tell. Unfortunately, the threshold for determining if a rate is abusive or not is a little bit gray. We assume that below more or less 22%-23%, we are safe. We expect that the majority of our portfolio lands in this space, so we are safe.
Thank you, Mario.
Thank you.
Thank you. Your next question comes from the line of Andrea Filtri from Mediobanca. Please ask your question. Your line is open.
Yes. Thank you for taking my questions. I have one on capital and one clarification on provisions. On capital, you have mentioned some of the regulatory changes. I just wanted to understand in bulk what would be the overall value of the regulatory easing that is being approved. If you still have any regulatory headwinds pending for 2020, and where do you see risk-weighted assets go this year, given the different dynamics in individual lending and in corporate? The second, a clarification on provisions. You mentioned before, I am not sure I understood fully, is the upper end of your 60 basis points-90 basis points guidance the equivalent of your worst-case scenario in GDP of page nine of the presentation, before the government measures, and 60 basis points is the equivalent of the base case scenario? Thank you.
Andrea, in terms of the projections we have, they incorporate the government measures, both on the 90 basis points is closer to the adverse, and the 60 basis points is closer to the base case. That's the reality. In all cases, we are including the current measures that have been announced. What we are saying is the adverse scenario would mean that from now on, there will be policy mistakes, most likely, in order to get to such a bad outcome. That's what we try to say. In any case, this is not an exact science. At this stage, as you can imagine, there can be infinite number of scenarios. What we are trying is to model two reasonable cases, one for a base case, another one for that adverse case. Javier, you want to comment on capital?
Yes. You had a question on pending regulatory impacts. Well, you know that before the crisis started, we were waiting for the final letter for the TRIM exercise for the low default portfolio. Now everything has stopped, at least for six months. Right now it's difficult for us to assess if this will come in 2020 or not. My personal feeling is that, and a little bit here from the mood from ECB, is probably that everything will be delayed to 2021. Please take this as a personal opinion.
Thank you. Thank you. Your next question comes from the line of Maksym Mishyn from JB Capital Markets. Please ask your question. Your line is open.
Hello, good morning. Thank you for taking my questions. I have two. The first one is on your ALCO strategy. You have increased the size of the portfolio significantly in the first quarter. What's your plan for the future? Do you plan to use TLTRO operations to further boost your ALCO portfolio? The second question is on state-guaranteed loans. I was wondering if you could give us some color of what are the profitability levels that you expect to generate on these loans, or at least how these compare to normal corporate loans with no state guarantee. Thank you.
On the second one, I would say, the pricing is in line with the risk that we're taking, and the risk that we're taking, on the one hand, is increased because of the current scenario. On the other hand, it is decreased because of the government guarantee. Pricing is around 1.5% for businesses, and up to 2.5% for self-employed. I would expect here, that we are making appropriate returns on capital, rather than excess returns on capital or losses. Time will tell. Javier, you can address the other one.
Yes. On the ALCO, yes, we have taken the opportunity of this widening of sovereign spreads to add to the portfolio. We felt that the size of our portfolio was comparatively smaller to many of our peers, and we saw this as an opportunity. Going forward, as we are planning to make a large use of TLTRO or TLTRO III facilities, we may, depending on market circumstances, but we feel that we still have some room to expand the portfolio. Mainly on Spanish and Portuguese government bonds.
Thank you.
Thank you. Your next question comes from the line of Fernando Gil from Barclays. Please ask your question. Your line is open.
Hi. Thank you for taking my question. Just a question on asset allocation on the ICO loan lines. What is the criteria that you're following when giving these lines to clients? Is it the same criteria in asset allocation in terms of sector size, as a normal portfolio, or are you following any other criteria that I might be losing? Thank you very much.
Thank you, Fernando. The reality is that, on these ICO lines, we have been reactive. Clients have liquidity needs or concerns that they may have the needs in the future, and they come to the bank and ask for the money. What we've been doing is reactive, analyzing these requests. Fortunately, in most of the cases, they have come from clients that were in good shape before this crisis. Hence they have been scrutinized according to our risk criteria and then priced and processed and, in some cases already disbursed, in others we're waiting for an increase in the guarantee. It's been a reflection of our current client base and a reflection of which part of our client base now feels that they need the cash. There's been no preconceived strategy of which sectors are we going to target with these ICO loans.
This is rescuing the economy. I think it's the right tool to rescue the economy. It's been used in most countries. What we've done is, I think, put some proper risk analysis. Obviously with a guarantee from ICO, it was something that we could actually get on. I don't think rescuing the society or the economy and making appropriate risk return decisions was contradictory, clearly, it's quite the opposite online. It's not been a proactive decision for us to target certain sectors. The reality is, our ability to handle the tsunami of requests, and separate those that made sense from those that didn't.
A follow-up, if I may. Do you think that the EUR 100 billion program is enough or would be needed probably an additional top-up on that program? Thank you.
As of now, I think it's enough. I think the split between the larger businesses and the smaller businesses is wrong. The split has to be more towards the smaller part of the business. The overall EUR 100 billion, at this stage, I think is going to be enough. However, we'll have to see how the economy evolves in the future. This rescue operation, I think, is appropriate. Probably policy measures going forward should be rather than just providing cash to keep people alive is providing incentives to make sure that the activity returns and that the people have the support to go back to this new normality. There will be, I'm sure, new initiatives and new thinking. There will be new lines also, obviously from European Investment Bank, and other initiatives that need to come to Europe for rebuilding.
That is, I think, a separate thing from rescuing, for which, at this stage, my personal feeling, I can get it wrong, obviously, is that the EUR 100 billion is okay. The splits will be changed so that we accommodate demand in a more proper manner.
Thank you very much.
You're welcome.
Thank you. Your next question comes from the line of José Abad from Goldman Sachs. Please ask your question, your line is open.
I think most of my questions have been answered. Thank you very much for explaining so long. Just one very quick on specific on the SPV that you set up with Lone Star, still at the time that was actually in June 2019. I think you kept a 30% stake there. I don't know whether you participate in any other SPVs, maybe on a lower scale. Have you incorporated potential losses from this vehicle or vehicles in your 60- 90 basis points, and how do potential losses from this vehicle actually flow to your P&L? Is this through the other income and losses line or is the credit losses line? Thank you.
The 60-90 basis points is a guidance for cost of risk. Losses that may come from other participation that we have are not included. Those would come from equity method accounting or other gains and losses. Obviously at this stage where we see the bulk of the problem is in credit losses, and hence that 60-90 basis points there.
Thank you.
Thank you. Your next question comes from the line of Ignacio Cerezo from UBS. Please ask your question, your line is open.
Yeah. Hi, good afternoon. Thank you for the presentation. Two, three quick questions from me, hopefully. Sorry to come back to the cost of risk guidance, if you can qualitatively tell us of the mitigation factors coming from loan guarantees and moratorias, which is the one has actually reduced the cost of risk guidance the most? Any number on that would be useful. The second one is on the non-core revenue, both equity accounting and trading in particular, declining quite heavily year-over-year. How much can you tell us on equity accounting? You have a payment company, you have a health insurance company, how do you think actually we have to think about that line? The third one is on the cost of risk in Portugal. We have seen write-backs in the last couple of years.
How does that reconcile with the COVID and the change, obviously, in the credit environment? Thank you.
Javier, maybe you can take this one if you don't mind.
Thank you, Ignacio. I will start from the end with this question on Portugal. We still have EUR 144 million, please, Eddie, correct me, but I think this is the figure, PPA remaining in Portugal. There is a very strong performance of the portfolios affected in Portugal. Even taking into account the COVID, we have been able to release EUR 45. I think that everything has been taken into account. Without the PPA in Portugal, on an individual basis, cost of risk obviously would have a negative impact this quarter. If I remember well, it's around EUR 30 million. Those are the numbers. In equity accounted, well, here you have SegurCaixa. Other than those market impacts we have felt this quarter, I would say that should be more or less business as usual.
We don't think that as long as the lockdown is not that long, the profits from SegurCaixa Adeslas would be that affected. The main impact here comes from Esteban, that as of today is presenting results. Probably you can reach your own conclusions clearly on this front. Obviously, Esteban is going to have lower net income this year, and as a consequence, being affected. As for the impact of moratoria and state guarantee lines, well, the impact is significant, I guess, because it's an important package. Providing liquidity with moratoria to households and providing liquidity with those warranted credit lines and our own balance sheet. As you could see, close to 15 billion EUR have been originated from our own balance sheet since the crisis, or at least since it started heavily.
I think that the main assumption here is that as the GDP corrects very sharp. Hopefully, we are not going to have a second wave in six or one year time. This is clearly an assumption. Otherwise, GDP would not rebound, according to our base case. By providing liquidity to households and mainly self-employed and SMEs, this obviously will cushion, as I commented, the impact of this situation on the creditworthiness. Obviously, this will not be 100%. Some of those borrowers will face a significant increase of credit risk, and as a consequence, we will need to set aside provisions for this. Some of them will end migrating from stage 1 to stage 2, and obviously, this will result into lifetime credit losses or lifetime provisions.
This is why we are estimating a credit risk that is, let's say, a cost of risk that is higher during next quarters. Because otherwise, we would have been to make all the loan loss provisions up front as of today. This is the situation. We will be able to assess this as we progress in next quarters. Other than this kind of top-down approach, that is what we have done during the last few weeks, a more granular analysis on how the situation evolves and to what extent those moratoria and, let's say, liquidity lines work, which is what we expect. Obviously, we will need to assess this in the future. According to our estimates, this is, let's say, the upper bound of our projections already takes into account those factors. Thank you, Ignacio.
Thank you.
Thank you. Your next question comes from the line of Britta Schmidt from Autonomous Research. Brita, your question line is open.
Yeah, hi there. I've got two quick questions, please. One follow-up on the cost. To what extent do you think the 2020 measures will be temporary relief, such as delaying investments, for example? To what extent are these pop-ups sustainable cost cuts? A second question, just on framing the provisions and getting your impression. We've seen some pretty unprecedented regulatory forbearance that has come extremely quickly when a bank like you guides to 60- 90 basis points of provision. Is there anything that we should be aware of that we don't know? How can you square this? Thank you.
Thank you. Thank you, Britta. No, we do not see anything different than what you see. We have obviously all our models, but they depend so much on external events to us. We're being prudent, but there's no hidden corpse, if that is part of the question. As always, we'd like to deal with problems sooner rather than later. We all remember that that was not exactly what happened in the last crisis generally in Europe and particularly in Spain, and we are not going to be going in that direction. That's why we are being up front, and we'll continue to do so in the future. With respect to the cost evolution, obviously, there's a lot of things happening here.
We are having an increasing cost associated to fighting the pandemic in terms of changes to the way we operate, protecting the health of our employees, providing them with appropriate sanitary measures, et cetera. Those will disappear, but there are other savings that are associated to the fact that we're in a lockdown and hence traveling, et cetera, all the things are coming down, and as a result, we'll likely suffer this year. You already have seen that we're going to take a prudent approach to compensation, as the management committee has already announced that they will be not accepting a bonus this year, including myself. That is obviously just one-off of various things that move.
Moving into the future, what is stable, we have, this is going to force all of us to rethink the way we do business, and I'm sure that there's going to be a decrease in travel expenditure, a part of that decrease that will become permanent as we go more towards our digital communication tools, clearly. There are many other initiatives that we had been working on already for 2021, and that we are bringing forward and deepening for that purpose. At this stage, what we are clear is that for 2020, we are going to be able to contain cost growth. Obviously, our ambition goes beyond that pure containment for this year, but particularly goes to 2021 and onwards to reduce cost growth. I think we have an environment which is going to allow us to reach agreements that make more sense.
I am now thinking about discussion of our collective bargaining agreement. Hence, we think that we will be able to adapt and.
Reduce our cost base, not just for one given year because there's lower activity, but going on that we will have a positive impact there. We're working on it. Obviously, there's a limited amount of things we can achieve in these seven weeks, and you've seen that we've been super busy. Clearly, we're not just thinking about dealing with these seven weeks or the next quarter, but dealing with the long term, and there's a lot of things that we can do, and that they are the right thing to do for our shareholders.
Thank you.
Operator.
Your next question comes from the line of Marta Sanchez.
Okay. I understand this is the last one. That's all we have time for today. Thank you.
Perfect. Your last question comes from the line of Marta Sanchez Romero from Bank of America Merrill Lynch. Please ask your question, your line is open.
Good morning. Thank you very much. Three quick questions. The first one, a clarification on the PPI, PPAs, sorry, and cost of risk. Does your 60-90 basis points guidance include the full release of those EUR 134 million? The second one is on your IRPH and your revolving credit book. Have you been repricing those books? In that case, could you share volumes and the impact it may have already had on NII or may have in the future? What's your general approach towards these two books? Are you willing to reduce litigation risk by changing prices and fees for those contracts? Lastly, thinking about potential positive one-offs that may come through in following quarters. The first one is, we've seen CVA impacts on your trading line. Do you expect that negative effect to unwind in future quarters? If you could quantify that impact on your trading line.
The second one is, I understand that your 10-year agreement with Adeslas comes to an end this year. What is your expectation for the final earn-out fee that you may get there? Thank you.
Javier, Well, let me just say one thing on second question, pass it on to Javier. On IRPH, we're not renegotiating contracts. We think the contracts are transparent generally. There's no change to be expected associated to that. In the case of revolving cards, we have adjusted our pricing policy downwards. Obviously our views of this year include the impact of that. That is going to reduce litigation risk going forward. Obviously on the PPA, well, Javier, you know the details better than I do. Please go ahead.
Hi, Marta. Well, the PPA release follows its own rules. It's designated to specific portfolios. Obviously, this is, let's say, business as usual in terms of deciding whether or not and what to release. Obviously, depending on the evolution of the underlying assets, we will proceed. While giving you the overall figure, all those effects are included. On trading, yes, we had this impact. As long as the spreads keep tighter, we will have positive news on this front. Other than this, trading on the fixed income portfolio, it's a year where we'll rather defend NII instead of looking for trading profits. Obviously, as we assume that we will face volatility in coming quarters and during the year, maybe we have the chance to have some trading profits. Generally speaking, it's not a year theoretically where we are looking for making very large trading profits.
Well, you had a question on Adeslas. I think that this is referring to the earn-out of Adeslas. This is the last year where we will face a potential positive impact from this side. Going forward, this will be the last year. I think that I understood well your question.
Yeah. It was just if you had an expectation of the quantity of that positive.
Not yet, unfortunately, Marta, not yet.
Thank you.
Okay. Thank you very much. That's all we have time for today. We'll reconvene for Q2, hopefully in better circumstances. In the meantime, let me wish you all good health. Thank you.
Thank you very much, and good health.