Good morning, and welcome to CaixaBank's Second Quarter of 2019 Financial Results. With us today is the usual management team of Mr. Gonzalo Gortazar, the CEO and Javier Pano, the CFO. We plan to spend around 30 minutes The Investor Relations team is at your full disposal. Without further ado, let me hand it over to our CEO, Gonzalo Gortazar.
Thank you, Eddie. Good morning to you all. I'll get directly into the summary of the quarter. Obviously, results are down due to the restructuring agreement. But I think it's important and there's weakness in core revenues.
We've changed our guidance. You've seen all that. I think it's important to keep in mind that our business is associated with clients. And these two quarters and this particular quarter has been extremely successful in our activity with clients. Performing loans are up, 2.3 percent quarter on quarter, 3.3% year to date, well above our peers on average.
Customer funds are up 6.2 percent year to date. Obviously, part of these customer funds are on balance sheet. They're generating more liquidity for us. That's in the short term negative, but this is not a short term business. This is a business that is associated to clients.
All this liquidity and clients are going to provide revenues for us going forward. So let's not lose sight of this. Commercially, the machine is as as productive as successful as it has ever been. We've been also good in the Fed in margins despite the lower rates. Customer spread is almost flat versus last year.
And we feel the organization, the commercial network is doing as much as it has ever done with a great deal of success. However, our core revenues, even though The improved quarter on quarter, clearly at this stage, given the lower rate environment, are forcing us to revise, being realistic, our guidance as to that circa 1% from the current 3% that we had put at the beginning of the year. The Q2, again, has been better than the Q1. Obviously, there's some seasonality associated With that, what we see in fees and in insurance revenues, right, positive trajectory during these quarters and during the year. NII is flat quarter on quarter well, not flat.
It's +1.2%. Javier will elaborate on that, but that's also associated to some portfolio sales that we've made in the quarter and associated with of our higher trading results. Obviously, the environment is a more difficult environment. We've seen that progressively during the year. So we have already taken action, and that's why we have advanced our restructuring, letting 2,000 people goal.
These 2,000 people are actually producing, doing things with our clients. And hence, it was not the plan that they will leave at once. We've decided and reorganized, and well, you'll see that in the following pages that we can actually manage to get everyone or basically almost everyone to leave the bank at the end of July. That means that our restructuring costs are higher than expected, €978,000,000 also due to the mix, as Javier will explain. But it also means that our cost savings are going to be higher, and particularly, they are going to be faster in terms of its implementation.
That's allowing us to reduce guidance in terms of increasing costs for this 2019 from 5% to 3%. And obviously, we're going to continue looking at ways to contain cost growth in this weaker revenue environment, which is well known to all of us. On top of that, balance sheet is moving in the right direction. I think it's worth highlighting the asset quality, 4.2% nonperforming loan ratio. It's gone down 46 basis points.
Cost of risk is approaching 0 with that 2 basis points. And we managed to maintain our capital levels in a quarter that given the very low results associated to the large restructuring cost It was a difficult one, 11.6%, growing year to date, 5 basis points. We are building quickly our umbrella. Thanks to good job of Javier and his team. We're very close now to the 22.5% that has been required from us at 22.2%.
So those headlines are obviously incorporated to a large extent already in our numbers. And we keep a very high level of liquidity even though we have actually reduced our TLTRO by almost half by half of what we had at Caixabank, Global Model, BPI. So it's a quarter where, obviously, net income comes down. It's positive quarter with €89,000,000 despite the fact that we had this €978,000,000 extraordinary charge associated to the restructuring agreement. We'll look at return on tangible equity, and we exclude the impact of the restructuring agreement.
We're still at levels 9.4%, in line with what we achieved by the end of 2018. Moving on to the commercial activity, And I just want to spend a bit of time here because this is not easy. We are actually changing our distribution network in a very significant way. We announced that we will bring down our traditional branches in urban centers and that we will create more of those store branches. We've managed to accelerate this.
This is also necessary in order to make sure that we Let 2,000 people go at the end of July, and at the same time, we do not have trouble in terms of managing our business. So So in order to do that, we have accelerated the opening of the new store branches. We are now projecting that we will have the 600 store branches by Mid-twenty 20, so in 12 months from now rather than by the end of 2021. There's quite a lot of activity, as you can imagine, some impact on costs because we're having our structure earlier than that, but it's allowing us to have faster savings on the personal line. And I think it's situated us in a place to continue grow our revenue significantly higher in terms of activity.
InTouch, the remote service is also in a similar trajectory. It's working very well, and we have now plans to advance by 1 year, full deployment in terms of reaching the 2,600,000 clients that we had forecasted for 2021 in our strategic plan. We continue to have very productive statistics there. With the in touch service, every manager actually manages to reach 3x more in terms of clients and business volume. So So it's obviously a more effective, and it's been very commercially productive.
We're very happy about the progress so far. We have now agreed with our unions the restructuring of our rural network, which is based on maintaining the number of branches but attacking the cost base by reducing the people in these branches so that 80% of these branches are going to have 3 employees or less, and that is now agreed with unions and actually be effective very quickly management as people are leaving at the end of this month. This rural network is actually doing very well. We are now the largest agricultural bank In Spain, it's a sector that we like, where we're growing nicely and where we're obviously being profitable and will be profitable in a sustainable manner after this restructuring. Continue to do progress on the digital front.
You have a number of statistics there, Whether it's payment or biometrics, the omnichannel strategy that we're following for of our products and the number of digital clients that we have that continues to grow and continues, obviously, as we have more and more digital clients. We can Actually, I switched them from a traditional service based on branch to a service that is more effective based on digital and the in touch service, which is much more productive, as I said. So it's important. We are reducing our cost guidance. It's not just we're spending a bit more money on the restructuring now.
It's also that we have made it possible because we have advanced in a major fashion, all of our transformation initiatives in the strategic plan. In In terms of clients, continues to be good clients. We now have 8,000,000 relational customers. Those are the customers that have 3 or more products, continue to increase.
This is
obviously Our main focus now, market share in payrolls, it's now 27,300,000. We have 4,000,001 100,000 payrolls at the end of Q2 of 'nineteen. And yes, based on the market share figures that we have, Our market share in payrolls is now higher than the addition of our next our nearest 2 competitors. So quite a lot. Obviously, payrolls are not productive on day 1.
They are actually generating more balances. But the payrolls is the first step into selling insurance, selling consumer lending, mortgages, etcetera, etcetera. So this is actually great news. It's not great news for the P and L this quarter. It's great news for the P and L structurally going forward.
Look at customer funds. There's the large increase that I described, both on balance sheet as well as off balance sheet in year to date and also quarter on quarter, Particularly good performance in pension funds, also the rest of the balance sheet. And yes, Significant increase in the bank deposits. You can see there, because this second quarter is seasonal, We tend to have because of the extraordinary payrolls, we tend to have higher increases in this quarter. So you can see what has been the comparison In the last 7 years, actually a record year, and this is obviously record year management of activity for us.
Market performance has actually been quite helpful. As you can see, €5,900,000,000 of increases also associated to market recovery. Asset Management and Insurance, again, We again have some different implications depending on how we look at it from the balance sheet and from the client perspective on the P and L. And obviously, I'm sure we'll spend some time on that during the Q and A. The activity is good.
You can see where we are in terms of long term savings insurance, mutual funds under discretionary management portfolios. We are above €20,000,000,000 with an 11% growth. That is 45% of our assets under management. We have a disproportionate share of this in the Spanish market, and this is because we have moved our model into advisory compliance with MiFID to of explicit payments for clients. And really, I think we are 1 step ahead of the market on this front.
We have over 17,000 now employees with a certificate in financial advisory. Overall market share in pension funds, mutual funds and Life insurance is up 45 basis points. So is market share in insurance premium. You can see how life savings insurance continue to grow, up 6% compared to June last year. And obviously, there are challenges associated to now the very low long term rates that have finally arrived to Spain, But we still are finding ways to grow.
And on the nonlife and Life risk side, we have had a great degree of success with the new commercial offering, MyBox, which really started in March and some products like Health were not only were not available until really June. But still, even in that context, we have actually 185,000 new contracts, new policies, and it has been launched. And this product is having a tremendous success, and it's going to build up given the natural the nature of this product is going to build up revenues Quarterly nicely. On a cumulative fashion enhancement, it's another investment into our future, particularly into 2020 and beyond. On the lending side, Very significant growth, 3.3%.
There's always this seasonal impact associated to advances related to pensions. So If we exclude that, which is a few days outstanding at the end of the quarter, we still have a 2.5% growth. And again, when we look at it compared to other June closings and hence, without that impact of seasonality, You still see how positive has been June versus the previous 6 years. So good performance here, and I think good performance also, particularly in Consumer and Business Lending. You see how quarter on quarter, we've grown 4.7%.
This is in the context of an overall sector that is slowing down I mean, the context of improving credit quality statistics on this portfolio, as we have gone up the learning curve here, We're doing more and with better asset quality characteristics, which have always been good, but they are certainly not deteriorating for us. On the corporate side, again, very good performance. Obviously, market is competitive. A lot of this business is done at spreads that are creating value for us in terms of return on risk adjusted capital, but there's not big margins there. But Certainly, we have increasingly a larger part of the wallet share of our clients in Spain Positive news on this front.
This 3.3% is obviously a very large, 2.5%. But certainly, we're moving away from that flat loan growth that we had been seeing up until very recently. New production mortgages is up 3% last 12 months consumer lending up 7% business lending very significant up 24%. Again, our commercial machine continues to be operating 100% of its capacity. Now we move on to financial results.
Obviously, we see weakness in core income year on year. And I think that it's important to see some good development quarter on quarter, okay? And obviously, quarter on quarter is helped, as I said, also by some seasonality impacts, but it's not just that. The trends of what we can do in fees and income from insurance are quite positive. On the noncore revenues, we obviously have lower equity accounted income.
We've lost now Repsol, and we've changed BFA from equity accounting into fair value. We have recorded the dividend from BFA This quarter, but still, there is a significant difference between the equity accounted income from last year and the dividend this month. Costs are growing 4.5%, but now we'll start to grow at lower levels to meet that 3% by the end of the year that we have guided to. Cost of risk is at very low levels. It's at 2 basis points or 14.
But just for that one in charge, but if we exclude that, it's appropriately both quarter on quarter and year on year growing. And that 9.4% return on tangible equity. BPI, just one page we highlights. We continue to be quite satisfied with the evolution of BPI. You see NII, 1% growth and fees coming down by 3%, but this is due to the businesses that BPI sold to Caixabank, there were fee generating.
It will exclude those fees. Really, the adjusted to do well, and it's investing for the future. And that's reflected in the cost line, which is increasing 4.5% of these 6 months, but obviously because the investment made to do more business and to adequate processes and controls to CaixaBank is being felt. But significant contribution, positive dynamics also in terms of balance sheet growth, consumer lending, savings insurance, business lending. Even though the market has been a bit weaker in Portugal for these 6 months, they are moving in the right direction.
So with that, I'll
Good morning. And as always, I will start commenting the main lines of the P and L account before shifting to the balance sheet. As usual, starting with net interest income that is slightly up this quarter by 0.2%, 0.9% year on year. I would say that the main headwind here has been the ALCO portfolio disposal. If Not for this, NII would have been, we estimate, around up by around 1%.
On On the positive side, I would mention, as Gonzalo was commenting, higher average loan balances. This is strong loan growth last year that now is having its impact in net interest income. And talking about net interest income, I would also like to remark posted at the ECB to redeem TLTRO funding. Some more focus on retail funding and the loan book. We see that our retail euro Deposits continue to be rolled at extremely low levels, just one basis point.
Our total funding cost goes goes up by retail funding cost goes up by 1 basis point. This is due to some more weight of foreign exchange deposits and also The impact of our retail note that we issued in March. Shifting to the loan side, I would say that the front book yield comes down by 7 basis points this quarter to 280 basis points, but this is due to small changes in the mix of the new production. Once To the spreads per segment, I would not say that things are compressing compared to of previous quarters. The bad book yield comes down by 4 basis points.
This is a seasonal effect that probably we can comment later on. And as a result of all this, our customer spread comes down by 5 basis points to 222 basis points If you compare it to the situation we had more or less 1 year ago, you may see that fairly stable. Some comments on the ALCO portfolio. As said, we have disposed. Remember that earlier this year, We decided to expand the portfolio as we had the view that long term rates could be turning again To the downside, and well, the market has clearly gone beyond our expectations, and we We have decided to dispose around €3,000,000,000 of Spanish 10 year Spanish government bonds contributing significantly to our trading profits this quarter.
The liquidity portfolio, remember that we set this portfolio In order to be prepared to redeem TLTRO in 2020 remains unchanged as we have been able to reduce our TLTRO Wholesale funding costs ticked down ticked up, sorry, by 7 basis points this quarter, expecting new issuances to 123 basis points over 6 months arrival but at the same level that we had 1 year ago. Let's now turn to fees. We have a better quarter this Q2 of 2019. Fees are up by 4% but down by 4.7% compared to the Q2 of last year. Last year, the 2nd quarter had very a very strong contribution from Wholesale Banking, which has not been the case this quarter.
If not for this, year on year fees could have been down by 1%. You may see the breakdown by main categories. Recurring banking fees management. Banking fees going up by 6.4% quarter on quarter, also up year on year. On Asset Management, we clearly improved quarter on quarter, up by 4.5%, thanks to larger average AUM balances, Almost flat year on year, here impacted also by some extraordinaries last year.
In insurance distribution, we start to recover. Quarter on quarter is slightly up, but year on year, clearly down as here we have the impact of different timing of the new product rollout, something that, as Gonzalo was explaining, is proceeding very well from now on. On Wholesale Banking, as mentioned, clearly down compared to the situation last year, down on this front by almost 50%. On the right hand side chart, you may see the evolution of AUM balances. The end of period balance is already higher than the average of the 2nd quarter.
Thus, if markets can sustain good performance, we can expect Some more focus on our core revenues, as said, have been improving this quarter, up by 1.5 It's here interesting to look at the breakdown across the different engines we identified for growth in our latest strategic plan. You may see that this quarter, our long term savings Related revenues are up by 5.3%. Also, protection is already recovering up by 0.9% and payments that is doing really well, up by 7.6%. The other core revenues, in this case, also impacted by this weaker performance from Wholesale Banking. If we put together all those key businesses, that is long term savings, protection and payments.
This already represents 40% of our core revenues, up by 1.2% quarter on quarter, shielding the bank in the coming environment of lower rates for longer. Let's now turn to costs. On this front, so far, we don't have news. Costs are up year on year by 4.3% and flat quarter on quarter. You know that costs are being compensated.
Recurring costs are being compensated by savings in real estate expenses year to date. But the key development this quarter, as commented, is The restructuring, we have executed it swiftly. 2,000 people that is going to leave in a few days. This is the new aspect that is important to remark. All departures will be in a few days in August 2019.
As As a result of this, we have higher restructuring charges compared to the initial estimate. This is in part due to The front loading impact but also a mix effect as we have had higher weight of people with longer tenure management. This results into annual cost savings, gross of €200,000,000 from 2020 instead than from 2021 than before, and we already have €80,000,000 of those savings in 2019, which allows us to reduce guidance cost guidance for this year to around 3%. To end with the P and L, some comments on loan loss provisions that, as you may see, remain at very low levels. Our cost of risk on a 12 month trailing basis, just two basis points even, not including an extraordinary write back During the Q3 of last year, our cost of risk at clearly below guidance for this year.
It's at 14 basis points. Remember that we guided cost of risk to be below 20 basis points guidance that we reiterate today. Now I shift to the balance sheet. Some comments on our nonperforming exposures. We have had this quarter's production of our nonperforming loan exposure down the ratio nonperforming loan ratio down by 40 basis points in just 1 quarter, in this case, clearly held by a portfolio disposal, 300 plus 1,000,000 portfolio disposal, but what you know that this is part of the business, and we continue working on different projects in order to reduce our nonperforming loan ratio below 4% by the end of this year.
The coverage ratio remained sound stable and sound, and You may see also that the coverage ratio for our uncollateralized nonperforming exposure remains at Very sound levels. Our OREO exposure also remained at low levels, €900,000,000 of real estate assets available for sale. The pace of disposals continue to be sound, €142,000,000 sold of real estate this second quarter and making 17% capital gains. Some words on liquidity. We continue to hold a really strong liquidity position, €88,000,000,000 of liquid assets.
The mix between high quality liquid assets and collaterals has changed a little bit as we have reduced our TLTRO funding, But our liquidity metrics remain really strong with our liquidity coverage ratio by the end of period and at CasaBank level after redeeming TLTRO at 180% and our net stable funding ratio after TLTRO redemption at 124%. As commented, we continue to have market access successfully, €1,500,000,000 issued this quarter, mainly senior nonpreferred and progressing towards our EMERAL targets at a good pace, as Gonzalo commented. Of generation, a small market and other impacts, but our CET1 ratio remains stable at 11.6%. We have already full disposed at Repsol, our Repsol stake. Our tangible book value per share remains stable during the year at €3.30, €0.11 from the first half result, which coincides almost perfectly with the dividend paid the complementary dividend paid last April, €0.10 management.
As commented, our number ratio already at 21.2%. And from my side, just a few words to wrap up. It's a quarter with solid loan volume growth, resilient margins, and the restructuring. Core revenues improved this quarter, and we think we'll keep improving in next quarters, but unfortunately not enough to meet our fiscal year guidance for this year. And on top of this, clearly with lower rate environment going forward.
Thus, we revised our core revenue guidance to around 1%. But at the same time, We have managed our costs. We have executed swiftly the restructuring. This allows us to reduce our guidance for costs to around 3%. Balance sheet metrics continue to be clearly reinforced with, I would remark here, our nonperforming loan exposures.
And going forward, we expect that non NII core revenue will continue to improve, and this will help support our profitability during the second half of the year. Thank you very much. And with this, I think that we may be ready for questions.
Okay. Thanks, Javier and Gonzalo. Operator, let's move on to questions, please.
And answer session. Management. And your first question comes from the line of Andrea Unsutu of Credit Suisse. Please ask your question.
Management. The first one is on insurance. This is the 2nd quarter that you disappoint on this line. And I wanted to understand how to think about this going forward. I can see the progress that you're making on long term savings, which are Growing by more than 10% year on year, but your revenues from protection are declining And offsetting all the improvements that you make on long term savings, how should I think of that going forward?
The other question is on your guidance. On revenues, your previous 3% core revenue guidance was split in 2% growth on NII, 3% growth on fees, and you had more than 6% growth on insurance. How does the new 1% core revenue guidance split amongst those three lines? And same for costs, management. What does the new guidance mean for the 3% CAGR that you have had for by 2021?
Thank you, Andrea. Let me answer partly your questions, and Javier will be able to provide some more detail. Let's start with the last question, the cost one. We have focused on reducing the costs inflation in 2019. And clearly, that means a lot of effort.
From a financial point of view, you see, okay, it's a higher charge because they leave early. From the operational side, is a big thing, and that's what has kept us busy in these months, to make sure that we were able to anticipate and make sure that we're able to anticipate all these exits and at the same time continue to have the success that we are having on the commercial front. That's done now in terms of planned. Obviously, we need to execute on it. And obviously, we're, We are not ready at this stage, both in terms of cost and also, to be honest, in terms of revenues because there's also of revenue enhancing measures that we are analyzing and that we can take.
We're not ready now to say exactly what that's going to mean Beyond 2019, clearly, we're saying for 2019, we're going to have revenues that are not going to grow as We would have liked to or we would expect it, which is unfortunately something that is happening to many of our peers in Europe. And at the same time, we can do better by 2% on costs. We are growing in terms of what Can we do beyond that to reduce the expected cost growth that we had by the time we presented the strategic plan? We're not done yet. And hence, I cannot commit now at exactly what that will be.
But certainly, We work day and night on it, and my expectation is that we will be able to deliver. How much we can deliver, We'll see, but we're working on it. And again, it's not just about cost. It's also about revenues. There's another question about insurance.
And insurance has not been helpful to the P and L in terms of comparing with last year In terms of protection, life risk and non life, the activity It's been higher than it was, okay? We have changed the product offering. The new product offering is being extremely successful. The new product offering is going to mean that we will build revenues because of Accounting here, everything is accrued. There's nothing paid upfront or nothing that is significant.
Of 3 years. And as it adds on what we saw in July August, August will not be that much. Obviously, for seasonal reasons, September, October and into that next year, we're We're going to have a cumulative building impact that gives us quite a lot of confidence that we're on the right way. It's unhelpful for the quarterly result. It was unhelpful in the Q1 where We actually did not have pushed the offering until the end.
We had the figures of April, and that's why we explained it in the Q1 that we were optimistic. Now we have the figures of June and how July is going, and we see that we have really got it right. And unfortunately, at the same time, you see actually weakness in the line, which There's a bit of a contrast. I will hope that you give us some comfort on what we have delivered in the past, and we cannot be sort of straight exactly every quarter. We're moving in the right direction.
In terms of life risk, the number of transactions is up 12% if we compare this first quarter sorry, this first half of the year with the first half of last year. So yes, again, because the change in that product, we're not seeing the logical positive impact on that income in how it is being affected by clients. In Life Risk, we have had also some slowdown in June as we had the change in the new law of so new mortgage law, they will later create the Moviliano. And because that's as it has changed the system, the visit to the notaries, the notice period, etcetera, before you sign, It has had some slowdown in June on the margin. But clearly, we have very good potential and expectation that quarter on quarter, After having adjusted to this level, we're going to see regime growth.
And Javier, I actually thought that you would, I'm sure, complement this.
Yes. There was a question about the split on the revenue guidance. Well, here on NII, The main impact comes this year from precisely from this portfolio disposal. I would say that with this, We are now getting closer to 1% for guidance for NII, I would say. But here, We are also considering different initiatives in order to how to deal with this environment of lower yields.
We have a situation where the loan book is doing, I would say, better than expected with a performing loan book that is up year to date by 2.5%. So this is clearly a positive supporting NII. Then there is all this question about wholesale deposits and whether or not to charge for large deposits. Obviously, we are already doing so for financial parties and some large deposits of large corporates. And it's something on what we keep thinking if to expand, something we think we'll do.
Then we have potential upside here if we are able to reinvest the ALCO portfolio At some point, who knows? Obviously, now there is obviously a rush for yields, but at some point, the market may revert. Who knows? And also, I would like here also to comment that on our hedging activities, so We have decided not to hedge our the new production of mortgages for 2019. This is was something that was pending to be done.
But in this environment, for this the vintage of this year, we have decided not to hedge. I think that all this will result into a net interest income type maybe around somewhere, but probably with a wider margin than initially expected, around 1%. Thus, fees, we think that we may have a positive year on fees, is approaching also 1%. And as one follow-up was commenting, insurance is expected to gradually improve its contribution.
Okay, Andrea. Hopefully, that answers your questions. Operator, can we move on to the next one, please?
Management. Certainly, sir. Thank you. Your next question comes from the line of Jose Abad of Goldman Sachs. Please ask your question.
Management.
My first question is on precisely a follow-up on what you just mentioned, Javier. On charging large corporate. You said you mentioned that you're already charging actually large deposits from large corporates, and you were thinking about Whether to expand this, so my question is whether your thinking is about expanding within the corporate segment or expanding it to other segments. I mean, in that regard, What's the rationale for charging or not charging actually retail depositors like SMEs and households? My second question is on M and A.
There were 2 failed attempts actually in the first half of the year, and the operating environment It's getting worse, therefore, more conducive to M and A, at least in theory. And then I think my question for you is what's, in your view, actually holding local players back from further consolidation. And if I may, a third question on dividend policy. Bank of Spain, in particular, the deputy governor, has been very vocal lately about banks reusing cash payouts, returning to scrip dividend. That was a new, I think, a couple of weeks ago.
And you're linking dividend guidance to payout over reported earnings. So in light of this, I think should we expect any changes in your dividend policy going forward? Thank you very much.
Thank you, Jose. Let me try and address the questions. In terms of charging for deposits, we are obviously separating the retail world. We were not charging, and we will not charge. And we think that is what makes sense.
Our strategy there is to make sure that Our clients have a relationship with us that overall provides with a profit profitability. And that is something that We're achieving to a large extent. I mentioned the increase in customers that have 3 or more products with us, again, to €8,000,000 and I think that's how we are going to be able to make the bank profitable. And this stage, whether we like it or not, the perception of retail in Spain about being charged for bringing money into the bank is not positive. And we're not going to for those We're not going to compromise our long term successful strategy.
We think we have the ability because we have of all these products and services that we can offer, I think more than most or all or at least most of our peers have been successful at developing These other insurance payments, etcetera, to make an overall relationship profitable, and clients are not prepared to accept those charges. And certainly, there are many new entrants looking at the opportunity to enter the market. And I think if the industry moved in that direction, that threat will become much more visible. Now obviously, at the other end of the spectrum, we have financial counterparties and not so large corporates with plenty of cash. We're really talking about a financial cost that is very significant and that obviously we want to look again in a harder way at it.
And There is no question that as a result of the review that we are undertaking, we will be charging more or to more corporate customers. And that is one of the sources of revenues or less paying depending on how you want to look at it in terms of our excess liquidity that we're developing vis a vis the plans that we had in November last year when we announced the strategic plan. So yes, We are moving further into that direction, but at the same time, we have a clear view that, that will not impact retail. We may be right or wrong, but certainly, we're not going to move in that direction. You mentioned consolidation.
The Research for other transactions to go or not go ahead are obviously for other institutions to answer. But I agree with you that the current environment is, in a way, further incentivizing consolidation. And we have I personally have been very clear that I thought that in this environment, consolidation was a logical response for the system in Spain and in some other European countries. And as the government is getting worse because of the rate situation, obviously, if anything, there's some more reasons. And it's not just about pressure on sort of due to monetary policies, also the transformation, the entrance of new competitors, etcetera, etcetera, it makes sense.
What is holding it up? Consolidation It's always difficult decisions. They are existential decisions for at least 1 or 2 of the organizations depending on the kind of transaction. And they take time. And at some point, they accelerate.
So you never know. They're very difficult to predict. If I may, we are of the view that for Caixabank, consolidation is not something that we actually need to do. We decided to do a very large restructuring of people in the absence of consolidation, which is something that we had not done before and that work is not that typical in Spain because we have the market share, because the machine is working in terms of gaining commercial presence. And there's a lot that we need to do in terms of transforming the business, and consolidation is also a distraction for us.
But the reality is we have a return on tangible equity of €9,400,000,000 and we had it last year I mean, when I exclude the restructuring costs. So we feel we have a sustainable business, and hence, we feel we do not need to. It means, on the other hand, that we are obviously always open if there's something that makes a lot of sense to move on it, but it's not that we are being proactive on that front. And I think obviously, not all institutions Are likely to be in the same position, so we'll see. But I agree it's something that is somewhat logical.
The cash and the payout, we have no plans to move our dividend policy. Our dividend policy is a variable dividend policy, which is What somewhat the Paco Spain has been demanding and we have said very clearly from the beginning, we have a payout. It's based on reported earnings. If reported earnings go up, Dividend per share will go up. If reported earnings go down, dividend per share will come down.
We obviously have some room management to play with between this 50% to 60% that we have said. We have no plans to return into a scrip dividend. We have plenty of capital. We actually are positive in terms of capital generation going forward. In a quarter where we've actually booked €978,000,000 of costs, So in 1 quarter, we're actually not having a negative impact on capital is by itself a statement.
Our SREP levels that are well known and our current capital levels imply there's a 2.85 basis points management buffer. I think, and we say this publicly, the right way to look at capital levels for an institution. I'm sure you will agree we have a variable minimum because various banks are fixing different rep levels. Then it's how much excess you have above that minimum with 285 basis points now and obviously going up because we are planning to build that get to 12% and and beyond. 12% will be at 3 25 basis points, and we have that 1% extra buffer that we want to build In the next two and a half years, we're very comfortable about capital position, dividend policy, no plans for a scrip.
Management.
Operator, let's move on to the next one, please.
Thank you. And your next question comes from the line of Xavier Acano of Santander. Please ask your question.
Management. I was wondering if you could give us a little bit more color on The drop that we've seen this quarter in the yield of the loan book, which for me seems a bit counterintuitive management. As the what you've been saying that the front book has been the yield of the front book has been ahead of of the yield of the back book and also I would expect to see some positive support from your arrival resets of the mortgage portfolio. So I was wondering what's happened there and what do you think is likely to happen going forward. And will this is an element of competition, gaining market share through pricing or maybe some impact from Hedging of part of the loan book.
Okay. Javier. Well, it's a technical issue, but let me explain it into detail. We have 60 percent of our loan book that is accruing interest on a 30, 30, 3.60 basis, So this what means is that there is 60% of the loan book that, independently of the number of days of quarter. It accrues the same number of euros.
As the Q1 of the year is shorter, once you split those euros into lower days results into a higher back book. So every Q1 of the year, You will have this uptick on our back book yield, and this is an impact of around 3 basis points. And thus of this reduction of 4 basis points from 229,000,000 to 2 and the 25.3% are due to this. The other basis point is due to fine tuning on the accrual of the mortgage cost that we have been fine tuning on the accrual on our back book, and that's it. So If you compare this back book yield with the situation 1 year ago, as I commented, we are almost flat.
It's what you say, that In one hand, the front book yield is having an accrual impact. But also on top of this, remember that since Last October, we are having also the impact of mortgage costs that are now paid by banks. This is obviously having an impact on the back book yield. So this is the reason. But if you look at the front book spreads per segment, As I said in the presentation, you we don't see signs of tightening.
This does not mean that there is No competition. So competition is extremely strong, mainly precisely on mortgages. You know that we are making Around twothree of the new production of mortgages at a fixed rate, we have been able to increase a little bit the front book yield for fixed rate mortgages, and this, together with long term deals that have clearly come down, as all of you know, we have been able to accommodate The extra cost for the new production of mortgages at fixed rate, this extra cost, we estimate, is around 40 basis points running. But this is not the case on floating rate mortgages, where mortgage costs are absorbed by banks. But unfortunately, due to strong competition, we have not been able to pass on this extra cost on the spread.
So this is the main reason, probably because it's a very technical issue, but I think it's worth to know.
Management. Thank you, Javier. Operator, let's move on to the next one, please.
Your next question comes from the line of Carlos Cobo management of Societe Generale.
A Couple of questions, one on capital, one on ALCO. Could you please elaborate a little bit more on the capital evolution in the quarter? I want to make sure I'm not missing anything. I want to understand how much dividend was accrual because if, in theory, The full year dividend based on your payout policies accrued throughout the year, and you have no retainer, I mean, this quarter. And the balance sheet was so the loan book was growing with a higher profile higher risk profile of the growth.
I didn't understand very well why the CET1 ratio remained flat even when you have some management. Additional few basis points from the market. So if you could explain, that would be much appreciated. Thank you very much. And the second one is just about your ALCO policy.
You sell a big chunk of it, €5,000,000,000 So what's the ALCO policy going forward? And what's the rationale management. Why didn't you consider it was more conservative to maintain that contribution
Okay. Thank you, Carlos. To your question, we are accruing a payout ratio of 60%. This is the maximum According to our dividend policy, remember, over 50%, maximum 60% for this year. This This 60% is going to be reviewed every year.
So we are accruing the maximum, which is, by the way, of what is required by the regulation. I think that this explains probably your question. It's a quarter with the impact of the restructuring charge. That's organically. We have considered this chart As organic, so let's be clear on this.
And we have almost no capital accretion this quarter. Perde, as for Vialco. Well
Sorry, sorry.
Yes.
So my point is if you are doing 60% payout on the full year earnings, and there's no repayment earnings because of the
Well, because you organically, we have had very low risk weighted asset inflation. And on the other hand, we don't have organic capital accretion because once you deduct the 60% on the Profit of the net income of this quarter, you don't you almost now have a positive impact. So this is the reason why we don't have, Okay. The But you don't accrue
on the full year. It's the you accrue on the quarter.
Well, this quarter is for the quarter, yes.
Okay. Okay. No, I thought it was the full year expectations divided throughout the whole year.
No, no. It's every quarter according to the actual results. As For the ALCO, well, I remember that 1 quarter ago that there was a little bit of questions about why we had increased the ALCO portfolio. And well, we had the view earlier this year after the Federal Reserve decided to no longer keep raising rates that probably long term yields could at least remain stable, If not, slightly down. What happened after this is known By all of you, the situation the market situation has gone clearly beyond our expectations and probably beyond the expectations of anyone with Spanish government bonds rallying by more than 100 basis points.
And thus, we have decided that it makes sense to take profits, to position ourselves more comfortably, to shield our CET1 ratios from market volatility by disposing and to from now on, we have more flexibility whether to add or not. So we don't have here, I would say a prefixed policy, so we don't we have no plans. So probably we want to add, so So we think that we would like to add to the portfolio, but we'll decide how one went. So
management.
Management. Your next question comes from the line of Andrea Filtri of Mediobanca.
Management. Three very quick questions. The first is where do you see your inertial net loan growth in 2020 given the Good momentum you're having, I. E, how much are you going to be able to bring over to next year from the good production of this year? The second is on capital and specifically on TRIM.
Have you got any better visibility of if there is anything else management. And finally, On capital accretion, just a follow-up from what my colleagues have already asked. What was the capital accretion in the quarter from the move of spreads on your bond portfolio and where are unrealized capital gains after the sale of the EUR 3,000,000,000 that you have made in the quarter.
Thank you, Rael. Let me start, and Javier will obviously to be more specific. In terms of 2020, we have not, at this stage, started to predict how 2020 is going to look like. And clearly, where we are in 2019, We see upside to our projections of loan growth for the overall plan. That's clear.
We see downside in other places. Obviously, The level of rates is 1, but this is 1 that is certainly positive. We have not yet started to do our detailed analysis on budget for next year, which we will do after the summer. And hence, I prefer not to be more specific, but clearly, we see some upside. And in terms of TRIM, We have to wait for the final TRIM exercise on low default portfolios, which we do not expect to be in our capital levels this year.
And hopefully, we'll have an outcome. We don't know if it will be positive or not. We hope it will not be material in any case, but it looks like it's not going to be finishing this year 2020, although you can never be 100%, Sorry, 2019 is more likely to be in 2020, although it depends on the ECB and hence not on us. Javier may want to add and also you have the final discussion again on capital attrition, yes?
Yes. No, on TRIM, we don't have further news this quarter, So the situation remains the same. We're still working on it. And as we see the timetable, probably this is a process that will not management. We have finished before late this summer, so probably we'll not have the final recommendations this year.
As you had a question on the unrealized capital gains, it's by the close of The quarter is €375,000,000 We have a small impact this quarter, but the main one has already been crystallized
of your question. Let's move on to the next one, please. Operator?
Your next question comes from the line of Sophie Pettersen of JPMorgan.
Here is Sophie from JPMorgan. So I wanted to ask Around your 2021 plans and the guidance you gave at the Investor Day. So I recognize that you have Reduce the cost growth for 2019, but how should we think about the absolute cost base In 2021 of EUR 5,100,000,000 that you guided for last year at the Investor Day, does the EUR 5,100,000,000 cost guidance for 2021 still hold. And related to this, I would also want to ask if the core revenue guidance of EUR 9,500,000,000 That you guided for at the Investor Day for 2021, does that also still hold? So are you still targeting to achieve SEK 5.6 €1,000,000,000 of net interest income, euros 2,900,000,000 of fees and euros 1,000,000,000 of insurance income by 2021.
Or The guidance that you gave today, does that imply that these numbers should be lower? And if so, which numbers management. Will it be mainly fee NII or will it also be fees and insurance? And then my second question would be on rate sensitivity. Could you just remind us on how you how we should think about The NII impact from 100 basis points fall in interest rates.
And if I may, just a very quick question. How come your forecast The assets actually increased by SEK 80,000,000 in the quarter to SEK 1,400,000,000 even though you sold assets of SEK 142,000,000?
Thank you. Having these savings earlier, but those are the savings that would, in any case, have been achieved by 2021. So the good news is limited to having it earlier, but not that through what we have announced, we have already That's what I mentioned at the beginning, that we have spent a lot of time in advancing these redundancies, The actual exit of people, and that means accelerating the transformation plan, etcetera, etcetera. In environment where rates are lower. We clearly have more pressure to look at other revenue enhancing ways and certainly cost reduction waste, and we are in that process.
We do not have now an outcome of what we can do. And hence, I can only guarantee work. I cannot guarantee results at this stage. But obviously, we're quite conscious that we need to have a very, very hard look at our cost base. At the same time, I was reminding yesterday the Board that the need for digital transformation It's as acute as it was.
It's not that because there's more pressure, there's not going to be a need to do the right things for the business long term. So juggling these two things is not easy, but certainly, it's our work. You have our commitment. And actually, we're working on on that front. It's too early at this stage to say what impact that may have.
And I feel the same way on revenues. Obviously, there's been quite a silent change of level of rates. We did explain at our Investor Day that If rates didn't go up, the sensitivity was to move 12% to down to 10%. Unfortunately, rates are not only not going up, but they are actually coming down, which means a bit of further pressure. And obviously, you can quantify that easily because you've asked question that Javier will answer better than us in terms of better than me, in terms of sensitivity.
We're talking about ranges that are not that radical, but there is there's an impact. We are as we look into the Q4 of this year or the second half of the year, we're going to of the year. We're going to start working in the detailed budget for 2020. As always, we'll come to the market when we announce results in January or at least I expect to come with guidance for 2020. And I think it's at that time where given that 2021 will be obviously the next year, so we will have looked hard at 2020.
We'll see if it means that we have to make any changes or explanations about 2021. But at this stage, the only thing I can say is a lot of work to reduce The cost inflation that we provide,
a lot
of pressure on revenues but also initiatives to offset that pressure and commitment to obviously update the market as we have enough information to provide something that is that we're comfortable enough to provide our at least intended credibility that we stand by what we say.
Sophie. For the rate sensitivity, I would say that the situation remains probably the same. Remember that we have been guiding the market for sensitivity of 15% for to an increase of 100 basis points on rates. This also works to the downside, although a little bit less due for some technical reasons, but probably too long to explain here. But between 1.25% and 1.5% next year.
So I think that this is probably the number. You You had a question on foreclosed assets. Available for sale assets go up. We still have repossessions. It's a bank will always have repossessions.
And there is a lack from when you repossess and that this asset is really available for sale. And on top of this, the disposals include not only disposals on available for sale assets but also disposals on rented assets. Our rental portfolio has decreased this quarter. It's now standing at €2,300,000,000 net.
Thank you very much.
Thank you, Sophie. Let's move on to the next one, please.
Yes. Next question comes from the line of Stefan Kekalov of Citi. Please ask your question.
Management. It's Stefan Georgiou from Citi. Two questions from my side. Sorry to bother you again on this topic of costs. Obviously, it's front and center for a lot of us.
So is it correct to assume that you are retrading the 3% CAGR from 2,000 from 3Q 'eighteen through 2021. And given that you've just changed your guidance for 2019 to 3%, we management. Can safely assume that the CAGR for 2020 to 2021 is also going to be 3%. And additionally, if management. I can provide some color on the €200,000,000 of saves.
How much of that is people versus non people, branches, processes, etcetera, Given that you guys seem to have taken a higher restructuring cost because of the longer tenure of the people that are leaving, does that also mean That the savings from those people leaving are going to be higher. Supposedly, they are on higher salaries as well. And just sort of Second question, which is not on costs. It's more on TLTRO and liquidity. Is it safe to assume that Your decision to sell a part of the structural ALCO portfolio was driven by the desire to pay off the TOTRO.
And if you can just explain what do you mean by the repayment, The prepayment of the Teotoro will have no impact. Is that on cost, on liquidity or something else?
Thank you, Stefan. Let me just make a statement. I think, Javier, you can management. On the 3%. Mathematically, as long as we keep our guidance on 2021, You will bring 5% to 3%, but we're not changing the 3% at the end.
Obviously, there's 333% in order to achieve that. But what I am saying is not that. It's I have certainty as much as we can have on 3% for this year, And we are working on bringing down the 3% for 2020 and bringing down the figure for 2021. But I am only committing that we are working. I cannot tell you now exactly what that is going to mean.
And hence, I apologize for being specific on 2019 because we are always very candid. I will say I we think as a bank, we can deliver that. And we're working. We have ideas, and we're taking it very seriously on 2020 2021, but we cannot, at this stage, put a different figure. And we are not also, at least at this stage, putting in question the overall plan, strategic plan.
I think it's helpful for us to keep that as a reference, a reference which is what we would like to achieve, knowing that today It's much more ambitious. It's much more difficult than it was 7 months ago. And as we approach 2020, we're going to have to have the confidence on 2020 as much as one can have because, obviously, the future, no one can predict exactly. And at that point, we can see if there's deviations in 2021, we may actually make that clear, not just about 2020 but also about 2021, but it's kind of dependent on events and how things stand. Obviously, there's a lot of uncertainty about what Exactly the monetary measures that policy are going to be and tiering and level of rates, etcetera, There's quite a lot of moving pieces.
So it's too early. We feel to venture more than there is more pressure on the revenue front. And on the cost side, it's just that we don't know exactly what is the scope of what we can really achieve without hurting our long term competitive position, Which is the limit to any cost saving measure that we can put in, right? We want to do something that is sensible, needed for the short term, But doesn't puts into question the overall position of the bank because that will be shortsighted. This is very difficult to juggle.
And at this stage, We have no specific numbers on cost beyond 2020 2021, and hence, we're keeping what we had.
You had a Stefan, you had a question about the €200,000,000 The €200,000,000 are only personnel costs, And this is the running those are the running savings from 2020 only for this the personnel costs related to this restructuring. You also had a question about TLTRO and the portfolio disposal. Let's be clear. So the portfolio disposal has absolutely nothing to do with the TLTRO redemption. We were already holding excess cash on deposited at DCB.
We were holding more than 20,000,000,000 last quarter, and this is on top of that portfolio of securities that we set for TLTRO redemption. What has happened here is that we have been accumulating cash not only because of The strength of our commercial activity, but remember that we had the real estate disposal. We had the Repsol disposal. So this adds to our liquidity position, and this was not initially on our plans a few years ago. We were able to, within TLTRO, reducing the extra cash we were holding at ECB.
That cash at ECB is paid at minus 40 bps, and we pay the same for TLT euro funding. Thus, we have the balance sheet perfectly matched with an asset at minus 40,000,000 and liability at minus 40,000,000. What we have done is to reduce the size of the balance sheet. That's also having some savings in terms of single resolution fund, for example, because TLTRO is considered on the perimeter for the single resolution fund. So nothing to do with the portfolio disposal.
We Still keep cash at DCB. We are closing the quarter with cash at DCB around €15,000,000,000 So as you may see, No need to dispose portfolios to reduce our TLTRO funding.
Great. That is very, very clear. Thank you.
Thank you, Stephane. Let's move on to the next one, please.
Your next question comes from the line of Marta Sanchez Romero of Bank of America Merrill Lynch. Please ask your question.
Good afternoon. Thank you very much. I've got a couple of follow ups on loan yields, Andy Alco. On loan yields, what's the year you're currently occurring on your NPLs? And what's the effect on NII every time you sell An NPL portfolio, let's say you sell with a bigger loss than the loss given default implied on your coverage ratios.
Have we seen any impact of that this quarter? And then based on the way you're growing your loan book, do you expect to see An expansion of back book spreads over the next few quarters. Do you think it will be enough to offset your ever headwind? And the follow-up on the ALCO portfolio. This new rate environment, what do you think is the right size of the bond portfolio relative to your equity and your site deposits?
Because compared to some of your peers, there's a clear scope to increase the risk profile of your portfolio. I'm trying to understand what is your appetite. Are you willing to do it? Or do you still think that a bond portfolio should be more
Thank you, Martha. Hello. I will start for the by the latest one. Well, as I said, we have positioned ourselves in a more comfortable situation in order to have the chance to add to the portfolio. You may remember me saying that we think that our portfolio of around €20,000,000,000 is something that we think is in line with our I would say, our risk profile, our business model, in line with the We see that we think that we may be holding over time.
We are clearly below. We are at €30,000,000,000 so we have room to add. Now it looks like it may be impossible, but who knows? The market can do many things. My view personally is that we are not heading into a recession nor in the U.
S, nor in Europe. That's if the central banks are successful, probably we may face a situation where Inflation expectations raise again. This is what they are working for. And we may have higher long term yields, and we may have the chance to add at some point, but probably we may be wrong. We may be facing into a recession.
We may face Spanish Roanem bond convenient position in order to act if there is an opportunity. As per the Back book spreads well here. The problem is that going forward, we are no longer going to have positive repricing impacts, something that was initially expected. Well, I think that still this year, probably, we don't we'll not have this negative impact. But Obviously, in 2020, this will be the case.
So you may see our back book spread to tick a little bit higher in the next quarter or the following one, but probably to resume downwards in 2020 as driver fixings kick in. So I think that this unfortunately, is the situation. I gave you numbers about our sensitivity. And you had a question on the Loan yield of the NPLs. Well, you know that this all these changes with IFRS 9.
And what we are doing is that we and accruing interest on the original loan on the net value of the original loan. So This is what we are doing, but this is following IFRS 9 rules. As per the question, if how much was this, this quarter. We can probably follow-up later because I don't have this figure now here.
Thank you
Thank you, Marta. Next one, please.
Your next question comes from the line of Britta Smith management of Autonomous. I've got a question on
the bond portfolio, please. Can you give us any idea about what the maturities are
until year end and also in 2020 2021
and what sort of impact that's going to have on the income from the bond portfolio. And we're talking about reinvesting maturities, but also expanding the bond portfolio. What sort of opportunities are you looking management. Would you consider expanding the investment grade corporate bond portfolio, for example? My second question will be On the size of the corporate deposits that you are charging on, what sort of volume are we talking about, euros 1,000,000,000?
And what sort of volume could you potentially looking to charging on? And my third question is quite a quick one. Can you just confirm the stock of your ECB deposit was
Sorry, I missed the third one. The
stock of the ECB deposit, I think you mentioned At the
end of last quarter, it was €20,000,000,000 But
given that you have repaid the Tier 2 or 2,
I was
interested in what
the
volume was posted.
If I may. On the on your last question, we are now holding I I think that I answered already, Stefan, on this. We are holding an average of around €15,000,000,000 at DCB right now. So I think that this is the situation. You had also a question about the maturity on the bond portfolio.
We are having a few maturities this year. If I remember well, it's around €200,000,000 But We have between 2020 2021 maturities of around €10,000,000,000 Remember that here, We are having maturities on this, let's say, liquidity portfolio that we set ahead of the TLTRO. So a large part of those maturities are for this. I think that you had a question about expanding into different assets. We did early this year.
We remember that we started to diversify on our corporate bond portfolio. Well, it's always a question about opportunity and if it makes on a risk reward and capital consumption basis. And so we are always looking at different opportunities on this front. Our teams work on it, and we have a flexible approach. So we'll see.
But probably the take should be that we We are willing to increase the size of the portfolio if there is a chance. I think also you had a question about If we have estimated volumes that may be involved on additional deposit charges, if I understand well, Really not. So we as I think the CEO was quite clear that we are working on it, so we are making us step up on this process, and we're already charging to all financial counterparties that are not matched but mutual funds, even our own mutual funds, obviously, and insurance companies, etcetera. We are charging remember that we charge fees because it's not possible to charge negative rates in Spain according to Spanish laws. So we charge fees, and those fees are not in the net interest income line, are in fees.
That is important to keep in mind as this part of the let's say, of the revenues may increase going forward. And we are working on it, Britta. We are charging already to some large deposits of some corporates, and we are working on it to whom So there is an important discussion here that we are working on.
Okay. Thank you, Britta. Let's have another question, please.
Your next question comes from the line of Mario Ropera of Fidentis.
Management. My first question is, could you please clarify the Non credit provision charges that we continue to see. We sold EUR 43,000,000 this quarter. Was it basically Those assets, what was it? And then my second question is, could you please tell us the percentage
Sorry, the first one was
Yes. The first one was about noncredit provision charges. We saw €43,000,000 again in the quarter. So could you please explain the nature of this charge?
Well, on other provisions, I think that we have even given if I remember well, there is some guidance on this that We always have things to provide for, and we gave guidance to be more or less around £50,000,000 per quarter. We are down. Just to clarify that there is nothing related to IRPH here. If I remember well, and I can reconfirm this, but it's approaching to 30% between 25% 30%.
Sorry, 25% or 30% of the mortgage book or
The total loan book.
Management. Okay. I think we have time for one more. Could we have the last question? And then my team and I will follow-up with anyone who's left in
the queue.
Your final question comes from the line of Dara Quinn of KBW.
Yes. Just one question to kind of follow-up on the bond portfolio. And you're Thinking particularly about the bonds held by the insurance business. So I think it was roughly around SEK60 1,000,000,000 or so of bonds there and quite a significant or reasonable decent yields at the moment. If obviously, It's an if, but if Spanish bond yields stay at these negative rates, How long what is the evolution or outlook for that for the insurance business?
How do those how long will it take for that portfolio To reprice or reset down to a lower level.
Thank you, Dara. I would say on the insurance business, We have run a very conservative book. The portfolio is matched. And hence, we may have accounting gains and losses, But this is much in our liabilities on the other side. So not much impact, obviously.
That's the first line. There's always Some of the details, depending on duration, convexity, etcetera, that always suggests that there's some twist that we can make, but basically, the main message is much stable portfolio. What's different is for new production. And obviously, as long term rates have come down to the 40 basis points area, We need to retain them for the client to gain something. That's not a problem for us.
It's a problem for every insurance business in Europe. And some insurance business in Europe had been living with this problem for a long time because, Let's say, Germany has had negative 10 year bond rates for a while, while for Spain, it's really been this last push in monetary policy that is management. What we have is other products, which generally our competitors are not really developing, combining sort of taking some risk with some protection in terms of fixed income and also some life risk elements Given the size of our company and The easiness that the network has on distributing insurance products, what we are doing is obviously now again rethinking Some of our product offering, I. E, that was long term fixed income based into some other mixes, which that we think will be successful and will be differential versus the other players in the Spanish market. So While there's no impact on the book, there's impact on the kind of product mix for new business.
And also, there's confidence that we have the ability to develop solutions that are innovative, differential and that we can even further outperform in these conditions vis a vis other players, but that is obviously also in work in progress.
Management.
Okay. Well, thank you very much, Dara. I think that's all we have time for today. So thanks. We'll reconvene next quarter, and have a great summer break.