Good morning, and welcome to CaixaBank's Results Presentation for the Q3 of 2018. Presenting today is our CEO, Gonzalo Gortazar and our CFO, Javier Panon. Just a brief reminder for our first time viewers, we plan to spend around 30 minutes with the presentation and another 30 minutes after that for Q and A. You should have received instructions via e mail to participate in that. My team and I will be available after the call.
And with that, let me hand it over to our CEO, Mr. Cortazar.
Thank you, Eddie. Good morning, everybody. We just published results, so brief summary of the quarter. I think it's a good combination of our core revenue growth and obviously lower provisions that have helped the bottom line vis a vis expectations. Core revenue, NII is up year on year, also quarter on quarter.
In the case of fees, seasonally down. But I would say it's it's been a good quarter within that context, just down 3.3% quarter on quarter. And you can see that because year on year are up almost 5%. Our core revenues also in the right direction. So good performance in terms of core revenues, 4.7% year on year and on the quarter over 0.5%.
I think gives us good comfort that we are in the right direction vis a vis the guidance we gave for core revenues. Volumes and margins, good combination, again, taking into account this seasonality of the quarter. You can see how, in particular, AUM and insurance funds in this quarter and despite the volatility are up 1% quarter on quarter and 3.3 senior on year. Also on the lending side, quarter is flat if we seasonally adjusted for the pensions advance that we had in the Q2 and some small yet positive growth on the overall year to date of performing loans, driven by Consumer and Business Lending, which is the 2 areas we've been pushing for the last certainly the last strategic plan and where our results continue to come across quite nicely. As you can see, defending spreads, which is not easy, continue our but that is not the end.
Asset quality, good progress in the year and in the quarter. NPL ratio of 5.1 confirms our ability to deliver on the target that we have internally to be below 5% by year end, which given where we are, should be attainable, although obviously, we'll need to work on it during this quarter. Cost of risk at 8 basis points, 20 basis points if we exclude the one off that we had in the quarter, which has obviously helped our the bottom line. On Solvency, 11.4%, which becomes 11.7% once we pro form a it for the Lone Star our disposal and Repsol sale. And just as a reminder, as we announced the cost of disposal of Repsol and mark to market, the rest of the stake has been 4.53 in the quarter.
So again, I think good combination of core revenues, obviously, helped by lower provisions, but also good performance on volumes, our prices and nonperforming assets. The commercial activity, precisely the point I was making quarter on quarter, Although customer funds are down 0.7%, seasonally adjusted, the figure is 0.2%. And again, some good growth, as you can CEO both year to date but also quarter on quarter on mutual pension plans and insurance. The overall trends are now different from what we've been seeing for the last years where site deposits continue to grow, our Off balance sheet funds and insurance do grow as well, reduction in term deposits. But overall, the numbers are, I think, think attractive and show the resilience and the good progress of the franchise.
Some further examples on long term savings, a strategic critical area for us, continue to do as well with 5% year on year on savings, insurance and AUM. Market share gains, significant gains over the life of the last 4 years, and we are giving some statistics on comparing 2014 and the current moment because that is as the horizon of our strategic plan, which we're about to finish. And I think it's quite remarkable the fact that we've been able to our CEO, weaned 2.7 percentage points of market share in the aggregate of mutual pension and savings insurance. Yet, as you can see on the right hand side, we feel there's good potential structurally in this market for the future. Protection insurance, life risk, in particular, with strong growth, 24%, but also on the Non Life premia and again, good progress on market shares
our CEO, Gonzalo Gortazar, and our CEO, Gortazar, and our CEO, Gortazar, and
our CEO, Gortazar, almost 4 years starting from December 2014 a yet untapped potential because we still have relatively low penetration. And hence, we we still feel we can do better in this area. On the lending side, again, taking into account the seasonality of the quarter, it's been a good one with a flat portfolio once we take away the seasonal a law factor and where particularly consumer lending has done very well, up 4.5%. And corporate and SMEs I have shown good growth, 1.4 percent in the quarter. Quarter has been somewhat less good in terms of overall numbers, we had a reduction on the public sector, which is a less strategic and certainly less profitable area for us.
When you see on the right hand side, you create the private sector, which is what we are focusing most on, you can see how year to date, we have 0.8% of growth and in the quarter also 0.4% our 1 suggested for that seasonality. And again, consumer and business are our sales team. We continue to see deleveraging on the mortgage side. And I have to say, we continue to be very disciplined in terms of pricing on the mortgage side, and that is why you will still see those red numbers on that part of the portfolio. Overall, a reasonable level of growth given what's happening in the market.
In terms of new production, it's up across the three areas, in this case also for residential mortgages where it's up 4.9%, but also stronger in consumer lending and business lending. I just want to make assume on the consumer lending, as it is generating increased attention and I'll compare A with some of our peer countries, Italy, Germany and France, in terms of percentage of consumer lending as the total of the outstanding credit, it's remarkably alike. For us, as a bank, it's just 6%, showing that certainly we have growth. And particularly, when you look at our market share of payroll deposits at 27.1%, we feel we still can do more and more on the consumer lending front. We obviously have to compete there not just with the banks but with other specialized finance providers, all we think we can do.
And beyond or besides the comparison with other countries, it's also the historical one where you can see what's been the production of consumer lending. We are 39% below the peak in 2007. And even though we have had good growth historically, you feel that there is still more room to go. In terms of outstanding consumer lending, it's also 20% below our CEO, Gonzalo Gortazar and our CEO of the CEO in the next years to come. And as you can see, 70% of our Transamer Lenin is focused on durable goods.
Our digital strategy, we don't speak too much about it, but we do a lot about it this quarter. Just a few headlines. The mortgage origination process been completed online. We're including the budgeting up to the post sale. And obviously, we want to make sure that our clients feel they can do this online, but they can do this
on physical channels and they can move across channels, making
a truly omni channel. Chicle channels, and they can move across channels, making a truly omnichannel service in which we have Obviously, we've made a lot of advances, but we'll continue to work in that direction. We have 58% of our clients that use digital channels today. It's a significant increase year on year, 4.5%. But it's more or less what we've been seeing in the last few years, certainly more digital clients in Spain than any other bank with 32% penetration.
It's virtually 10 percentage points above our nearest competitor. We continue to explore and invest in Open Banking opportunities. And again, just to give you an objective data, which is the rating that we get on the stores for both Caixabank and ImagiBank and our main peers. And again, it's always nice to see that we are doing better than any of the rest, both Imagi Bank, but also Caixa Bank. Moving to results.
Income statement is an income statement where we made €470,000,000 of reduction from last year, but where we had €453,000,000 of losses associated to Repsol. Excluding that, obviously, we would have been an absolutely record quarter. Core revenues, I discussed it at the beginning, do not want to repeat myself as a good performance across the board, taking into account, in case of fees, the typical sort of seasonality reduction in that is typical for the Q3. Our costs are up 3.2% year on year. We'll continue to invest in the business, and that requires costs.
Unfortunately, We would like to see revenues going up and costs coming down, but that is not possible. And the reduction in provisions that are related to the provision release from 1 large exposure that we do not expect to be repeated, and hence, we have made it clear it's a one off. Bank Assurance continues to be very profitable in the current context. It's 12% return on tangible equity. Approximately half of Assata return on tangible equity coming from non banking business.
Our model is working well from that point of view despite the negative our Euribor negative rates. Bank Assurance, once we adjust for the extraordinary one offs The quarter is up double digits, obviously, even higher. We don't do it, but I guess it's a better indication of the trend, the 10.7%, we had good performance on the investment side by the fact of other than because of the fact of the Repsol disposal and BPI continues to provide a significant improvement to our profits. That's all from me. Javier, all yours.
Thank you, Gonzalo. Good morning. And here we have our slide with the P and L of BPI. It's BPI, as you know, has already released its numbers a few days ago. And as commented, BPI is contributing markedly to catch up on profitability.
And you may see that in different performance metrics, BPI is doing extremely well, both in mortgage lending, consumer lending, credit to businesses and also on the liability side, where we are planning more and more to deploy our business model. BPI is now having a return on tangible equity, only considering the domestic operations already at 8.6%. And with this, let me focus a little bit more on the different lines of the P and L account, starting as usually with NII, that continues to progress steadily. You may see that It is up by 0.7% quarter on quarter and 3.1% year on year. It has been quarter with broadly stable volumes.
Also, the 3rd quarter has some favorable calendar effects. And we have had the tailwind of lower funding costs, sorry, after the redemption of our retail subordinated bond in joint. All this offsetting what are still negative LIBOR impacts, that's we are still repricing at lower levels, a negative impact that now we really expect that will fade in very few quarters. Also, please note I'll say that when comparing BPI, the impacts of NII on from BPI, there is there are some changes in the scope and accounting criteria. Altogether, we think that we are on track to I slightly overperformed our NII guidance for the year.
Remember that we guided for NII to grow between 2% 3%. And we with just 1 quarter left, we think that we may be slightly over this figure. Some more focus on assets and liabilities. On deposits in euros, we continue to roll them At just one basis points, the back book standing at 6 basis points. And on the loan book, this quarter again, on the front book yield, we have the impact of, I would say, an extraordinary contribution in the front book of CIB with our lower yields as always because CIB always has lower yields.
And in this case, also this quarter, affected by some large syndicated loans. As a result of this, the front book yield improves slightly only to 267 basis points from 262. But when looking to the performance of the different segments, I would say I'll tell you that we are in line with the performance of recent quarters, just a few basis points up or down depending on the segment and the quarter despite intense competition. The bad book yield at 2 30 basis points, down by 1 basis point, as commented, affected by negative variable resets. So loan volumes, as I said, stability in the quarter.
And with this shift to our ALCO activities. The wholesale funding costs are stable, 123 basis points over 6 months LIBOR. On the ALCO portfolio, no much activity either. We have had few redemptions on our structural portfolio. We have not had the chance to add to the portfolio during the quarter, something that in the future, we think that we have room to do, to slightly increased the size of this structural portfolio that, as you may see, is gradually trending down as we have our strong redemptions.
On the contrary, on the liquidity management portfolio, we continue to accumulate cash. And you may expect that in coming quarters, we may have a larger size on this part of the portfolio. On spreads, no news, just down by 1 basis point. Our both the customer spread and net interest margin, as said, affected mainly by this tick down in our bad book yield Goltazar, and our CEO of the loan book. And with this shift to fees.
On fees, I would say that the The 3rd quarter is always a seasonal one. We are down quarter on quarter to 3.3 minus 3.3 percentage points. Goltazar. But when we compare to last year, we are clearly have done better. We are up by 4.8%.
I think that the best way this Q3 to look at the performance is to look at the numbers year on year. You may see that on banking fees, We are doing well year on year. We have almost flat. In this case, also helped by low contribution from CIB during the Q3 of last CEO. Mutual funds and pension plans continue to do well.
We have had steady inflows on those asset classes year our CEO of the company's portfolio of around €3,000,000,000 despite market turbulences. And you may see that both are doing well, and I say, pension plans despite the cap that entered into force last month of April. On Non Life, also is a clear engine for growth for us. And you may see that year on year, our Non Life insurance revenues are up by 17%. Some more focus on our insurance and asset management activities.
You may see that revenues continue to progress steadily Even on a like for like basis, only considering CasaBank, we are up by 12% more than 12% year on year. Those revenues now already represent 27% of our bancassurance revenues, up by 3 percentage points in 1 year. And as in recent quarters, we displayed here a detailed P and L account of our insurance activity. You may see an improvement across the line, but I would remark that net attributed profit goes up by 21% our Year on year sorry, quarter on quarter. And on costs, not much news either.
Remember that we guided for cost to grow in the 3 percent area, we continue to seize business opportunities. And the way we are trying to run the businesses in order to deliver positive jaws. So far, we have been able to do so, and this is what we are planning to do in the future. And we'll update you in a few weeks in our incoming strategic plan in London. Recurring cost to income standing at 53.2%.
With revenues core revenues doing well, You'll see that our up by on a like for like basis goes to 4% year on year. Our core operating income as a result of those positive jaws also continues to perform and up by 5.2% on a like for like basis and up to 7.6%, sorry, when considering BPI. And finally, on the P and L, some final comment on our loan loss provisions. As I commented, we have had the release of single the provision of single large exposure. It's a one off.
It's €275,000,000 release. If it were not for this, our loan loss provisions would have been a €77,000,000 in the quarter. Now our cost of risk on a 12 month trailing basis is standing at just 8 basis points. And if it were not for this extraordinary impact, it would be 20 basis points, clearly below guidance we gave earlier in the year for cost of risk to be below 30%. So clearly, a positive evolution on our bonus provisions recently.
And now I turn to the balance sheet, some comments on some key metrics. On NPLs, well, continue to trend down. NPLs down by €600,000,000 during this quarter. The pace of inflows continues to clearly abate this year compared to the previous year, and the pace of cures and sponsors continues to do well. So as a result of all this, the stock of NPLs is gradually being reduced.
Our NPL ratio down by 20 basis points to 5.1% and on track to be below 5% before our CEO by the end of this year. On the coverage, I would only like to remark that the un collateralized our NPL coverage ratio stands at a sound level of 81%. And on real estate exposure, The pace of disposals has continued during the year. And you know that on top of this, we have the large disposal to Lonestar that is expected to be closed in coming weeks before year end. And pro form a this disposal, our stock of real estate available for sale is just at stands at €600,000,000 On liquidity, no news.
We continue to hold sound liquid metrics, €76,000,000,000 of liquid assets. A liquidity coverage ratio close to 200% at 193%. You may see in CasaBank a slight decrease of liquidity. This is also due because we try to manage our excess cash reserves. We're trying to avoid some our large corporate deposits.
And on issuance, you know that we have been quite active this year, again, issuing across all asset classes. Recently, just last week, we took advantage of a narrow market opportunity in these difficult markets to issue a 5 year senior nonprefer our at mid swaps, plus 145 basis points, continuing to build up our MREL requirements. And you know that with progressive de risking that our balance experience after the real estate disposal and our plans to dispose Repsol. I could like also to remark that in recent months, the 4th main rating agencies have upgraded our senior ratings by 1 notch. Urs.
And finally, on capital, stable situation, but some interesting developments. 11.4% is our fully loaded CET1 ratio By the close of the quarter, on a pro form a basis, after the real estate and Repsol disposals, 11.7%. We have had our plus 16 basis points of organic capital generation and negative market and other impacts our CEO by 17 basis points. I would like to remark that these other impacts include an adjustment in our credit requirements for nonperforming mortgage in the nonperforming mortgage portfolio of 24 basis points as derived from the TRIM process, and we think that with this, we are done on this mortgage review from the TRIM process. On our total capital, only to remark that it stands us at 15.2% after the cancellation, the call that is planned to be done in November of €750,000,000 subordinated bond.
And I would like also to remark that our subordinated fully loaded MREL ratio our pro form a, the real estate and Repsol sales and the recent senior non preferred issuance stands already at a sound 17.2%. Just to remind also that we have just announced the payment of an interim dividend of $0.07 like last year. And to wrap up, some final remarks from my side. Our only 1 month sorry, 1 quarter left to end our strategic plan. And we think that we have been moving with confidence towards our targets.
Continued core revenue growth recently, also supported by lower cost of risk that is clearly supporting the bottom line. The underlying volume trends in the asset side and also on the liability side on our long term savings business continues to I remain unchanged. And this has been a year also with strong improvement in the pace of asset quality improvement and all those solid balance sheet metrics have been confirmed by recent rating upgrades. Just to remind that we are hosting an Investor Day next November 27 in London. Very shortly, you will be sent an invite.
With this, I think that we may be ready to take some questions. Thank you very much.
Yes. Thank you, Javier and Gonzalo. I think it's time to move to Q and A. Operator, can you please proceed with the first question, including the name and company of the caller?
Thank you. Your first question today comes from the line of Jose Abad from Goldman Sachs. Please go ahead. Your line is open.
Yes. Hello. Good morning. Thank you, everyone, for the presentation. I have two questions.
First question is whether you could actually please remind us on the size of the IRPH mortgage portfolio and maybe also on the judicial situation and your expectations with regard to this portfolio. And the second is on Repsol. So you booked a €453,000,000 provision, as you guided earlier, In the year and now the implied stock price at the time was north of €16, today it's less than €15, so I estimate that probably you will need an incremental provision of around €100,000,000 So where would you plan to book any additional provisions. Thank you very much.
Thank you, Jose, our Repsol. It's accounted as fair value or the comprehensive income. So whatever the result is, it will not go against the P and L, we will go against equity. So neither profits nor losses would show on the P and L. Obviously, economically, There will be an impact.
And on the IRPH, we Javier, do you want to take that one?
Absolutely. Well, now the stock of mortgages at with the IRPH Index stands now in the €7,000,000,000 area. And well, regarding the process, I think that Everything is very well known. IRPH is an official index. It has been sanctioned by the Bank of Spain historically and published monthly in the Politin Profitale del Estado, the official asset.
And now, well, some consumers have complained that in the lower course, that probably this index has not been adequately explained. And well, as a result of this, well, Now there is a case where the European Commission of the Health Service has presented a report stating that there are grounds for this ruling to be examined our CEO by the European Court of Justice. Well, we have to remind that the Spanish Supreme Court already wrote in November 2017 our CEO that this interest rate index was an essential part of the contract and as a result of this was fully transferred. For what? It's early days to tell you how this would end, but we are completely confident that there is not a case of lack of transparency on this issue.
May I ask one follow-up? Gonzalo, you've been, I think, very vocal on potential consolidation down the road over the last, I think, few months, including, I think, this morning, do you think the increasing legal uncertainty in the sector and I'm having, obviously, mortgage fees in mind as an AGD. Could actually make this more unlikely? Has this actually changed your views with regard to consolidation in the sector? Or do you think this will have no impact?
Well, may I just make sure what I believe is that there will be consolidation, but not necessarily in the short term. This is more a question of the sustainable profitability of the sector being under pressure. And hence that in due course, we will see some moves by some banks. That's my feeling. But obviously, I have no long crew.
I do not think that is Lee to be in the short term. And again, I do not think that we are likely to participate, although If there are opportunities, we will analyze them, but we're going to be reactive rather than proactive. What is the impact of these a sentence from the Supreme Court on this situation. It's a bit early for me to say. At least, I would like our CEO to see how things develop over the next few days.
And I don't think that necessarily that's going to be our CEO is now affecting consolidation one way or the other because I didn't think that was something imminent, but we'll have to see, Jose. Our
Okay. Thanks, Jose. Can we move on to the next one, please?
Thank you. Your next question is from Alvaro Serrano CEO, Morgan
Stanley. First of all, on mortgage, on the ruling, I apologize You've commented on this already, but I dialed in a bit later. In terms as we look at the 5th November, I mean, we will have a view on how fair or unfair it might be. But in when you discuss with your lawyers in terms of what as the potential outcome could be, I'm interested to see your opinion. We're waiting to hear from the administrative But how that when we think about the retroactivity, my understanding is there's what really matters is what the civil court the interpretation the civil court makes of that ruling.
Can you just maybe talk us through what the different scenarios as you see and maybe put some kind of limits to how bad it could be or what you think it might be, just maybe hand hold us a bit in how we think about that to the extent You have any ideas you can share? And my second question is just in general, in the global economy in Spain, we're seeing a slowdown In the growth, in Q2 results, you were you're very vocal about how The recovery in loan growth was coming through. As we look into next year or medium term, how confident do you think the loan growth recovery will be sustained? A lot of that is obviously mortgages a sort of breakeven, but in general, how confident you are in loan growth accelerating even Gortazar.
Thank you, Alvaro. On the Supreme Court ruling, I am Always cautious, we have a very close date, the 5th November. We have a strong position that is We have acted in compliance with the law or with the regulation because this is a decree, as you know. We have acted in accordance with regulation at all points, And hence, it is not expected and not reasonable to think that for complying with the regulations, as there should be any damage to us, both reputationally and certainly economically. That is our position.
That's the position that we I've made, with all due respect to everyone, if you comply with regulation, there should be no penalty for doing that. And that's our position. What happens on the 5th November, given the current ruling, we do not know. I would rather not speculate at this point in time. Obviously, I know you would be interested in all our detailed views and scenarios, etcetera.
I do not think it is productive for us to get into the public domain having these discussions. There is certainly, and all you know, There is a 4 year statutory limitation on tax matters, which is, if you wish, a second line of defense our CEO for the industry. But clearly, again, the principle of complying with the norm, hence not having negative economic consequence is the one we want to defend at this point in time. With respect to the sorry.
Gonzalo, just to clarify on that, because the 4 year statute our expectations applies to tax matters, but the civil court given the annulment of the expense clause, does that not open up risk
In our view, from a legal point of view, it does not. Obviously, I understand that investors and everyone is cautious in this environment to be cautious on what eventually comes out is a logical attitude, and I personally share it. But the legal advice we have our CEO is a different one. But again, I'd rather wait and see what happens and take it from there. With respect to your second question, we were expecting a slowdown in Spanish GDP.
And we were expecting a slowdown more or less in line with what's happening. Clearly, the risks are tilted to the downside, not just in Spain, but generally at this stage, we will see. But this coming down from a 3% sort of cruise speed to a 2% cruise speed, not this year, but I guess 2019 onwards, which is what we're expecting, It's not a surprise for us. We have seen that with very strong credit sorry, with very strong GDP CEO of 3% for 4 years. Actually, credit was coming down in terms not in terms of new production, but in terms of volumes.
And the fact that it moves from 3% to 2%, I do not think is going to force credit to take another dip, quite the opposite. It is the accumulation of growth, whether it's a 3% or 2% after 4%, 5%, 6 years, which should, at some point, lead to a recovery in credit. And what we have seen today this year is clearly positive. You saw our CEO, the impact on new production, the growth of 9% for mortgages, 15% for businesses and for our Consumer Lending. It's not slowing down in the Q3.
Obviously, do not know yet if it will at some point. Gortazar. But I have the sense is that our expectations for sort of volumes of credit growth for the stock have been so low that the slowdown from 3% to 2% is not negative, and it's included in our view of the world. Obviously, when we look at the former 3 years, some market our observers, analysts, investors may think that there is a substantial opportunity for loan growth. We do not.
We think it's going to be a gradual recovery of loan growth following the trend that we have seen in the past. But at some point, rather than moving from negative to less negative, It's becoming now neutral and then will become slightly positive. So far, that is what we see. We obviously will have the opportunity to update I'll now hand over to you to our CEO, Gonzalo Gotazar, and I'll hand over to you to our CEO, Gonzalo Gotazar, and I'll hand over
to you to our
Thank you, Alvaro. Thank you.
Let's move on to the next one, please.
Thank you. Your next question is from Mario Ropero from Bidentiis. Your line is open.
Hello. Good morning to everybody. Two questions on capital. The first one is on the 24 basis points you said regarding TRIM. Just to make sure, does it mean that there is no further impact coming from TRIM going forward?
[SPEAKER CARLOS GORENTINO:] Or in any case, can you give us an
update on the possible capital impact you foresee due to this topic? Then the second question is on the unrealized ALCO gains that you have. Please could you update on the total gains you have and specifically on the gains you have included in your core capital ratio. Thank you.
Thank you. Okay. Hi, Mario. Well, on the impact on TRIM, it's an impact related to the mortgage loan book. And it affects the parameters that we have been using to calculate our estimated loss for nonperforming exposures.
And actually, it's not a change that does not entail a substantive modification or increase of our estimated losses, but what happens is that there is a rebalancing our CEO of the components with a lower weight of the expected loss and a higher unexpected as an expected loss, you know that is the one that is covered through capital. And as a result of this, we have an increase of the our liquidity of the risk weighted assets on our nonperforming loan mortgage exposures, and that results into an impact of and a minus 24 basis points. The TRIM process continues to it's ongoing. Has different steps. First one was, let's say, a general topics exercise affecting mainly government issues about the internal models, etcetera.
We have had no issues on this. Now The mortgage loan book is the one that has already been finished, and the impact for this analysis On the Morrisland book is this one. We don't expect further impacts for the Morrisland book. And now We have also concluded the market risk TRIM. It's not for us, we think that it will not be an issue.
And what has just started is the analysis of the large corporates and what and this is still ongoing. So different phases, I would say that for the mortgage portfolio With this impact, we are done. And you were asking about our ALCO ALCO portfolio. If I remember well, the figure that is now in our numbers is around €200,000,000 And what you know that I take the opportunity now to comment that we have low our Italian exposure, around €1,000,000,000 in CasaBank. It's short maturities, less than 3 years and also around €700,000,000 in BPI, so also short maturities.
Thank you very much.
Okay. Thanks, Mario. Let's move on to the next one, please.
Your next question is from Ignacio Bulgari from Deutsche Bank. Your line is open.
Hi, this is Ignacio from Deutsche Diaz. Two questions on my side, one which is very recurrent, which is So far, we have seen a very good performance in terms of cost of risk and NPL exit. How do you see this will evolve going forward? The 20 basis points something that we can extrapolate for the future? And the second topic is if you could update us on your TLTRO exit strategy.
What are you expecting to do if there is any demand to accelerate that process or not? Thanks.
If I may, on credit risk, you're going to need to work for weeks because we will give you some further views. Sorry for that. But I want to give you a full view of the next 3 years and our perspective. But so far, the trends are encouraging. Maybe Javier you can get on to the TLTRO.
You know that our main maturities in June 2020, And we are planning for this since a long time ago. You see that we are accumulating cash. We have precisely said a separated ALCO portfolio for this. We are planning to continue issuing wholesale markets, mainly for MREL our sponsors from now on, mainly with the senior nonprofitable asset class. And while this, together with the evolution of the business, etcetera, puts us into a comfortable position to redeem TLTRO in time Gortazar, and our CEO in 2020.
For us, it does not make much sense to early redeem, although there are some windows because, anyway, the cost For us, of the excess cash, is minus 40 bps, which is the same that we pay on the liability side for TLTRO. So there is no positive impact early with an early redemption.
Thank you very much.
Thanks, Natio. Should we move on to the next one, please?
Thank you. Your next question is from Benjamin Thomas from RBC. Your line is open. Good morning.
I just have one question, please. The insurance revenue line has been very strong for you this year so far. The portion quarter, it was down a little bit. Were there any particular drivers here? Or is it just seasonality?
Nothing specific. I would say that, first, we had extremely good results as we had a commercial campaign in the Q2 that entailed probably a slightly higher production than expected. It was extremely successful. And also, this third quarter, probably we have had a slight increase in some contingencies, so the net result is slightly down, but I will not read much into this. And as you see, the continued performance on that front is there and expected to continue.
Thank you.
Thanks, Ben. Next one, please.
Thank you. Your next question is from Carlos Cobo from Societe Generale. Your line is open.
Hello. Thank you very much for the presentation. A couple of questions for me. First one would be following up on what Alvaro I touched before lending outlook. And just a quick thought, I mean, in your previous business plan, and you weren't the only one, but you also consider Lending was picking up 3 years ago and that has disappointed expectations yourself and probably most of us.
I mean, when you analyze all that, what is what happened that you weren't expecting at that time? The deleveraging of the bio sector was stronger than anticipated. And now that you are planning, are you comfortable that you have what is what the sector needs to grow or this our continued political instability with elections here and there and different budgets could wait on [SPEAKER CARLOS GORTASSER CARLOS GORTASSER:] Man, as we are seeing for the sector level, I mean corporate loans are slowing down again. I would like to see your thoughts. I'm sure you're going to discuss it in the Investor Day, I'm not asking for your outlook, but your thoughts around the drivers of that growth because I mean, we're also I've seen how disposable income is not growing as fast as consumer loans, like saving ratio is at historical lows and new car registration already quite high.
So just your thoughts there. And the second one would be a more numeric one, it's on the 17 basis point negative impact from markets and other on capital. You mentioned that you have 24 basis points from the TRIM review and then I'll say something around 7, 9 basis points from the Telefonica mark to market. So here, we I would be missing like something around 15 basis point a positive impact to reach that 17 basis points. Is it that correct?
And what would be that positive impact? Thank
you, Carlos. I will start with the first question, but let Javier elaborate because I'm going to repeat myself probably and so, you have a richer background on volume. I think one important point, when you look at some of the sector figures, They are affected by sales of NPLs. And to some extent, the sector Lending appears more disappointed than it really is. If you adjust for that for the sector, our growth is at 0.4% year on year on households and corporates.
And households, it's also 0.2% positive. This is very low for 40 years of 3% growth, but it's better. And that's what we have that is what we have seen. I think we've just thought that strong economic recovery would lead to more our outstanding volumes of credit. We got it wrong.
Obviously, capital markets were also a factor at some point for big corporates, but it's not just that, generally, we've seen that the depth and the length of the crisis has been so marked that it's taken a much more time for credit to start to recover, and it's recovering at a much lower pace. That's my sense. I'm our project in the past that's what we are likely to do. I would say, well, given that this is very slow, it will continue to be very slow, but still moving into positive territory, which is clearly happening already. But Javier, you may want to give your own view and then obviously our Yes,
on the second question. No, I would say that on the loan book, everything is going according to our expectations. I remember always guiding for a flattish to slightly positive loan book. And actually, it's where we are. We have outperforming loan book that is growing now at plus 0.8% year to date with a strong contribution from Portugal.
There, It's up by close to 6% year to date. Things are doing really well in Portugal. But the situation remains probably the same, still deleveraging on our mortgage portfolio and this being compensated with growth in consumer and SME lending. And the same picture is valid our CEO since at least 2 years old. And at least for the next few quarters, it's more of the same.
I think that our CEO is the same situation. The stock of mortgages is so large. And well, there is a large part of the monthly installment that is principal. So the velocity of prepayments it's quite fast now. And I would say that, in this case, It's very difficult to compensate this natural tendency of the mortgage loan book with the new production, although our new production year to date is up by close to 10% on mortgages.
But even by doing so, it's difficult to balance to And as a consequence, we are doing our best to grow in other segments that, by the way, are more profitable and with a higher return on equity. And I think that, like it or not, from our side, is what we have in the for the next very few quarters. And you had a question, sorry.
I just wanted to clarify that I was assigned to the assumptions in the business plan. Obviously, you've been very I mean, as your colleagues have been very diligent in toning down the expectations and everybody was already factoring in lower growth. But originally, when you planned, that was kind of the idea, but I think you've elaborated on that.
Okay. So may I move to the second question now? To the second question, I think that the piece that probably you are missing is that We have lower deductions from DTAs this quarter as we have settled the corporate tax, And there is a release of deductions there, and that is an impact of around 10 basis points. And then you have some other small moving parts here and there.
Okay. Thank you.
Okay. Thank you, Carlos. Let's move on to the next one, please.
Your next question comes from Marta Sanchez Romero from Bank of America Merrill Lynch. Your line is
open. Thank you very much. Good morning. I've got 3 quick questions. The first one is how much dividend accrual have you included in your capital ratio of 11.3 our Sandd.
And what's the implied payout relative to your EUR 1,800,000,000 reported earnings? The second question is what are your plans for your EUR 3,000,000,000 rental portfolio? And the third question is about Angola. In a recent interview, our CEO. The Governor of the Central Bank mentioned he had given the country's banks a December deadline to raise their capital requirements.
Is there a risk BFA needs to raise equity? And could you commit more capital to the country?
Thank you. Marta, may I answer to in terms of the dividend expectation or included, it's in line with our policy of 50 percent plus. That's what it's included in our capital ratios. With respect to Angola, BFA's capital ratio is 37.9%. That's the total capital.
And the position of non performing loans, yet they have very limited loan to deposits because of the structure. The non performing loan ratio is 3.7%. BFA is extremely well provided for, extremely well capitalized. We expect absolutely no impact. That is not the case for all banks in the country.
I will not I'll elaborate more for obvious reasons. But certainly, BFA is in a very strong position. Hence, it will not need capital. And certainly, we're not planning our CEO to contribute capital because there's no interest on our side, but also because there's no need for it. Our
Javier. Only to emphasize on this, probably, Marta, is that I would like to highlight that our BFA has already paid the dividend corresponding to 2016 in U. S. Dollars. Our BPI has already received the U.
S. Dollars. So I would say that just to highlight that I can imagine The Central Bank of Angola would not authorize this, the payment of this dividend in U. S. Dollars if we're not quite I'm comfortable with the situation of BFA.
And on the rental portfolio, you had a question on this. Well, now it's not actually €3,000,000,000 It's €2,500,000,000 And Well, we'll see. So I think that we have already demonstrated that we were able to dispose our available for share portfolio. We have to think about this over time. I think that is not such a large exposure now.
If you look at our our nonperforming asset ratio. I think that you can calculate it in different ways, but I think that We are clearly not an outlier on that front. And anyway, it's a, let's say, profitable portfolio with a yield our region of 4%. And we'll have to think about it, but obviously, it's not our long term business plan to be landlords, but we'll see what comes in the future for this.
Thank you very much, Maria.
Thank you, Martha. Let's move on to the next one, please.
Thank you. Your next question is from Sophie Pettersens from our JPMorgan. Your line is open.
Yes, hi. Here is Sophie from JPMorgan. So I wanted to have a follow-up question on BFA. Given that you now are selling Repsol, how should we think about BFA and your other stakes? Should we expect that everything you have is core and we are not going to see any changes to these ownership stakes?
Or should we expect reduced stakes going forward? And my second question would be on trading income. It was a little bit lower Done what we had expected in the quarter. How should we think about trading income going forward? And what do you think is the normalized our trading income level, especially considering that rates potentially go up.
And my last question would be on the EBA stress test that we get next week. What are your expectations from the upcoming stress test? Thank you.
Thank you, Sophie. On the first one, I would separate Telefonica and Erste, where We have a stake. We are planning to keep those stocks, and I wouldn't expect activity In the future, as long as I can see, we have now Around 3% of our capital allocated to these stocks, we come from 24% in 2011 16% in 2014. So obviously, we've made very, very significant progress. And we are at a level where we are comfortable with these two mistakes.
With respect to BFA, the situation is different. First, the bank is doing well. Javier has mentioned that we've been paid the dividends in hard currency. The bank is very profitable. Obviously, Cuonca has had a devaluation process, very significant our CEO, Gonzalo Gortazar.
At the same time, that has been a result of, I think, the right economic policy from Angola. We continue to work closely with the IMF, moving into the right direction. Economically, I think generally, politically, the oil price has helped, obviously, as well the country. And certainly, there are less clouds on the horizon now than in the future. We are are interested in the right time reducing our stake because generally, it's not about the quality of as we move forward, owning a minority stake of 48% makes not much sense.
It's just too large for a minority stake. And I think in the next years, we will find the opportunity to reduce that stake in a cooperative manner our CEO with Angola with the rest of the shareholders and that BFA will continue to prosper and that will also be done in a sort of shareholder value maximization way. But we need time for that to happen. And in the meantime, as we understand that shareholders and analysts are valued in Angola differently, which I have full respect for. We will continue to provide appropriate disclosure so that everyone can do it.
But we are confident that the course of events is certainly putting us in a much better our position to be able to reduce that stake when it is sensible, which still He's not around the corner. And in the meantime, we'll continue to hold that stake, providing all the details.
On trading income, Sophie, well, it's clearly a volatile line. I would like just to remind that the trading income line this year includes a negative impact of around €40,000,000 due to the pass through Of the dividends on the equity swaps we have been holding during the year, mainly on Repsol. Just to take this also into account, Also, on the other hand, had an extraordinary impact from the disposal of Via Thera stake that BPI I was holding historical. But I think that it's difficult for me to give you a clear guidance. Somewhere Between €200,000,000 €300,000,000 is where we should be.
No doubt that as yields Long term yields are no longer trending down, making trading profits is becoming more difficult. But so far, we also have our recurring business with our CIB activities, where we have some trading our income derived from the distribution of derivatives with large corporates, etcetera. So also clearly, it's also helping. So I think that Between €200,000,000 I understand that is quite wide, but this is where we may stand. And on the EBA, unfortunately, I can say nothing.
You know that We are strongly encouraged by the supervisor to not to say nothing, and you have only to wait slightly more than 1 week us before Norway.
Okay. Thank you.
Thank you. Thank you, Sophie. Can we move on to the next one, please?
Thank you. And your next question comes from the line of Andrea Usnietta from Credit Suisse. Your line is open.
Hi, good morning. I just want to better understand how I should be thinking about the cost of risk In the context of the increasing consumer book, so if I do a rough calculation, Consumer loans are roughly 20% of your lending revenues. What is the cost of risk for such And today, what percentage of your 30 basis points guidance comes from
Well, a few comments on our consumer loan book. It's a loan book now standing around €11,000,000,000 Now the nonperforming loan ratio standing at 4.3%. And I would like to remark I hear that there are different categories or soup segments within this consumer loan book. I would say that generally speaking, consumer loans for household needs, for auto loans, even revolving credit, etcetera, is in the average or clearly below the average of this nonperforming loan ratio. It's only one sub segment, which is what we call click and go.
This is less than 10% of our of the portfolio. Our those loans that are, in some cases, granted online, etcetera. Here, we have done some changes on our internal policies also our CEO for the greater scoring and in order to better assess the greater scoring our shareholders, etcetera. And it's only in this sub segment where we have had slightly a worse performance probably than expected initially. But the rest is doing extremely well, really sound.
We are our normalized cost of risk for our consumer loan book between 2% 2.5%. So I would say that this is the run numbers that we are using. And with those numbers, the return on equity of this portfolio is extremely high. It's between 25% 30%. So it's a business that, if done properly, that is what we think that we are doing and adjusting in due time for any changes that we may have to do, it's extremely profitable.
So It will be it's only a part of our portfolio. So €11,000,000 out of our loan book of more than €220,000,000 it's less than 5%. So it's not going to grow exponentially. So I think that but on the other hand, it's extremely profitable with strong contribution to NII, as you know. And this is one of the keys of our resilience on NII performance.
I don't know, Andrea, with this, I have given you some color.
Yes. Thank you.
Okay, Andrea. I think in the interest of time, we can only take one more. We will, of course, follow-up with people who are still on the line. So operator, can you please take the last one?
Thank you. We'll now take our last question from Andrea Soltri from London. Your line is open.
Yes, good morning. First question on VIDA Caixa. Could you please give us more visibility on the solvency II ratio in Q3? And if you could provide a sensitivity of this ratio to credit and sovereign spreads, interest Straits and Markets. The second question is on TRIM.
How much does the TRIM change to your models overlap with EBA guidelines. And would you say that the change incorporates both TRIM and EBA guidelines at the same time then? And just finally, very quick one. On Repsol, how should we expect the P and L contribution from our Repsol to evolve in the coming quarters. Thank you.
All yours, hello.
Well, on Solvency II, well, we'll come back to you with those sensitivities because, unfortunately, I don't have them with me. The Solvency II ratio of VIDA cash in the 140s area, as you know. And It's not expected to be materially impacted by those market moves that you are mentioning, but we can come back to you Goltazar, and our CEO with this. And on TRIM and EBA guidelines, no? And I think that with those 24 basis points that I am already we are already impacting within that, we are including all those impacts.
But well, this is my best estimate that I can give you. I'm sorry, but the last one on Repsol. I missed Charlie, which was your question.
Just what we should be expecting in terms a question of contribution to quarterly profits from Repsol in the coming two quarters.
Well, Repsol now, it's accounted as fair value with impact in OCI. So the impacts will be the dividends paid by Repsol. According to the position we may be holding at each moment that we are in a plan to dispose.
Thank you very much.
Thank you, Edgar. We'll follow-up with the additional information we require. I think that's all we have time for today. So thank you very much, and we'll see you next quarter.
Thank you.