Good morning, and welcome to CaixaBank's Results Presentation for the Q1 of 2018. Presenting today is our CEO, Gonzalo Gortazar and our CFO, Javier Pano. Please note for comparison purposes that this quarter includes 3 full months of BPI versus Q1 2017 where only 2 months were included and that we have also changed our segment reporting to include BPI's investees within the Investments segment. Also, just a brief reminder of our format for first time viewers. We plan to spend around 30 minutes presenting.
That's slightly less than in the past, and leaving more time for Q and A around 45 minutes. And you should have instructions to participate in the live Q and A on your screen. Let me end with a reiteration that my team and I are your full disposal after this event. And without further ado, let me hand it over to our CEO.
Thank you, Eddy. Good morning, everybody. Summary of the quarter, obviously, is the bottom line in terms of RoTE at 9.8%, in line with our targets for 2018, a very significant improvement in net income, as you have seen. How do we see it and how has it happened? Core revenues and lower impairments are the drivers.
You can see how NII And also fees and insurance have done fairly well year on year. Obviously, you have the impact that Edi mentioned on the 2 months 3 months on BPI, so you can also look at the quarter on quarter where that impact disappears. The comparison is positive on both sides. Core revenue is up 6.5% year on year, 1.8% quarter on quarter and a significant fall in provisions as well. In terms of the business, We have had a good quarter on the both on the liability and on the asset side, AUM and insurance funds, up almost 1% despite negative market evolution.
In the quarter, consumer lending, in particular, up 5.3 And as always, strong discipline on the way we are conducting our lending, 13 basis points So of uptick in front book in the quarter compared to last year. Nonperforming assets, We had a meaningful reduction of non performing loans, 21 basis points year to date from 6% to 5.8%. We continue and will continue Along this road, the cost of risk at 29 basis points on a last 12 month basis, and we'll continue to sell actively real estate with significant capital gains. You can see that 16% number is the result on average for the quarter. Coverage has gone up mostly as a result of IFRS 9, as you would have expected.
Solvency and liquidity maintained at very high Levels, I would particularly highlight the LCR, the last 12 month average at 194%, which is a good indication of of our always liquid position. Getting to some of the details on customer funds. It's again similar story to what we have seen in the past. It's a reduction, increase in demand deposits and increase in insurance and assets under management. Again, In this quarter, we have had negative market impact on this part of the business, €1,100,000,000 So the growth of €1,300,000,000 I think it has to be seen as particularly positive because it's despite this negative €1,100,000,000 We'll see how the market evolves During the year, April looks certainly better than the previous months in terms of market impact.
All in all, that 0.6% growth in customer funds. And I would also highlight that the end of the year is seasonally high for us, December, so the fact that we are growing in the comparison March versus December, it's quite a good indication that the business is firing on all Cylinders. Long term savings, up 5% compared to last year, EUR 148,000,000, where we include both Insurance pensions and mutual funds with good level of net inflows and a market share that is, as you know, very high at 21%. Life risk has been particularly brilliant, I would say, with this increase of 24% in premia compared to the same quarter of last year, production and market share are moving in the right direction, again, one fairly important driver of profits for the insurance business. And the Non Life business continues to grow nicely 26% if you look at how premium has evolved over the last 3 years versus the sector.
And obviously, this is largely due to the branch network of Caixabank, which is responsible for 70% of the new production. Technology, just a brief note. In the quarter, we've launched Smart Money, our robot advisory service. And Obviously, it's early days, but it's another indication that we continue to be at the forefront of Developments in on the technology side. In Spain, we have 56% of our clients now are digital.
A very, I think, Visible, Imagine Bank, our mobile only bank, has now crossed the 1,000,000 client line. We have 120,000 Clients active every day. The average age of people using Imagine Bank is 26. So that targeting to particularly millennials has been quite effective and certainly is, I would say, an extraordinary lab for us not only To provide service to this client base, but also to test a number of initiatives that we can then export very quickly to the Of the Caixabank digital offering. We have also started a new virtual assistant for employees based on IBM Watson, on IA, which is already solving 80% of the questions that our employees used to have to the call center, obviously, Significant improvement in terms of efficiency and also agility for our people to have their problems sorted out.
On the loan side, stable portfolio, which in the current context in Spain and Portugal, I think it's a good achievement. As you can see, mortgages continue to come down as per the existing trends, a very Good showing on consumer lending, up 5%, €500,000,000 In the quarter, some reduction, which reflects some seasonality as well on the business side and which has been offset by some higher level of activity in the short term lending side for the public sector administration. If we include the nonperforming loans, then there is a reduction of 0.3%. But obviously, the performing loan, which is what we are trying to Management growth is stable. And in the current context, we are happy with that development.
We'll see how we can and get this loan book to perform on a positive side during the rest of the year. The Q1 has been, I think reasonably good for what we were expecting. New lending, the dynamics are very strong on the consumer lending, as you can see, euros 2,100,000 in the quarter. We are producing significantly more. It already happened in 2017 on the consumer Consumer lending and on the residential mortgage side.
The residential mortgage new lending is stable, in line with our market share. And here, what we see is a higher emphasis on our side on the fixed rate production where We are producing 60% of our new mortgages. It's something that the market is We're doing in a fairly different form because the majority of the other institutions still have a floating rate offering mostly. We think our proposal makes more sense for consumers, and that is most important. And also, I think it provides Also better result for the bank, both in terms of margins and also particularly for future asset quality issues when rates raise.
Consumer lending, we continue to make progress on the various initiatives That you know, during the quarter, we announced the JV with the supermarket chain Diya, which we will developed during the year. But we have continued to make strong growth on Funding the consumption of products that are commercialized through us like Samsung, the new S9, TVs, etcetera, etcetera. The results, As you see, we are dominated by that strong increase in terms of net attributable profit to the group, that round number, 75%. We're showing in this slide both year on year and quarter on quarter and then CaixaBank only, mostly because the year on year has that difference between 3 months For BPI in 2008 versus just 2 in 2017. But you can see, Particularly on core revenues that the evolution is pretty positive on all fronts.
We look at CaixaBank itself to avoid this comparison impact. NII fees and particularly insurance are significantly up versus last year. So it's the case for the group, but quarter on quarter is the same story with the exception of fees where we have had Less activity on the CIB side on this Q1. The other revenues are up strongly, boosted by some one offs that you know well because BPI published results last week on both on BFA in Angola and Viacer, the sale of our stake in the beer company in Portugal, both Figures, you can see, €60,000,000 for BFA and €54,000,000 for BSRR, the impact on the net attributable profit. Of those two Items we have also generated some capital gains in the ALCO level, which I'm sure Javier will go through.
Costs up 1.8% for CaixaBank, in line with what we expected. As you know, in the Q1, we also have the property taxes And all matters on this front are developing in line with the guidance we provided at the year end results presentation. Return on tangible equity, as discussed, very close now to 10% Core revenues, sort of the longer trend, we continue to see improvement, both at the group level and at Caixabank level, up 6% in one case and 15% in the other. The proportion of core revenues Percentage of the total gross income increasing to 93%. And the core operating income when we deduct recurring costs from core revenues continue to grow in a very solid and positive manner.
So I think the substance of our model continues to show it is working, and the numbers are improving quarter after quarter. Looking at the segment reporting and reemphasizing what Eri said at the beginning, we have made Some changes to make sure that this represents more the reality of the group. So all investments that should be in the investment Segment are there, whether they come from Caixabank or BPI, and that includes Viacer and BFA as the most So 2 relevant investments in the quarter. That means that BPI contributes €40,000,000 from their Total recurring banking business in Portugal, up until the EUR 169,000,000 total contribution, we have BFA be a fair and some smaller items. Total investments are EUR 211,000,000, very high contribution for this quarter, which explains a very sharp increase in the bottom line.
The real estate noncore Items are still contributing negatively but much less than they used in the past. And bank insurance at €520,000,000 is actually providing a return on tangible equity of 12%, which is obviously Quite relevant. The comparison with last year is negative because we actually included the pad wheel from the BPI acquisition, which was $256,000,000 Once you exclude that, the actual trend or the actual increase rather than trend is 84%, obviously, a very relevant number. Banking and Insurance Asset Management are contributing basically same 40% in the quarter, with the rest being mostly payments and some contribution from our specialized consumer finance subsidiary. Obviously, there's more of the consumer business that we do directly within the banking business.
To finalize on my side, just a reminder, BPI and figures as per the consolidation into CaixaBank's Accounts, as I said, EUR 40,000,000 in the quarter compared to EUR 22,000,000 last year. The comparison here again has the problem of 3 months versus 2 months, so it's not Obviously, spot the trend, but you can see that in a better way in terms of activity. Basically, every category on the lending side is up and in a meaningful way, 3.5% business sales, consumer lending, 4 Mortgage lending, 0.4 percent gives you an indication that BPI is already capturing the opportunity that we think we have In Portugal, client deposits are also up 3.1%. Economy continues to help. We have a, I think a solid environment for this year and the coming ones.
And with that, Javier,
[SPEAKER ANASTASIA DE LAARSCHOTTI PROVERA:] On the P and L, first on net interest income, that we see that it is up quarter on quarter by 0.6%. The main drivers being on the positive side, higher loan yields helped by a front book that is And on top of this, this quarter, also higher NPL Also on the positive side, I would remark lower wholesale funding costs despite intense activity on that front and lower average loan volumes, although by the end of the quarter, we had a much a bit tone. We have negative contribution from BPI of minus €13,000,000 in this case due to the 4th quarter sale of businesses to Caixabank and also some changes in accounting criteria being mainly the reclassification of some internal rate hedges from NII to trading results. If we look at the client activity that impacts net interest income, first, [SPEAKER DIDIER MICHAUD DANIEL:] On the liability side, on time deposits, we see that we are repricing those deposits in euros at ultra low levels, just one basis point Last quarter. The back book is impacted this quarter upwards by some Foreign exchange deposits impacts, but this is absolutely not a new trend upwards.
And with this front book in euros At those low levels, we should keep our back book at very low levels. Loan yields, as commented, front book [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] That is now this quarter has yielded 3 24 basis points, clearly accretive compared to the above book, as you may see, for many quarters in a row with front book Over 3%. In this case, this quarter, there is always the mix of the new production that affects positively. But also on SMEs, we have had good quarters in prices. Now the back book yield goes up to 228 basis points by 9 basis points, also impacted by this higher NPL accrual.
Lower loan balances during the quarter, Slightly, this is impacting a little bit on average net interest income, but as I say, a more a bit tone even on the mortgage segment by the and of the quarter. If we look at the impact of our wholesale activities on net interest income, Despite intense issuance activity during the quarter, we have lower funding costs, 120 basis points over 6 months of LIBOR, 6 basis points less. So this, as I mentioned before, has been helping NII improvement during the quarter. Some comments on the ALCO portfolio. On the structural ALCO portfolio, we have taken advantage of the sovereign spread compression to dispose and crystallized some profits on some long term bonds that were asset trapped.
As a result of this, we have made a trading gain of close to €60,000,000 And this has resulted into now a portfolio with a slightly higher duration as we remove this It's a short duration part of the portfolio, as I mentioned, as it was swapped into floating. The comment going forward, our activity on this portfolio will depend on [SPEAKER DIDIER MICHAUD DANIEL:] Market circumstances. But anyhow, we don't see current levels as ones to add much to this [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] Structural portfolio. On the liquidity portfolio, we have been buying short term and medium term notes, matching [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] The maturity around the TLTRO disposal and well, this portfolio is set to grow. As you know, we are accumulating cash in order to face the TRT redemption in 2020.
As a result of all this, the spreads improved. Both customers the post customer spread goes up by 8 basis points as a result of much better back book yield on the loan book. And net interest margin also improved by 7 basis points as we overcome the small setback we had on that front during the 4th of last year as we accumulated extra cash balances. Now we turn to fees. On fees, [SPEAKER ANASTASIA DE LAARSCHOT:] I would say that we are down quarter on quarter by 0.9%.
If we compare with Compare CaxacaBank with the Q1 of last year, we are slightly upwards. The Q1 always being more slow on fees. I could mention here that BPI is down on fees for the Q1, but this has more to do with the fact that during the Q4 of last year, BPI was positively impacted by the distribution of retail sovereign bonds. So this was an extraordinary revenue. And at CasaBank, we are flat.
As CEO was commenting, we have had this lower CIB activity during this Q1 compared to what is usually the case in the Q1 of the year, volatility of from markets Has affected somehow. This, in any case, has affected assets under management fee revenue as we have [SPEAKER JOSE ANTONIO ALVAREZ DE TEJADA:] At EUR 1,100,000,000 mark to market impact on our asset under management balances. But also in the Q1, we have to remember that there is always, while comparing with the Q4 of the year the impact in the Q4 of success fees. All in all, we have an upbeat View on our fee revenues going forward, and we reiterate our guidance for the year. A focus, as always, on our insurance and asset management activities.
You see that revenues continue to improve steadily Year on year, up by 22% at group level, 20% at CasaBank. Those revenues Every quarter, more important for us, this now representing 25% of our Total revenues on our bancassurance business, 3 percentage points up in a year. This time, we take the opportunity to [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] Further disclosed information about our insurance activities. Here, you may see the complete P and L account of our Insurance business, you may see that the improvement is across all lines on from NII to All revenue lines and for a final net attributed profit for our insurance business of 144 €1,000,000 up 17.1 percent year on year, and that represents already slightly more than 3rd quarter on quarter costs up by 2.3%. As you may see, personnel costs broadly stable as cost synergies offset Waste inflation, we have extra costs on general expenses and amortizations, mainly reflecting the Seasonal property tax that is registered in the Q1 and also expenditure, as commented the previous quarter, on revenue opportunities.
All in all, positive jaws. As a result of this, our recurring cost to income ratio improved to 52.7%, down by 1 point 6 percentage points in a quarter. A few comments on loan loss provisions. Continue to do well. [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] On a 12 month trailing basis, the cost of risk is already at 29 basis points, already below our guidance for the year.
Remember, guidance to be below 30 bps. Two quarters in a row with cost of risk on a normalized basis at 24 basis points. And we think that in this front, Everything is going as expected and on track. And some final comments on the P and L [SPEAKER JEAN FRANCOIS VAN BOXMEER:] For our real estate disposals, we continue to make profits on disposals, 16% over the cost price during this Q1 of the year. That sharply contrasts with the situation of 2 or 3 years ago.
You know that we have made Profit of €40,000,000 As much as this is possible, we have been providing further for this portfolio to make a net real estate result of €2,000,000 in order to smooth disposals in coming quarters as much as possible. And now some comments on the balance sheet. 1st, Starting with our nonperforming loan exposures. We have reduced NPLs by around EUR 600,000,000 The NPL ratio down by 20 basis points to 5.8 percent. And well, after IFRS 9, a sound coverage ratio of 55% at group level.
And I would remark that the coverage ratio for the uncollateralized part of the nonperforming loan portfolio standing at Very sound level at 80%. Some comments on our real estate exposures that are gradually trending now. The Orbeo book coverage ratio is stable at 58%. The pace of inflows into this portfolio gradually trends down, 11% down this quarter compared to the Q1 of last year. The pace of sales, in any Only organic disposals this first quarter, euros 306,000,000 [SPEAKER DIDIER MICHAUD DANIEL:] Up by 3.4% compared to the Q1 of the year, always the Q3 of the year, slightly more Slow during the year, but remember that we have already reached an agreement for a portfolio of sale to Testa of a portfolio of €228,000,000 to be executed from this 2nd quarter.
And finally, on liquidity and solvency. On liquidity, not much to comment. We continue to have a really Sound liquidity position, €73,000,000,000 of liquid assets at group level, €65,000,000 at the cashier bank level. Our liquidity coverage ratio is standing at 2 0 6 percent by the end of the period at CasaBank. [SPEAKER IGNACIO CUENCA ARAMBARRI:] And as you know, intense activity in wholesale markets with 2 covered bond issued, 5 year senior preferred, and I would remark, EUR 1,250,000,000,000 that already fills our EUR 81 bucket together with the issue we did last year.
And finally, on solvency, we closed the quarter with a CET1 ratio at 11.6%. We have had this quarter the well flagged impact of IFRS 9 minuteus 15 bps, Positive organic capital generation, 24 bps and other value adjustments, minus 17. Amongst them, I would remark the impact from the devaluation of the Angola and Cuansa that has obviously had an impact on this. Improved credit ratings, well known. And also, I would remark here a total capital position that is now already over 16%, standing at 16.1%.
I would make some final remarks [SPEAKER JOSE ANTONIO ALVAREZ DE SOTO:] From my side, we feel that we are moving with confidence towards our targets with return on tangible equity that is already at 9.8% within our targets. This is supported by high core revenues that results into positive jaws That result also into an efficiency improvement, a cost to income ratio that is down by 1.6 percentage points, Thanks to a good business mix with higher margins that reflect the strength of our franchise and this, together with The continued decline in NPAs, as always, with the DNA of CasaBank, which is a strong solvency and Equity metrics. And with this, I think that we are ready for Q and A. Thank you very much.
Okay. Thank you, Javier. As you rightly point out, it's time to move to Q and A. Operator, can we please have the first call, including the name and company of the caller?
Certainly. 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, Jonas, for the presentation. And I have a question on consumer lending. I think maybe you could give Some data on the yield of the consumer lending in Spain and how that has evolved over the last few quarters.
Maybe to date would be enough like Q1 2018 and Q1 2017? And we've seen that once again, I mean, the NPL ratio has increased to 4.4%. This is probably the 9th quarter in a row. This is not Caixabank specific issue. This is a system issue.
But so the question is, At which beyond which NPL ratio would you consider to slow down the origination of NPLs? My second question is on maybe you could give us an update on your strategy for real estate asset disposals given there's been a lot of noise in the press about a potential Large transaction down the road.
Thank you very much.
Thank you, Jose. I'll take the second part of the question on the NPLs and asset quality. I may be let Javier Give any figure on the lending. The NPL obviously has So I've been slightly increasing in consumer lending associated to a very significant increase in the activity. We have a policy in which we look at every vintage that we produce, and we see what is working and what is not working well, and we adjust immediately.
So this is not a process in which we wait until PPLs reached a certain level and then we change is obviously every action that we take after we start doing it because the portfolio is obviously very granular. We have the appropriate monitoring follow-up, and we fine tune. We stopped certain actions. We emphasized others. We moved the scoring line at which we would produce new lending.
We will change the terms. We will emphasize certain channels or others. And this is a constant development. And what you see in evolution of the NPLs is obviously with some lag effect earlier vintages. We are actually very satisfied of the course that we are following here.
We have found plenty of very attractive activities that are obviously, given the margins that are above 9%, are always contributing to shareholder value, but we are also actively learning from what we do. There's a lot of test and learn, particularly when we look at new initiatives, new world digitalization, etcetera. And we're actually quite happy, and we feel The NPLs on the consumer lending portfolio are completely under our control, and we continue to feel Significant growth, and we plan to exploit it without an impact on NPLs that will be not bearable. So There is no limit, I think, at this stage. It will obviously more depend on What is the market demand?
Consumption growth in the economy, which continues to be positive, particularly the evolution over the next 3 years. It may suggest that the overall demand for consumer lending will continue to grow maybe at a slower pace than it has been Lately. And maybe Javier, do you want to add something on the margins?
Jose, well, I was looking to the figures, and actually, [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] There are no much changes. The latest figure for our front book on debt tron is Around 9%, 9% yield. And if I look to the different vintages in recent quarters, I would say that it's somewhere between 9% and 9.5%, depending on the sorry, on the quarter. So it's true that there is more and more focus from our peers on this segment. But so far, we are being able to defend our position, our margins.
And you know that we are making new Reaching new initiatives with different vendors, etcetera. So no doubt that this is helping on that front.
If I may, very quickly, if you could remind us the contribution to NII from consumer lending?
Well, it's around a €10,000,000,000 book. And with those yields, You can make the numbers pretty easily as well, the bad book yield is, as I say, more or less at the same level, around 9%.
Operator, can you please hold? We had one question pending on, Jose, on the real estate strategy.
Well, on real estate, we have not any change To explain, we continue with our strategy. We want to reduce our burden of nonperforming assets. We want to do it in as we have been doing in the past, selling organically and complementing that with some Smaller portfolio transactions like we announced earlier in the quarter. We have sold approximately 3.4% More than the same quarter last year, as Javier explained. And we have also announced this portfolio sale of another 2 And EUR 28,000,000 Javier, anything you would like to add on this front?
It's just that. Does that cover your question, Jose? Or was there any specific
It's clear.
Okay.
Thank you.
Thank you, Jose. Now can we move on to the next one now please, operator?
Thank you. Your next question comes from the line of Alvaro Serrano from Morgan Stanley.
Hi, good morning. Two questions. On NII, first, I think you were very clear at the end of Q4 The NII should be cover already in the Q1 and you've delivered. When I think about your targets for the full year, you need further growth In NII, just if you can give us some commentary if this is going to be a linear process or should be back end loaded depending on rates, Something along those lines. So can you link that answer to comments from Gonzalo?
I think you said at the beginning that loan growth A flat year to date given seasonality is off to a better start than you expected. It feels like you're more positive on loan growth. Does that change any of your or is there anything you can add on your NII guidance given the better loan growth? And second, similarly on fees. They were a bit lighter than consensus in the quarter.
Understandably, It's quite difficult in banking, as you mentioned. And you've also mentioned the market impacting the Asset Management business. I just wanted to and obviously Easter as well in Q1 this year. Can you also give us some color Given the pipeline, given the market volatility in the last couple of months, is that going to affect The fee line in the short term? Or just give us a sense of how the markets are affecting because Q2 last year was So very strong.
So I just wanted to get a feel for development during the year.
Alvaro, I'll take the NII question. Well, we guided for NII to grow between 23%. We obviously, we [SPEAKER ANASTASIA DE LA CHEVARDIERE:] We confirm this guidance for the year. If you look at the to the ladder of the NII evolution, you may see that during this Q1, we had A small negative impact coming from lower average loan volumes, but I said also that we had a more a bit tone as the quarter progressed, also on the mortgage segment. So I would say that, obviously, we expect that this The negative average impact will not happen again, and this [SPEAKER ANASTASIA DE LA CHEVARDIERE:] Firstly, we'll support NII going forward.
When I gave guidance last year for this, I said, Look, if rates do not go up, we have sensitivity on this, on NII, of around 50 basis [SPEAKER ANTOINE MAHENDRA RAJAH:] 0.50. What we gave you a range between 23. We think that it's early days in the year, we'll see, but we are confident that we will be there. And obviously, loan growth, if it happens [SPEAKER ANASTASIA ALVAREZ DE SOTO:] If it helps, it will be good news. And obviously, the fact which is mainly the driver for NII in our case, [SPEAKER DIDIER MICHAUD DANIEL:] The fact that the front book is clearly on a sustained basis accretive compared to the back book, once arrival resets FADE, negative arrival research FADE, that has an immediate positive impact into NII.
And hopefully, this would be the case from midyear on. So those are the main drivers. And together, we're trying to manage our Cash balances, obviously, on a smart way in order to have the smallest impact possible of the minus 40 bps from the ECB. So I would say that this is the main those are the main levels for NII management for the rest of the year. On fees Javier,
just is it Javier, just a follow-up on that. Is it fair to say that at the beginning of the year, you were not factoring loan growth and now loan growth is coming [SPEAKER DIDIER MICHAUD DANIEL:] Better than expected.
Is that a fair comment? Well, if it is better than expected or not, we will have Confirm, what I say is that we had a small negative impact from average loan volumes and but that by the end of the quarter, we had a more [SPEAKER DIDIER MICHAUD DANIEL:] Positive tone. So it has to be confirmed that this positive tone continues during the year. But obviously, Our initial guidance was made on the assumption that we had stable loan growth. That's right.
Okay. Thank you.
Sorry, the fees interrupted you.
No problem, Alberto. On fees, I think we are On the right track in terms of what we are doing with respect to our guidance, I would highlight particularly on the insurance front, we have been actually doing very well. On AM fees, we have had the impact of negative market Development. And that has also had some impact on our CIB business. For the rest of the year, I think the quarter indicates that we will be meeting our guidance.
But Obviously, the market may help us or not, depending on what happens In the next few months, as I said, April in terms of AUM's market valuation is quite positive, but it's very difficult to Make a judgment on the full year. That front, nothing of what we have seen both in NII and fees, Some things are slightly better than we expected, as you were indicating. Others are slightly worse. All in all, I think we are in good Making good progression towards our meeting our guidance, but we will have to obviously monitor how the developments go during the year.
Thank you very much.
Thank you, Alvaro. Can we move on to the next one, operator, please?
Your next question comes from the line of Sophie Peter Zand from JPMorgan.
Yes. Here is Sophie Pettersthan from JPMorgan. I was just wondering if you could share with us your plans for BFA in the future Sure. And also Repsol, how should we think about the equity method contribution from these holdings? Are they long term holdings?
Or should we expect potentially lower kind of ownership in future? That would be my first question. My second question is around the Real Estate division. The pretax loss was almost EUR 100,000,000 this quarter. What kind of loss should we Based in this division going forward, and could you elaborate if you plan to do slightly bigger portfolio sales than the EUR 228,000,000 that you have already announced.
And then just if you could give details on IFRS 9, provisions went up By almost EUR 760,000,000, but the core equity Tier 1 impact was only 15 basis points. Could you just give details what explains the delta? Thank you.
Thank you, Sophie.
I will try and deal with the first two questions, and Javier can give the details on IFRS 9. With BFA and Repsol, There's there are no news in terms of our strategy. We have been quite clear with respect to BFA that our interest would be to reduce our investment in BFA And at the same time, we do not have a certain deadline to do it because we obviously depend on the environment. BFA is a fantastic bank, and we want to make sure that we do this at the right time and in the right conditions. Angola It's going through a period of change.
Angola has recently requested, as you well know, to the IMF, the implementation of a program of The policy coordination initiative, we basically without asking or getting money from the IMF, Angola is offering or trying to Comply with certain policies that are, I think, orthodox From a macro point of view, which is, I think, very good news, and I think this will be followed by further Openness of Angola to the international capital markets, plenty of good developments. This is what is most relevant. Obviously, the oil price is also helping the situation of the country, and we are cautiously optimistic and certainly We're willing to work with our partners there and in order to find a solution at the right time. In the meantime, as we have 48%, we will be receiving the 48% of the income from the bank. The bank continues to do well.
Obviously, there's A change now in terms of accounting for high inflation, which is reducing the bottom line. We saw that in the last The quarter and that continues to impact the recurring profitability, which is significant but less than it used to be. And then we had this particularly High result this year associated to the hedges on the devaluation that has taken place with the Quanta. But No change in plans really here. Our long term expectation is certainly to be at lower level, but we depend on some of the circumstances.
These circumstances are clearly evolving in the right direction. With respect to Repsol, there's absolutely no change. We have a significant hedge aimed at reducing concentration risk on one given investment, which we think is sensible as a bank to do. There are no further plans. We have protected value.
We continue to believe that there is significant upside in the company, particularly now but the oil price is going up quickly.
Javier? Yes. On the IFRS 9 impact of minus 15 bps, [SPEAKER DIDIER MICHAUD DANIEL:] Well, this was very well disclosed a couple of quarters ago, but I summarize the key numbers. There is an increase of provisions of around €750,000,000 I am giving you round numbers. Net, it's around €560,000,000 That would [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] The impact on our regulatory capital.
You have to consider that before this, We already had a deficit of provisions that was already deducted on our CET1 regulatory [SPEAKER DIDIER MICHAUD DANIEL:] Capital ratios of around €400,000,000 So the net impact is the difference between the new provisioning levels and this deficit that we already had on our capital ratios. Together with this, this was a negative [SPEAKER DIDIER MICHAUD DANIEL:] Impact on this RWAs. And what if you put together, there is the impact of minus 15 bps. But this is the only impact. So we have not taken other decisions related to bond portfolios, etcetera, evaluation of bond portfolios other than the pure impact of the increase of provisions that, by the way, have resulted into a coverage ratio that goes up by 5 basis points to 55%.
And coming back to your second question, Sophie, on real estate. You asked whether we could envisage further portfolio sales. We're going to be opportunistic. The environment is 1 in which more and more people are quite keen to get into. We have plenty of real estate.
We have started to dispose of it. We are always open to hear to people that want to invest in the market. And if at some point someone comes with Attractive proposals, then we will react positively. This is the case with Testa. And I obviously do not discard that we will have some others that will come and where we will find some point at which we will Trade larger portfolio like in the case of Testa.
But we are clearly going to be considering at all times these strategy versus the granular one of continuing our sale through mostly our branch network in order to evaluate whether it makes sense or not. But if you ask me, it's more likely than not that we will find further pockets of money interested in buying some of our assets. And if that happens in attractive terms, we will obviously Communicate to that in due course.
Thank you.
Thank you, Sophie. Can we move on to the next one, please?
Your next question today comes from the line of Javier Ekanov from Santander. Please go ahead. Your line is open.
Hi, thank you. Thanks very much for taking my questions. I have 2. The first one is, where you could quantify the impact NPL recoveries in the NII in the quarter. And what would have been the yield on the loan book not taking into account these NPL recoveries?
And what do you expect to see in future quarters coming from NPL recoveries? That's one. The second one is on capital. Taking out the IFRS 9 impact, capital core Tier 1 generation in the quarter has been about 7 basis points. And I was wondering whether you think that is a good run rate for the rest of the year or you expect more or less [SPEAKER JOSE ANTONIO ALVAREZ ALVAREZ:] On what basis, on what factors?
Thanks very
much. Thank you, Javier. Maybe Javier.
Javier, how are you? Well, the NPL the accrual of on NPLs has had an impact this quarter close to €20,000,000 Thus, [SPEAKER DIDIER MICHAUD DANIEL:] I would here want to highlight the following. With IFRS 9 in force from earlier in the year, We are required to accrue interest on net Stage 3 past due balances, but the same amount is being provided as loan loss provisions, thus resulting into an offsetting amount with no impact [SPEAKER ANASTASIA DE LA CHEVARDIERE:] On net income, so there is like a reclass from NII to loan loss provision. So as we have already guided For cost of risk, lower, by the way. So everything is in the pack.
But the impact this first quarter is around €20,000,000 We think that this is more or less [SPEAKER JEAN FRANCOIS VAN BOXMEER:] Sustainable. And this has had an impact on our back book yield of around 4 basis points. So I would say that this is 4 or 5 basis [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] Point is the impact we have had. I don't know if you want to comment me on capital. Sure.
Well, on capital, I would you know that we have Lader explaining the different impacts, organic, inorganic. On the inorganic From I would remark the devaluation of the Angola and Cuansa. This has an impact on OCI of around €130,000,000 So that explains close to 8 basis points of this impact. We have other impacts. Amongst them, we have the IFRS nine impact of Esteban Inc, which is 2 basis points.
So there are always some noise here and there. [SPEAKER DIDIER MICHAUD DANIEL:] But on our recurrent organic capital generation, I would say that without the externalities, no, but because obviously, this quarter is affected by so many stories, I would say that a figure between 15 20 basis points can be a good run rate.
Thank you.
Thank you, Javier. Can we move on to the next one, please?
Thank you. Your next question comes from the line of Marta Sanchez from BAML. Please go ahead. Your line is open.
Thank you very much. I've got 2 questions. The first one is on asset quality. The workout of your mortgage NPLs remains very slow. Why is that?
When do you expect to see a significant reduction in mortgage NPLs? And the second question is more on strategy. You are the masters of cross selling. Do you think rising regulatory and supervisory scrutiny could have a negative impact on the revenue power of your franchise? Do you think we'll see rising conduct risk provisions in and that will become structural as we've seen in other countries like the UK?
Thank you very much.
Thank you, Martha. On the second point, we are spending a lot of time in making sure that What we do is properly done. And I think It's our focus on advisory in the selling of mid- and long term advisory products. But obviously, we do cross selling of many other things. And we are, I think, at this stage, quite comfortable that the conduct that we are following here is appropriate and is certainly a big priority for me.
These Actually, I made organizational changes around 3 years ago to have all the conduct compliance reporting to me directly and making this a top priority for the organization. Because as you say, we are very successful commercially, And we just want to make not only be very successful commercially, but also make sure that every part of the process is appropriately managed and appropriately done. And at this stage, I'm very comfortable, and I'm very comfortable also compared to what I see is market standard in Spain. I'm convinced that the regulations will Sort of raised the bar, I have no doubt. And we want to be ahead of the regulations.
And so far, We are. And we have, at this stage, all reasons to believe that we will continue to develop our activity quite successfully and complying with applicable regulations and regulatory standards and also even the demands from society, which are significant in that front. So I'm saying I do not think this is going to be an issue mid- to long term, but not because we're We have an easy road. It's because we're taking these things extremely seriously. And we have now a way of Conducting ourselves, which is actually very strict.
And we'll continue to be investing on that front. With respect to NPLs and mortgage NPLs, obviously, yes, you are right. The NPL ratio for mortgages is not coming down as we would like it to come down. Obviously, the mortgage portfolio is coming down on the other hand. So there's a question also of the denominator.
What is what's happening? Well, you know that there is a New mortgage law in Spain that is going through parliament that hopefully should be approved and will certainly have an impact. While that mortgage law is not approved, What we have had is a situation in which most courts throughout Spain have really stopped executive procedures on mortgages because there are a number of questions that are pending sort of firm European Court of Justice decisions. And that means that the reduction in the portfolio is improving, but the reduction is very slow. And I think it's going to take some time.
We have not been active in selling NPL mortgage portfolios because There are substantial issues when you're talking about doing this. People and first residents, etcetera, it's From a reputational point of view, it's complex. We're analyzing some portfolios that are actually not focused on 1st residence, and we'll clean up the portfolio to see whether we can, through wholesale markets, accelerate the reduction on that front. There's a significant element also here of, Let's say, unlikely to pay is subjective NPLs that are still paying. We have a portfolio Of a significant size, which has been subject to The last change is on the good practice code, as we say in Spanish, they call it the one as practicas, that is basically allowing people to have a 5 year extension of their loan with just Paying a small interest amount.
And obviously, that immediately becomes as a subjective NPL, and it has to stay that way for 5 years. So there's a lot of things that are just happening in which we have no room for action. This being one example. The portfolio will come down but will come down slowly.
Thank you, Marta. Can we move to the next one, please?
Your next question today comes from the line of Ignacio Ulargari from Deutsche
Bank. Yes, I have two questions. On one side, could you comment a bit on how do you see the competitive pressure with some of your competitors Lowering mortgage yields by a week
Sorry, Ignacio. Could you speak up? We have a hard time hearing you.
Yes. Sorry. The first one is on the competitive pressure of in Spain, whether you see a lot of pressure coming from competitors lowering lending yields in And whether this may have an impact on your customer spread assumptions. And the second one, it's On gross entries in the quarter, you have seen almost 50% decline year on year in terms of gross entries. Do you think this might be extrapolated to the year?
There was anything particular? Or just the NPL formation is improving materially, which underlines the Improvement in credit quality. Thanks.
Thank you, Ignacio. Two very relevant questions. On the mortgage side, generally, the competition is stronger in Spain. I think you might remember We had this discussion at year end results, and I was quite clear that I continue to see a very competitive environment Into 2018. And this is what we are seeing.
On the mortgage side, I think it's a fact that the competition is actually is strengthening and being very aggressive. You can see that actually our results For this quarter, new protection for us is stable versus last year. And actually, we're defending very nicely our phone book, to a large extent, thanks to our focus on fixed rate mortgages. But there is no question That market is becoming more competitive. And at the same time, it is also true that we are not competing on price.
We continue to think that the best advice for clients, for most clients, is to at least levels get a fixed rate mortgage, which we normally tend to manage through ALCO and swapping to floating, so that we can obviously manage the interest rate risk Better than the man on the street. And hence, the strategy for us continue to be to protect value and not to enter into a price aggressive strategy to react to others. And we are willing, if need be, to sacrifice volume growth for us to be stable in new production is a good indication of our discipline on that front. And The second point in terms of entries into NPLs, I think we will be having good news On this front, on the NPL side in particular, And obviously, we were also going to be seeing lower entries into real estate assets because we have a lower stock of NPLs. We have made changes later or the second half of twenty 17, we reorganized our recovery teams, grouped under 1 head around 600 people, also Directly reporting to me, and we have put in place many, many Small but very relevant initiatives when taken as a whole.
And what we have seen in the Q1 is pretty good results in terms of lower new entries. Obviously, the comparison with last year is a bit more complex because you also have sort of large items here and there. But beyond the specific numbers, the actions that we are taking suggest to us that we are going to go to an increase sort of Increasing low level of new entries, which will obviously be very helpful for NPL evolution going forward And the least costly way to reduce NPLs, obviously, is not to have them become NPLs in the 1st place. The effort of these 600 people team that existed, the effort of these 600 people team that existed before, but was directly reporting to the various direct deposit capital areas, various regional managers. But now that they have One single sort of management line, I think, is going to yield good results for us this year and contribute to a good reduction of nonperforming loans.
We're expecting to be around 5% by year end. That's our target, and this is a critical part of it.
Thanks very much.
Thank you, Ignacio. Can we have the next one, please, operator?
Your next question today comes from the line of Bridget Schmidt from Autonomous Research. Please go ahead. Your line is open.
Yes, hi there. I've got 2 quick questions, please. One is on the insurance business, which had a very good quarter in Q1, both in the equity and the other income contribution as well as the fees. Is there any sort of seasonality that we should bear in mind when we model this out? Are you confident that these lines can go from here throughout the year?
And then the second question, can you just update us on the swaps Swaps that you've taken out on Telefonica and Repsol, I think the Telefonica swap has been closed. Is there any sort of impact that we should expect In the trading income and on Repsol, I think you might have increased your swap. Maybe you can update us on this and any potential plans to further hedge some of these stakes.
Well, starting with the first question and Javier, maybe you add something at the end. But I am at least I cannot think of seasonality in this line at this stage. But If there's any other reason, you will let us We will let you know. But on that line, I don't see it. Where we have a seasonality positive is in the Equity accounted income coming from Segurcaixadeslas in the Q3 because the month of August is Really low in terms of claims.
As people go on holiday, they do not get sick, one of these marbles. And seasonally, we have higher contribution on the 3rd quarter. But I don't think that the Q1 has been pushed by any Our seasonal factor, it's been a pretty good quarter in a solid trend line. Nothing comes to mind on That would suggest a seasonality that may be corrected later on. On Telefonica and Repsol, We had put a hedge on Telefonica at around €10.5 We obviously have a significant investment in Telefonica, and we thought that for concentration risks, it was right to take A hedge at a point where we saw that value was attractive.
And That hedge proved effective not only as an instrument per se, but also obviously, unfortunately, market price for Telefonica came down and came down to a very low level, after which we decided that at those levels, it was the right thing to unwind the hedge. And we did that was finalized during this quarter at somewhere just below €8 per share. Obviously, that makes us economic capital gain, but the way we account for that is against shareholders' equity. So nothing is going to accrue through the P and L, but we have that €115,000,000 We basically hedged at €10,500,000 and bought €8, and that has made us that economic capital gain over €100,000,000 but it will not go through trading income. In the case of Repsol, we have also a very large position.
We decided to hedge approximately half of our stake, which we have done at around €15.5 There is no further plans with respect to more or less hedges or any other decision around Repsol. What will happen is that when Repsol pays dividends, we will for this Portion that we have hedged is below 5%. We will pass on these dividends to the hedge counterparty. And hence, we will have for the size of that payment, we will have a negative impact on trading income according Into the current rules, no? But there's no as I mentioned before, no other implication or change.
We are and we think we have the duty to manage these positions and particularly the concentration Risk associated with it, but the concentration risk is not the only dimension. The value is obviously very relevant as well. And as a result of combining these 2, concentration risk and valuation, we will continue to, when we file appropriate, Manage proactively our positions.
Thank you.
Thank you, Britta. Can we move on to the next one, please?
Your next question comes from the line of Benjie Croulian from Jefferies.
Yes. Good morning, everyone. I guess I wanted to follow-up on that other question around the Investments division. Perhaps just a little bit more broadly, can you give us an Vacation of how you as a management team assess or weigh the benefit of the earnings stream from those investment stakes versus the potential To free up capital and redeploy it into the core banking business. I'm just wondering how you measure the risk reward?
Or ultimately, What would lead you to think about registering those holdings? The second question is just on just a technical point. I know there seem To be a restatement this quarter, which has reduced losses in the Real Estate division but has increased the drag on the Core Banking Division. I was just wondering if you could explain what was behind that this quarter.
Thank you very much, Benjie. On the first point, we have been for some years now saying that While we like we used to have a lot of minority investments, we would like them each of them individually. We have a core business, which is our bancassurance business in Spain and Portugal, and we wanted to make sure that our results were a consequence of our core business and of extraordinary or one offs coming from these investments. And hence, We marked on a program to reduce the weight of these investments. 5, 6 years ago was a quarter of our capital to the levels Today, it's more in the 5% to 6% of the capital.
And from that point of view, we were Prepared to reduce earnings coming from these investments in exchange for having a clear equity story and I think a lower risk profile or a risk profile at least that is very well known to our shareholders because it's the Business they are investing in what we do in Spain and also in Portugal. This is the conceptual framework. That does not mean the fact that they are non core business. That does not mean that we cannot own them. And that does not mean that We can have some of these investments for a certain time.
And at this stage, We feel the best way to serve our shareholders is to keep these investments in With the appropriate management of value through the instruments we have normally when it or What has happened in the last quarters through derivatives, and we will continue to do so. The way that the Evolution of our bank is going. These investments weighed less and less In our equity story, in our capital, in our earnings, and I think that is going to continue to be the case going forward. Further beyond that, obviously, we have also to keep some of our cards close to our chest As we are talking about very relevant and listed public companies, and I continue to emphasize that We have a positive view on the upside on both Telefonica and Repsol. There is
We have a question on the Real Estate division. Yes, Benjie, I mean, basically, what we had is around €25,000,000 net per quarter being transferred in terms of analytical commission being paid from the Real Estate segment to the Bank Assurance segment that given that it was a noncash item, we've decided to discontinue that. And as a result of that, the Real Estate segment will have €100,000,000 roughly less of net expenses in 2018. And what we've done is restate 2017 accordingly.
Thank you.
Thanks, Benjie. Can we move along to the next question, please?
Thank you. Your next question comes from the line of Carlos Corvo from
Hello, Carlos. Couple of questions quickly. One is on BFA again, but more about BPI's capacity to upstream dividends given that In Angola, they have some restrictions on U. S. Dollars.
So when we think or when you think about the payout of the whole group, Do you count with this cash? Or should we kind of adjust that, which would make sense? And then lastly, and you've already touched on this, but Quickly, how is your approach to asset disposals moving in the context of the IFRS 9 adjustment? So now coverage looks Under high, are you going to use that to accelerate the asset disposals even in the retail segment being a bit more, Let's say aggressive on prices or you still plan to retain as much value as possible? So I understand this is a moving thing, but How is your mind evolving in this topic?
Yes. On the second point, obviously, IFRS 9 has had an impact on provisions for nonperforming loans, not on real estate assets, foreclosed assets. And somehow, the I'm not sure of the question You're linking to our sales of foreclosed assets IFRS 9 will not have an impact on that front. It has had an impact on nonperforming loans. We have been selling also nonperforming loans portfolios in the past, I think with A fairly good impact.
I think during these crises, we've done over 11 or 12 portfolio transactions. And we expect to have a few portfolio transactions during this year as well. And clearly, from that point of view, IFRS 9 is, I guess, helpful, but it's not going to alter what we have already been doing, which is where we see nonperforming loans that we can sell And where reputational impacts or other considerations do not constitute a problem, then we go because we do not want to on nonperforming loans. The exception is when we see a market that values nonperforming loans well below where We see the value. This particularly happens with large tickets where there is also a market.
And when we actually see an opportunity, we hit the market. But Sometimes we have a view that the recovery is ultimately going to be much higher. And because we know quite well these situations, in those cases, we keep that. But Our strategy will continue to be 1 in which we want to accelerate the disposals So nonperforming assets, our budget for this year is in foreclosed assets now is €2,300,000,000 compared to €1,600,000,000 that we did last year. So Very significant, almost 50% improvement.
And where we are going to include some portfolio sales, an example is the agreement we reached with Testa and where we will probably, as I was mentioning before, find occasions to do some other similar transactions. Certainly, There's a lot of interest in the market, and we think it makes sense for us to explore it and continue on this basis. Javier, you may want to answer the first question.
Yes. On the Angolan dividend, well, the administrative process for payment of The 2016 dividend is progressing. The good news from Angola, as you know, is that the government has presented a micro stabilization plan that we think set the wood foundations for medium term growth. And also, the Angolan authorities have Non financial assistance from the MIF, thus giving credibility to all the programs. And also, I think that In due time, the Angolan Central Bank we'll authorize this payment into hard currency.
While to your question, [SPEAKER DIDIER MICHAUD DANIEL:] If this is considered on our payout or not, I would say that we have guided clearly [SPEAKER ANASTASIA DE LA CHEVARDIERE:] For dividends, no? And we have clearly said that you should expect payout ratio in cash over 50%. From here, [SPEAKER JOSE ANTONIO ALVAREZ DE SOTO:] Obviously, there is not a mechanistic approach. And while deciding the management proposing to the board the dividend policy, Obviously, many things have to be considered, not only this one. So I would say that There is not, as I say, a mechanistic approach related to this.
So this is the news that we may have on this.
Thank you.
Thank you, Dara. I believe we have time for one more. And luckily enough, there's one more person on the line. So Could we please have that call, operator?
Your next question comes from the line of Ignacio Serrazzo from UBS. Please go ahead. Your line is open.
Yes. Hi, good morning. A couple of quick ones for me. Follow-up on the consumer lending business, if you can sort of tell us How the customer acquisition has changed since you started pushing that business more decisively? What are the cost of risk actually you're having on that business today?
And then just a number basically on which is the updated book value of BFA? Thank you.
Thank you, Ignacio. Updated book value of BFA is 513. That is the easiest one of There are various questions that you have. The first one is obviously one that is very relevant. It's difficult to I will try.
We continue we have 2 ways to acquire customers. 1 is through our JVs, Telefonica Consumer Finance or be it hard or virtual JV, the case of Telefonica is a hard JV where we are funding clients of Telefonica that want to buy their mobile the mobile phone. And this is obviously working quite nicely for us, both in terms of business and in terms of cost of risk. We have similar agreements with Aflac, with KEA. Now we have reached 1 with MediaMarkt, and we will be launching also this agreement that we've closed with Supermarket DIA.
In these cases, obviously, we have the advantage that when a new client is acquired, 30% of the cases, it's our client Because we have a 30% market share in Spain. So it's even when we're talking about point of sale lending, The information that we have is very significant. And when we're not talking about our clients, then we have Basically, information on every other client because they have actually purchased at our sort of establishments where we are are the merchant acquirer. And one of the client will give us enough detail. We have very quickly the ability to model and understand their payment profile and provide new lending to non clients, which is all this part with competitive advantage because we actually have a lot of information.
30% of them are our clients and the one that are not our clients, we have plenty of information. Once they allow us, they give us permission to access that data because they would have been purchasing at Establishment where we are the merchant acquirer. Again, we have 26% market share in merchant acquiring in Spain. So the power of data here It's quite significant for customer lending. We're using technology and information and agility to serve all this part of the business.
Having said that, the majority of the growth is coming from lending to our own business our own clients. And what we are doing is providing for more pre granted credit limits. We have over 4,000,000 clients with pre granted credit limits, Some of them pretty obvious because we have the payroll, we know what income they have, and we can fairly accurately establish the scoring. In other cases, we may not have the payroll, but thanks to our efforts in advanced analytics and big data, we have been able to now create Scoring models that are equivalent to those, including, again, our knowledge of payments made throughout Entire Comercia, our merchant acquiring network. So a lot of the business that we are doing is business with our own clients where we have A lot of information.
What we're doing is they now know they have that grade pre approved. They have it in one click, and they have it through it can go to the branch network, obviously, but they can also get it through the other channels. And this is making a difference. We just want to be Very quick, very fast, very convenient and at the same time, have the necessary information to make sure we're making sound credit decision, The progress that we have made on these areas is tremendous. Again, this is related to big data.
We actually Put all our information data pools into 1 integrated data pool 3.5 years ago. And during this 3.5 years, we have had a lot of progress in treating this information to our advantage. And one of the Most obvious places is precisely consumer lending, and this is what is working This is a very nicely for us. There was another part of the question, Javier.
You had a question on cost of risk. Well, this is a business that is evolving really fast. And as Pivoli commented, with different initiatives that we try one way or another. But Anyhow, for this year, we are considering a cost of risk for this business around 60 basis points. But Obviously, we are perhaps in the good part of the cycle.
Through the cycle, maybe higher than this. Difficult to give you our figure, but obviously, more close to probably 100 basis points than those 60 basis points that are now being considered. Anyhow, you see that the yield on this portfolio is Sustained net over 9%. So that's making really a good profitability.
Very clear. Thanks.
Okay. Ignacio, thank you very much. That's all we have time for today. Thank you for watching, and I guess we'll reconvene in Q2. Thank you, everybody.
Thank you.