Good morning, and thank you for joining us for Sabadell's results presentation for the Q4 of 2020. My name is Luke Saz. I am the Deputy Head of Shareholders and Investor Relations. I'm presenting today are our CEO, Guillermo Guardiola and CFO, Tomas Barela. This quarter, we plan to spend around 40 minutes presenting our results, and then we will answer your questions for an additional 20 minutes.
Today's presentation will take the following structure. Our CEO will start by going through the key developments of the year before providing some details on the most significant topics. He will also give details about commercial activity and business performance. Our CFO will then discuss financial results, asset quality, liquidity and capital before our CEO concludes with some brief closing remarks, including the main achievements in 2020 and the priorities for 2021. I will now hand over to Chiama Guardiola
to kick off our presentation. Good morning, Luc. Good morning, everyone. Thank you for joining us today. Before we begin our presentation this morning, I would like to Take a moment to reflect on this being my final results presentation as CEO of Sabade.
As you all know, in December, the Board approved the nomination of Cesar Gonzalez Bueno as our new CEO. We also announced this morning that the Board has approved the appointment of a new CFO, Leopoldo Alvear. Consequently, today will also be Tomas' final results presentation. This change in leadership signifies a new chapter for the bank. I have every confidence that Sabade will succeed under the new leadership team.
In the coming months, we'll be working closely together to ensure a seamless transition period. Cesar will lead the development and execution of our new strategy, which will be presented to you in May, soon after the Q1 results presentation. Without further ado, I would like to kick off our presentation by going through the key developments SaaS. Firstly, I feel it's important to highlight the decisive action we have taken to further improve our NPE Quality and our conservative provisioning efforts in the quarter. This explains our full year net profit at breakeven with extraordinary provisions amounting to EUR 1,200,000,000 and financial performance significantly impacted by the COVID-nineteen pandemic.
Secondly, our franchise performance in the quarter has remained solid. Core banking revenue growth was a strong again in the quarter, while recurring costs decreased, both in the quarter year on year. Thirdly, the efficiency plan in Spain has been implemented with great success. The restructuring costs finally amounted to €314,000,000 implying gross annual cost savings of 100 and €41,000,000 going forward. We will fully benefit from these savings as from the Q2 of 2021.
Fourthly, the credit cost of risk was 86 basis points at the end of the year, which is In the lower range of our guidance of 85, 90 basis points, even after migrating some loans to different stages. Next, this quarter, we have made significant progress in our balance sheet derisking by selling EUR 1,200,000,000 of vintage NPAs. That will leave our NPL ratio at 3.6%, with NPLs classified as more than 90 days past due and older than 3 years, having a net asset value of just EUR 360,000,000 And finally, our capital position continued to show resilience. Our fully loaded CET1 ratio remained stable in the quarter at 12%, even after for loading some regulatory implementations previously expected in 2021. In phasing terms, our CET1 ratio ended the quarter at 12.6%, which is more than 3.50 basis points above our regulatory requirement, including our last issuance of Tier 2.
At the same time, we still have €1,200,000,000 of unrealized capital gains remaining in our Help to Collect portfolio that are not included in the capital ratio. Now let me go into more detail about 3 specific topics: the resilience of revenues the resilience of revenues the benefits of the efficiency plan in Spain and the work carry out to upload vintage and legacy NPAs from our portfolio. Let's start by discussing the resilience of our banking revenues on Slide 5. We have some levers to improve our core banking revenues in the current low interest rate environment. In the first place, we expect new lending to be robust, accompanied by lower attrition rates.
Also, TLTRO 3 conditions have recently been improved, allowing us to withdraw an extra €5,000,000,000 at the next option. Moreover, we will benefit from the 12 month extension of the favorable interest rate period with a rate of minus 1% As long as we meet our net lending target, which we expect to do. These improved conditions will lead to higher NII levels, adding more than EUR 85,000,000 in 2021 and EUR 80,000,000 in 2022. On the fees side, If we compare ourselves with our peers, we still have room to increase the fees charged to non loyal customers. Moreover, wholesale deposits may potentially be gradually repriced with negative interest rates.
SME and corporate current accounts And deposits are gradually being charged a variable fee linked to the outstanding balance. So All these levers will improve our revenues and mitigate headwinds such as the ALCO bond sales, We will reduce our NII by €75,000,000 in 2021. In the future, we can eventually offset this impacting by reinvesting. Clearly, interest rates are still going to be a headwind in the coming quarters. In this regards, let me highlight that only EUR 22,000,000,000 of our loan book are sensitive to the decreases of the 12 months ago, and they reprice Saas.
It is worth noting that more than 85% of new lending and 40% of the stock Our mortgage to individuals are fixed rate. Moreover, lending to SMEs and corporates is also mostly fixed rate. Another important factor is that only 3% of the ALCO portfolio will mature over the next 2 years. Therefore, it's not subject to further reinvestment risk. And finally, in the UK, we have a 5 year caterpillar structural hedge with a notional value of £22,000,000,000 at TSB, which will reprice gradually over that time.
Moving on to Slide number 6, you can see the details of our efficiency plan in Spain, which we have successfully executed during this quarter. In the Q1 of 2021, we will have reduced our employees in Spain by 11%. Let me point out that these employees were not part SaaS. Our sales force, they mainly work in the corporate centers and servicing activities. As you know, this efficiency plan focuses on the digitization SaaS.
Of customer services and on the simplification of corporate centers. We believe that we have executed the plan successfully Because we have completed it in a short period of time, just 5 months after starting negotiations and also because it was negotiated process, which ended with a high rate of voluntary uptake among the targeted employees with no impact on employee experience. All in all, this plan should allow us to generate gross annual savings of EUR 141,000,000 with 100% cost saving as from the Q2 this year, implying a payback of 2.2 years. To finish this first section of the presentation, in Slide 7, we go through the improvement of our risk profile after the vintage NPL disposals during this quarter. Since 2013, when the stock of NPLs peaked At almost €25,000,000,000 and our NPL ratio reached 19%, we have normalized our stock of NPLs And lower our NPL ratio to 3.6%.
Baselu NPLs stand at 3 €1,000,000,000 after a reduction of €1,200,000,000 in the last year, which implies a decrease of around 30% year on year. Furthermore, and this is very important, there has been a huge improvement in the profile of these NPLs. It is worth noting that almost Half of our current NPLs are classified as unlikely to pay and that we just have a small exposure to NPLs older than 3 years. Moving to moving on to business performance. Looking at our performance loans by region in Slide 9, This quarter growth continued to be driven by a very dynamic mortgage book at TSB as a result of higher activity levels in the UK market.
This was partially offset by a migration of performing loans to different stages in Spain and by lending volumes in foreign branches. Volumes in Mexico decreased in the quarter, but they were still up by 13% year on year. Overall, group performing loans grew by 0.4% in the quarter and by more than 4% year on year. Slide 10 shows customer balances excluding TSB. On the left hand side, you can see that performing loans decreased slightly in the quarter due to a conservative migration of loans from Stage 2 to Stage 3 with a total value of €700,000,000 but they grew by more than 4% year on year.
2 of the main segments to support volumes were mortgages, We show a solid growth both in the quarter year on year and SME lending, which increased in the quarter despite the lower demand for ICO guaranteed loans. On the liability side, our customer funds grew by more than 1.5% in the quarter, driven by both on balance sheet and off balance sheet funds. Mutual funds grew by more than 6% in the quarter, boosted by higher mark to market valuations. Moving on to Slide 11. In terms of commercial activity in Spain, we can see that performance in the 4th quarter was good, particularly when taking into account the COVID-nineteen restrictions that have been in place during the year.
The total turnover of our retail payment services declined mainly due to a drop in payments by non Spanish individuals because of the lower levels of international tourism. On the other hand, point of sale turnover originated by Spanish individuals remained flat year on year. In terms of market share, we recorded an increase of 21 SaaS. Credit card turnover remained at pre COVID levels. Our market share decreased slightly due to our higher exposure to corporate cards, where turnover has fallen significantly due to the COVID restrictions.
New insurance premiums show a strong recovery and ended the quarter close to the levels of the Q4 of 2019. Regarding mutual funds, we are taking advantage of our partnership with Amundi and have recorded the highest annual volume of assets under management this year. Our market share has increased by 4 basis points year on year. Moving to Slide 12. At the bottom left of the slide, We can see how the new mortgage lending has consolidated its recovery in the Q4, reaching the highest levels of the year.
At the same time, we have observed positive growth in new corporate new loans to corporates with a higher proportion of non ICO guaranteed loans. In fact, only around 25% of new SME loans recorded in the Q4 were AECO guaranteed loans. As you know, most of this demand was concentrated in the Q2 of 2020. Throughout the year, new SMEs loans were up By 38% compared to 2019. Looking at the right hand side of the slide, We can see how credit facility drawdowns and consumer loans have decreased slightly as expected.
Turning now to TSB in the Slide 13. On the asset side, net lending grew in the quarter across products. Mortgages continued to perform very well, growing by 3%. This was mainly driven by the recovery of mortgage market activity. Unsecured lending growth was supported by digital improvement in our offering as well as by more competitive pricing.
Business banking loans kept growing but at a slower pace, driven by demand for the U. K. Government's bounce back loan scheme. Overall, year on year, net lending was up by more than 7%. On the liability side, customer funds continue to increase across all products, recording significant year on year growth of around 14%, which shows the trust that customers place in TSB.
The figures on the left hand side of Slide 14 further demonstrate the good performance of TSB's commercial activity. New mortgage lending volumes are the highest they have been in several years. Meanwhile, new unsecured lending also continues to perform well. Additionally, in 2020, TSB has also made substantial progress in other areas of its strategic plan. Regarding customer focus, TSB has continued to enhance its offering by launching new products and establishing new partnerships.
A new brand proposition has also been launched, built around the slogan, Life Made More. TSB Also has a focus on simplifying its operational model. This year, 93 branches were closed and the workforce was reduced by 600 FTEs. The pace of digitization has accelerated during the year, with customers increasing their use of digital channels and digital sales consolidating as a solid growth trend. The modern multi cloud and UK based IT platform, SDG, has been vital in accelerating the delivery of its strategy and extending digital service to customers.
In the Slide 15, we provide details about the key COVID related financial solutions that we have offered to our customers, both in Spain and in the UK. Statutory payment holidays in Spain are currently nonmaterial. We granted around EUR 1,000,000,000 of statutory payment holidays. When those gradually expired, around 60% of the volume was migrated to the sector specific program. The other 40% of expired Statutory repayment holidays have mostly resumed payments with no significant impact on asset quality.
The outstanding principal of sector specific payment holidays ended the quarter at €2,400,000,000 with no material past due exposures. In the UK, TSB granted payment holidays amounting to more than GBP 5,000,000,000 Currently, life exposures account for less than £400,000,000 with no significant uplift in NPLs coming from expired payment holidays. At the bottom of the slide, we can see the solutions provided to SMEs and corporates. In Spain, in terms of the ICO Guaranteed loans, we have granted EUR 11.9 percent sorry, EUR 11,900,000,000 so far. And finally, in the UK, TSB has granted around GBP 600,000,000 in BBLs.
These loans, as you know, 100% guaranteed by the government. Turning now to sustainability in Slide 16. Over the last few months, Sustainability has continued to be a central topic at Banco Sabade. We have formally declared our support for recommendation The task force on climate related financial disclosures. In Spain, we have continued to launch products that are more sustainable.
This includes our fixed rate green mortgages and our new credit cards made from materials that help to reduce our carbon footprint. Moreover, in 2020, we have granted over EUR 1,100,000,000 in finance for renewable energy projects. Lastly, TSB has announced its plan for net zero carbon emissions by 2,013. And with that, I hand it over to Tomas.
Thank you, Joao, and good morning, everyone. Moving on to the financial results. I would like to start by going through our quarterly P and L, where we have recorded net losses of €201,000,000 mainly as a result of around €400,000,000 worth of different extraordinary and seasonal impacts. Specifically, the negative impacts are The extraordinary costs related to the restructuring plans, particularly in Spain, which amounted to €314,000,000 I started on the provisions of €380,000,000 associated with the aforementioned NPA disposals that were carried out in the quarter, €115,000,000 due to the migration of loans to Stage 2, along with €62,000,000 Sasse. Provisions at TSB associated with charges relating to the treatment of some customers in arrears.
I would like to highlight that in order to finance these Efficiency plans and some NPA disposals, we sold government bonds from the Help to Collect portfolio, generating capital gains of €599,000,000 Finally, we recognize the IDEC, which is actually the Levy on deposits taxed by the regional authorities in Spain and the Deposit guarantee fund, annual payments that usually take place in the Q4 of every year. This amounted to €146,000,000 Turning to the annual P and L. This year, we are practically at breakeven due to the negative impact SaaS. Of 1 offs. In addition to the items I just mentioned that have impacted the quarterly P and L, The annual results have also been impacted by credit provisions, which are amounted to around €650,000,000 and were related to the new environment generated by Saas.
COVID-nineteen. Finally, on the positive side, we have gained €293,000,000 on the sale of Sabadell Asset Management, which Involves entering into a partnership with Amundi in order to work together and foster this business. We will now I'll go through the different items of the P and L as we usually do. During the quarter, NII increased by 105 sorry, 1.5% and was mainly boosted by the good performance of loan volumes, Particularly in the UK, where we saw high volumes of new mortgages and the partial recovery of overdraft fees. At the same time, factors that reduced NII included lower yields and the ALCO portfolio contribution.
In the year, NII fell by 6.2%, driven by the same factors and by the 2019 consumer loan securitization. In terms of front book yields, we defended prices in both loans and credit lines to SMEs and corporate. In contrast, there was still considerable pricing pressure in consumer loans and especially in mortgages. Noticeably, and despite the low interest SaaS. Great environment and tight competition.
Overall, we have managed to protect our front book yield. Regarding group NIM, this increased in the quarter due to a higher customer spread and a lower wholesale funding cost. Customer spread increased slightly in the quarter as a result of the lower cost of customer funds. Moving now on to our fixed income portfolio. As I mentioned before, this quarter, we sold Spanish and Portuguese government bonds from the Help to Collect portfolio in order to finance our restructuring plan in Spain And some of the institutional NPA disposals.
These transactions have generated substantial capital gains of around SaaS. €600,000,000 and we still maintain hefty unrealized capital gains of €1,200,000,000 after the Saas. Moving on, looking at fee income. This quarter, fees have increased by 7%. This growth Has been driven by both service and asset management fees.
In this regard, service fees increased by 3% as a result of the good performance of syndicated loans. Nevertheless, it is worth highlighting that service fees related to customer activity and transactions remain constrained as a result of the lockdown measures And restrictions that we that were put in place to tackle COVID-nineteen. On the other hand, asset and wealth management and insurance fees Where the other drivers of growth benefiting from both Q4 is seasonality. Leaving now the revenue line to one side and moving on to costs. Total costs increased in the quarter as a result of the restructuring SaaS.
The efficiency plan in Spain. Expenses related to the restructuring plans in both Spain and the U. K. Also had an impact on total costs. Additionally, I would like to highlight the positive strength of the recurring cost base, which keeps decreasing quarter on quarter And year on year, driven by lower staff expenses at ex TSB level due to COVID-nineteen and lower general expenses at TSB.
In this context, recurring costs decreased by 3.4% quarter on quarter and by 2.4% on an annual basis. Moving on to credit provisions. I would like to highlight that credit cost of risk ended the year at 86 Lucas. Basis points in line with the guidance of 85 to 90 basis points. On a quarterly basis, credit provisions increased Sasse.
EUR 115,000,000 as a result of the migration of loans to Stage 2. However, it is also worth noting that TSB's Provisions decreased given the improved macroeconomic outlook once a no deal Brexit had been rolled out. In addition and on an exceptional basis, this quarter, we recorded €325,000,000 of additional provisions Sasse. Related to the aforementioned NPL sales. By executing these disposals, we have offloaded the remaining all NPLs that we had kept from the previous Saas.
Finally, let me also highlight that COVID-nineteen provisions were around €650,000,000 in the year. Now in the following section of the presentation, we will look at the key balance sheet metrics. We'll start this section in Slide 28 of the presentation by giving an update On the breakdown of group performing loans and the exposure to sensitive sectors as well as an update on the structural analysis that we presented in Q2. The portfolio mix and the exposure to sensitive sectors have remained relatively stable in the quarter. 67% of the portfolio is collateralized.
The exposure to the most sensitive sector remains at circa 8%, While the proportion of eco lending increased by 2 percentage points in the quarter. The bottom left The chart shows that actually the level of debt to our assets of all the different Segments of micro enterprises, SMEs, corporate, etcetera, Has remained pretty stable since May, month after month, which is a sign of How the financials of the SMEs and corporates are evolving and therefore, How their creditworthiness is being kept up until now. Their structural analysis Update shows a multiplier of pre COVID PD levels, which remains at 1.3x in the base scenario and increases from 1.8 times to 1.9 times in the stress scenario. And it's worth mentioning here that if we look at the 86 basis points of cost of risk That we achieved the multiplier to the last year corresponding level is around 1.9 Times, therefore, showing that we've provided conservatively for COVID-nineteen. In Slide 29, you can see that our group NPL ratio was improved significantly this quarter to 3.6%, mainly driven by EUR 1,000,000,000 of NPL disposals At low levels of NPL inflows from 90 days past due loans in the quarter, which demonstrates the effectiveness of the support measures that have been put in place with COVID-nineteen.
Our NPL coverage ratio remained stable at 56% even after disposals of vintage NPLs. The Stage 3 coverage ratio stood at 39%. On the top right hand side, We highlight the NPL exposure by stages, reflecting changes in the volume of loans classified in each different stage. Finally, we have a residual exposure to foreclosed assets of less than €1,400,000,000 of which 95% are finished products And 76% are properties that have been repossessed in the last 4 years. Turning now to Slide 30.
The group once again ended the quarter with a strong liquidity position, reflected in an LCR of 198 percent €48,000,000,000 of high quality liquid assets. The loan to deposit ratio ended the quarter at 98%. Finally, as we showed last quarter, in terms of Central Bank funding, we currently have €27,000,000,000 of outstanding Sasse. TLTR 03. And as mentioned in the highlights section, we have an option to withdraw an additional €5,000,000,000 as from March this year.
In terms of DFS, we have £3,100,000,000 outstanding, which will likely be rolled out into new DFSME facilities. Moving on to capital. On the following slide, we show the evolution of the group CET1 ratio in the 4th quarter. Starting from the reported CET1 ratio at the end of the Q3 and following the graph to the right, we show the different drivers and capital impacts in the quarter. As the main positive impact, we have the new treatment of IT software, which added 48 sorry, 45 basis points to the ratio.
Then as negative factors, we have firstly, some regulatory impacts expected in 2021 that were front loaded this quarter, which reduced the ratio by 27 basis points. This is mainly explained by 10 basis points from the final application of TRIM to the low default portfolio, Sasse. 80 basis sorry, 8 basis points from the effect of the secured models update at TSB And 6 basis points from the early absorption of all the RWAs covered by the asset protection scheme. So let me highlight that we have completed the application of TRIM and we have also absorbed And the remaining RWAs under the asset protection scheme before the maturity of the scheme in July 2021. Sorry.
Secondly, organic capital generation, which includes our quarterly pretax loss, Higher intangible asset balances, other organic reductions or deductions and the variation of organic RWAs. All in all, organic capital generation subtracted 17 basis points from the ratio. And finally, the IFRS 9, transitional reduction that had a negative impact of 38 basis points, which is related to the migration of some loans from Stages 1 and 2 to Stage 3 and also due to the reduction of the provisions that were faced in from the beginning. All these elements bring our CET1 ratio to 12.6% and our total capital ratio to 16.1%. Finally, our MDA buffer stands at 3 57 basis points above our requirement of 13%, including the Tier 2 bonds issued last month.
Regarding our NREL requirement, it is worth highlighting that We are already compliant with the new requirements that are now based on both risk weighted assets and leverage ratio exposure. In terms of risk weighted assets, our requirement for 2022 is 23.8%, and we are already at 24.75%. And if we look at our requirement based on leverage ratio exposure, The requirement is 6.22 percent for 2022, while we are already at 9.25%. We are also well above the subordination requirement for both metrics. And with this, I will hand over to Jaime, who will conclude our presentation today.
But first, Let me just say that so this is my last results presentation with Sabadell. I have many reasons to be grateful to my bosses, my colleagues in Sabadell and very, very, very especially to my teams. But I will find the right forum to do so. Here and now, I want to express my gratitude to all the persons, market participants that I have met over these almost 20 years and with many of whom I have enjoyed a long lasting professional but also candid and close personal relationship for which I am deeply grateful also for you for your interest and support following us over all this time. I will see some of you shortly in the roadshow.
Jaime? Thank you.
Thank you, Tomas. To end our presentation today, I would like to highlight our main achievements during 2020 and our key priorities for 2021. Firstly, despite the lockdown, we have consistently ensured most operational and service continuity without lowering our level of service. And of course, we have done that while taking care of our customers and employees. Secondly, we have continuously demonstrated SaaS.
Even when a very severe lockdown was in place in Q2, we originated more than EUR 7,000,000,000 of IQO guarantee load in Spain and more than GBP 5,000,000,000 of payment holidays in the UK. Thirdly, we have Created long term strategic partnership to enhance our offering and our customer experience through the alliance of Sabade Asset Management with Amundi. Regarding costs in Spain, we have executed a highly successful efficiency plan, which will reduce our cost structure going forward. And in the UK, TSB has made substantial progress on its restructuring plan, which is expected to complete 1 year ahead of schedule, while increasing its commercial momentum. As a result, we expect TSB to breakeven in 2021 on a stand alone basis.
Additionally, this quarter, we offloaded practically all the vintage and legacy NPAs, which has further derisked our balance sheet and substantially improved the composition of our problematic stock. Finally, this year, we have integrated sustainability into Sabadell business model and strategy. Good examples of these are the launch of the Sustainable Development Goals bond framework and the inaugural issuance of EUR 500,000,000 of green bonds. On the next slide, we show our 3 main strategies, priorities going forward. This will be developed in our new strategic plan, which will be presented in May soon after the Q1 results presentation.
We will focus on our domestic market, where we have a solid franchise. We will transform our retail banking business and generate efficiencies using the group's Saez. And thirdly, we will boost our leadership in Spain SME segment, consolidating our solid position in a highly profitable segment of the business. To sum up, based on these pillars, we will focus on creating value for Banco Sabade's shareholders. And before we move on to the Q and A section, let me share with you a couple of more personal comments.
Picking up on the theme that I opened the meeting with and in a similar vein to what just heard from Thomas, I would like to close this morning's presentation by saying that it has been a real privilege to lead Sabadell over the last 13 years. I would like to thank everyone in this room for your support and interest in Sabade. I would also like to take this opportunity to thank all of those who have gone to such great lengths behind the scenes to make these results presentations possible. On a more personal note, it has been a real pleasure to work with Tomas. I would like to thank him on behalf of everyone at Sabade for his enormous contribution to the bank.
I have every confidence that under the new leadership team, the bank will continue to go from strength to strength. Finally, I would like to thank everyone who has been following Sabadell since I first joined the bank. Thank you, you all. And with that, I will now hand it over to Luc to kick off our Q and A.
Thank you, Xiaoma. We will now begin the Q and A session. As we only have a limited amount of time available, I would kindly ask you to limit the number of questions to no more than 2. So operator, could you open the line for the first question, please?
Thank you so much. And the first question comes from the line of Ignacio Ulargui from Exane BNP Paribas. Please go ahead.
Thanks very much for the presentation. And on the Saas. Tomas and Iomma. I have two questions. 1 on NII.
I mean, you have covered a bit The main headwinds and tailwinds, but what should we expect in terms of group NII into 2021? And how confident you are on meeting the TLTRO benchmark, given the trends that we see in lending with large Saas. Corporate is down 1.8% quarter on quarter. And then second one is, if you could provide a bit of color on what has been the mitigation that has Saas. In between stages, particularly focusing on the Stage 3, where there has been the €700,000,000 migration in the quarter.
Thank you.
Tomas? Thank you, Ignacio. Well, as for NII, what we see for Next year and I will be relatively contained in terms of guidance since, as you know, The new strategy will be communicated in May. And therefore, there, You will see the whatever is disclosed in terms of the future. But what we see in terms of NII is pretty much disclosed in the slide in the presentation actually.
So it's true that there is a headwind given the reduction of the ALCO portfolio. Also, it's more than Said by the additional benefits from the TLTRO, we see we've seen and we keep seeing going forward a Strong volume performance and also the opportunities in terms of Managing prices on deposits will contribute to A strong NII performance, which in the Q1 will see the headwind of the ALCO, But at the same time, the other factors also mitigating. In terms of migration to the of unlikely to pay to Stage 3. This has been driven by SaaS. Actually, the environment in terms of the expectations for all of us banks To be very proactive in trying to anticipate and being conservative on the classification of exposures in the COVID situation.
So we did this, and we had also anticipated that we would do it in our previous result presentation and Sasse. We would complete the analysis over the Q4, and this is what we did. It's a result of this thorough and individualized analysis trying to follow the guidelines of not Being automatic in anything on classifying or not classifying exposures into stages, but being careful and also very conservative.
Okay. Thank you. Can we move on to next question, please?
Thank you so much. And the next question comes from Carlos Cobo from Societe Generale. Please go ahead.
Hello, gentlemen. Thank you for the presentation and all the best in the next stages For the future. A couple of questions. The first one is just to clarify, touching on the EUR 115,000,000 Positive impact on per provision profit from the restructuring plan, I'm not sure if I got all the numbers correct Today, because I was the sound wasn't great, but have you said that the cost savings will be around 141,000,000 And that you're expecting lower NII from the ALCO contribution of around EUR 76,000,000 next year. That means that you sold more ALCO than initially planning, and that's like downgrading the potential Positive impact on pre provision profit.
Am I reading that correctly, please? Secondly, if you could discuss briefly what are your feeling on the initial conversations regarding a potential divestment Of PSB, I'm still confident that, that could free up substantial capital to continue to finance New efficiency savings in the rest of the group. Thank you very much.
Yes. Thank you, Carlos. You are right in the figures. So it's EUR 75,000,000 NII the amount of NII that is being given up Through the sales of the ALCO portfolio and EUR 115,000,000,000 the savings in the 1st year in but Also, this €75,000,000 actually Are the result of sales that we have done to cover for the additional Charges due to the sale of the NPAs. Therefore, the amount actually of NII given up due to the coverage of or covering the extraordinary costs of the restructuring costs It's €41,000,000 So we will see these savings in the P and L in 2021.
Notice that we've already Executed part of the savings in this year in the recurrent at the recurrent level, with a decrease of 2.4%. So when we've been referring to our savings of around 5% of the base costs, part of them have been already Achieved this year and will be completed next year. As for The additional NII given up to the EUR 75,000,000 Due to the sales that we've used to cover for the charges of the NPA sales, we will see also Savings in cost of risk going forward from those assets and also in the costs Sasse. Related to manage those portfolios. So there will be also some savings there related to these the Celoz's NPAs On top of the derisking that they mean.
As for the second question, Carlos, there is no change over there. But Jaime, please.
No, no. I want to say the same, there is no changes in our position. And as we always explained, management and the Board will consider any strategic
Saas. Thank you, Carlos. Can we move on to the next question, please?
Thank you so much. And the next question comes from the line of Maxim Mishim from JB Capital. Please go ahead.
Hello. Good morning, everybody. Here is Max from JB Capital. Thanks for the presentation and taking our questions. Good luck to you guys And the new endeavors, I have one question on capital and one on asset quality.
The first one on capital, Now that you have front loaded some of the regulatory impacts that you've been expecting for 2021, is there anything left That can negatively impact your capital this year. And the second is on the asset quality. How do you see your cost of risk Evolving in 2021, you mentioned that the disposals of NPAs should help getting lower cost of risk. And when do you expect NPLs to peak? Thank you.
Yes. Thank you, Max. As for the first one, There are so for 2021, what we see is a path Around a stable path around the levels of 12%. So Little small variations can come from how eventually RWA's inflation behaves In the year, in comparison with organic generation, and we see there the potential range Of variation being lower than 10 basis points, so 10 basis points Around the level of this 12% and for the rest of stability. We don't expect for 2021 specific Regulatory headwinds or challenges.
The next one, the next known one It's the EBA guidelines. This could be in 2022, 2021, Depends. Some of us see it in 2022, some in 2021. The impact that we see coming from this is like the range lower than 15 basis points [SPEAKER IGNACIO CUENCA ARAMBARRI:] And organic generation will cover this. And the second one was, sorry?
On asset quality and
Okay. Asset quality. If you look at the 86 basis points that we posted, I said that it's been like 1.9x last year's the equivalent of last year's For 2021, with the current scenario, With the current scenario as challenging as it may be, We don't see we see the level going down, As we've been saying in the last quarters, more or less there, no changes. We see it towards back to the level of last year, but above it. So A little bit less, a little bit lower than halfway from this year to last year, right?
I hope this is helpful.
Okay. Thank you, Max. Operator, next question please.
Thank you. The next question comes from the line of Mario Ropero from Bestinver Securities. Please go ahead.
Hi, good afternoon. Well, good morning. And again, all the best of luck for you too. My first question is on the average margin of the company loan book. There has been a bit of pressure over some quarters in recently from 2.2% to 2%.
You think that the 2% is sustainable? Are you expecting some pickup in there? How do you see this item? And then the second one is just a clarification on an NII item of EUR 7,000,000 in the quarter, a positive one off. If you could clarify, please, what this is?
Thank you.
Mario, thank you very much. As for the first one, We see it stable. We are not seeing a huge competitive pressure. We think this can be stable. Sasse.
And for the actually, one of the drivers for NII this year with Together with volumes is some spread stability as we see it now, okay? As for the second one, this is a one off that had to do with some In yield or interest coming from tax matters from the past, Which has been sectorial, and we've recovered this quarter. That's a one off. It's not recurring.
Thank you, Mario. Operator, next question, please.
Thank you. And the next question comes from the line of Britta Smith from Autonomous. Please go ahead.
Yes, hi there. Well, firstly, best wishes from me as well to you both. Regarding my questions, On the EUR 700,000,000 reclassification into unlikely to pay, it seems like a rather large classification in just 1 quarter. Can you give us a little bit more background as to what exactly you've looked at and which portfolio is this impacted? Am I right in assuming that it's mainly commercial real estate And large corporate.
And maybe you can also tell us what the performing loan growth would have been without the reclassification in corporate. And then secondly, the question on the NPL sales, it looks like the provision of EUR 325,000,000 It's rather large in relation to the NPLs that were sold. What explains such a large discount on the disposals, please?
Thank you very much, Britta. As for the first one, the reclassification, So basically, it was more corporate than the other segments. There was a little bit of All segments there, but basically, it was corporate based On a conservative approach and demanding approach on looking forward, Take into account cash flow prospects with haircuts due to sectorial impacts, Using this to classify as unlikely to pay and taking into account also the sector exposures And therefore, affected more corporates, but no short term signs of Difficulties to pay, right. As for the second one, well, You will remember that last year, we suggested at the year end results presentation that we would sell portfolios Because we found it more efficient. So those portfolios, we could have kept going on and recovering, working out the usual way.
It's more efficient in terms because of a number of things, but the regulatory treatment And also the of course, how selling these portfolios has a positive impact on the perception of derisking of The balance sheet and so a number of reasons, right? Last year, of course, the haircut that we expected would have been lower, And that's what we suggested. This year, the haircut has been higher because, after all, we are in a COVID environment, and therefore, there are more, so to speak, cautiousness around these things. And therefore, The kind of the market was in a different level. We still felt that it was good to sell them, and we did.
That's the reason that explained those haircuts. Last year or pre COVID, The level of haircuts that we had anticipated was more or less half the level of or 60% the level that we've seen this year.
Thank you, Britta. Next question, please.
Thank you. And the next question comes from the line of Andrea Sasse. Filtri from Mediobanca, please go ahead.
Yes. So first of all, thank you for all of our interaction in the SaaS. As to my questions, did I understand correctly that there could be further repricing of fees In 2021 and a cost of risk clarification, Thomas, you said before Indicating your kind of guidance for cost of risk for 2021 as midway between Last year and the previous year, did you mean in between 2019 2020 reported cost of risk? Or can you just clarify specifically Which years you were talking about? Thank you.
Thank you very much, Andrea. Yes, What I meant was we've finally ended up this year with 86 basis points. I said that this the multiple to the level of 2019 in terms of NPL provisions, it's been around 1.9 times. So it means in 2019, that was Half of this around a little bit more, but around 0.5% half the 86 basis points, Where we see the cost of risk for 2021 is a little bit below Halfway at this level. So more or less 60% Down the level of this year to last year's, right?
This is more or less where we see it. It's consistent with what we've been saying in the last quarters.
Okay. Let's move on to next question.
Thank you. And the next question comes from the line of Stefan Nedialkov from Citi. Please go ahead.
Hi, guys. Good morning. It's Stefan Miglielco from Citi. Best of luck to both of you going forward. Two questions on my side.
The first one is actually a follow-up to Carlos' question on the EUR 100 and Saas. €15,000,000 of pre provision profit savings that you expected as of last year. So is it fair to assume that this has now gone down to around 65 from 115, which is 141,000,000 of cost saves minus 75,000,000 of the ALCO NII headwind, so 141 minuteus 75 equals 66, which is down from 115 as of last year. And my second question is on potential NII levers. You mentioned that you have Been charging deposit fees on SME and corporate deposits.
Can you give us a feel for what the Of the charging right now, what percent of your deposits are being charged for deposit fees? And what's the level of the deposit fee? Is it close Sasse.
Thank you, Stefan. Well, I will try to clarify the question around the pre provision. So this year so you need to 1st of all, you need to try to compare with the recurrent level this year. So if you look at the recurring level this year, the Increase in pre provision for 2021 as compared with this will be in the range that you had come up with before today's presentation at the beginning. So You will find this around this EUR 100,000,000 if you compare the Recurrent level this year with 2021.
So the fact That we are disclosing the savings with the NII that we've given up For all the total sales of the asset protection scheme that amounts to 75,000,000, This actually is offset by other things, and there are also savings below the Level of the pre provision profit related to this extra EUR 30,000,000 that we've given up as a result of the Sales that we've done to cover the charges for the NPL sales, right? But there are other things that offset this A slight decrease at the level of pre provision profit. So if you look at the recurring level again, In 2021, we'll see an increase around this level that you started mentioning, right? As for the second one, we are not disclosing the exact levels of pricing that we are imposing on deposit. You will forgive me for that, Right.
Okay. Operator, could we could you connect the next caller, please?
Thank you. And the next question comes from the line of Marta Sanchez Romero from Bank of America. Please go ahead.
Thank you very much. Just a follow-up on the NPL sales. Could you be a little bit more explicit on the loss given default? Because I'm trying to compare that with the current Stage 3
Saas. It seems
low. Regarding to this, according to your Pillar 3, you had €1,400,000,000 of Gross NPLs are older than 5 years back in June. What's the balance today after your disposals? And the last question, if I may. Could you please provide an update on the status of a potential sale of TSB?
And is this Still an option that you are exploring. Thank you.
Thank you, Marta. So the LGV of the sales, the €1,200,000,000 sales that we've Realized this quarter is around over the gross value is around 70%, 72%. If you are trying to tie this with a disclosure with Don Of €360,000,000 of NPLs older than 3 years, Here, the coverage is around 60%. So the if you try to compare the 2, which doesn't necessarily mean that this is going to be the case, but because as I said, The assets that we sold this time around were much older than those or than these EUR 360,000,000 of net asset value. But if you try to compare this, you would come up with a 10% on the gross value that basically would be less than a 30% of the net value.
So around close to around our EBITDA be lower than EUR 100,000,000. We don't have plans at this moment to sell these assets or to sell portfolios with these assets. But the important thing here is that This is the exposure that we have of NPLs older. So they pass due NPLs older than 3 years, and this is very important because it means that the portfolio is absolutely current. In terms of the second one, Jaime?
Okay. And regarding your second questions, as I said before, There are no changes in our position. And as we have always explained, management and the board will consider any strategic options that We'll create value for the shareholders.
Okay. Let's move on to next question, please.
Thank you. And the next question comes from the line of Carlos Peixoto from Caixabank. Please go ahead.
Hello, good morning. First of all, thank you very much, Jaime and Tomas, for all the years and good luck Saas. Now going into the two questions. My first question Actually, on the Stage 2 loans migration, so you explained a bit what happened with Stage 3. So we're wondering here What segments and what type of situation and what were the drivers for the reclassifications on Stage 2 That we saw in the quarter as well.
And second question would actually give it on your expectations for dilution of fee income Throughout 2021. And finally, just a third question, if I may, on costs, which would be Basically, the press has reported on the possibility of Sabadell carrying out an additional restructuring plan this year. Could you share some color on whether that will be the case? Or what can we expect there in 2021? Thank you very much.
Thank you, Carlos. Again, migration to Stage 3. We had a net increase of EUR 3,800,000,000 of migration to Stage 2 in the quarter, and this entailed EUR 115,000,000 Of provisions. At TSB, we had a net reduction of €1,300,000,000 of Stage 2, which implied a reduction of €22,000,000 in provisions. The kind of criteria we used for this was related to the evolution of payment holidays that Had in TSB, for instance, had had in the second and third quarter basically the second, a significant increase due to The volume of customers that applied and achieved payment holidays And therefore, being very cautious about what this meant and using some other indicators in terms of the creditworthiness that wasn't necessarily meaning that they would have difficulties as it's been proven afterwards.
They were classified as Stage 2. Then, David, this has been reduced as all those customers have resumed The bulk of those customers have resumed payments normally. In terms of ex TSB, the increase has been in the 4th quarter. The criteria use has been also, again, as I described earlier, regarding how we've came up We've come up with reclassification to unlikely to pay. Also for Stage 2, we've taken into account some Short term indicators in terms of stress in liquidity, sectorial views on how Looking forward, how the heat could be in terms of haircuts on revenues And also trying to undertake a view on how the cash flows of these different customers would behave.
In terms of individuals, we've taken into account their situation in terms of employment or unemployment or Their situation, if they had a furlough, for instance, and in which sector they work Or they received the furlough or the payroll from this kind of thing, very The very detailed, very analytical, very data driven criteria to be used. And I already Said that for Stage 3, it was mainly forward looking cash flows using sector views, haircuts, expectations, very conservative. In terms of the 2 first questions or sorry, no, The second and the third, we see positive trends for fees as we saw for NII In the year, we need to remember that we had a Q3 in 2020 that was Very good, a significant rebound, driven both by ex Sasse. TSB and TSB very significantly because in the UK, the pressure on revenues was very significant in the second quarter. We've seen a 4th quarter here even in a situation where, again, the restrictions and partial lockdowns have been in place, in which we've been seeing both also in ex TSB and TSB A good behavior, a powerful behavior of revenues.
So we still see activity. And we see this also going forward. As we've highlighted In the second slide, I think, in the presentation, one of the levers we have is to keep going through The policies of customer loyalty and charging fees and commissions for where We don't have customer loyalty, and therefore, this has been a path that we followed already in the past And where we still have potential. So based on all that, we see potential for growth. In terms of cost and the possibility of another Exercise or restructuring exercise, this is this will be part of the strategy strategic plan release And that we will hold in May and you will allow me please to not disclose anything at this stage.
Okay. Can we move on to next question, please?
Thank you so much. And the next question comes from the line of Ignacio Terezko from UBS. Please go ahead.
Hi, good morning. I join my colleagues in thanking you for all these years Wishing you good luck for the future. A couple of quick questions from me. The first one is on NII. Most banks seem to be quite confident on meeting The TLTRO target, if I have a look at the numbers between September December, there seems to be like 1% decline on the stock that looks eligible.
So what do you expect, Especially considering there's a bit of legacy echo in the quarter. And what makes you confident on that? And then the second question is on cost of risk. Obviously, a difficult one to go beyond 2021, but then do you feel the decline in 2021 should be followed by no decline in 2022? Or are we basically talking about Kind of spreading the cost of risk actually over a longer period of time, given that the support schemes from the government are still in place.
Thank you.
Thank you, Ignacio, once again. And as for the first one, yes, we are confident That we will meet the requirement. It's true that you've pointed out to some variations that we've seen in the quarter, but those are Actually, one offs that for the requirement, we are flat actually. And So therefore, we don't have, at this stage, significant headwinds. So we are confident.
As for the second one, cost of risk, we see a sustained Passed downwards, so actually, IFRS 9 should, as you know, Account for so when there is a significant and abrupt change in the environment, IFRS 9 should actually absorb upfront Almost all the effect of such change, right? So what we are seeing is in 2020, Even if we haven't seen a significant bad behavior in terms of NPL inflows We've actually we actually posted twice as much provisions As we had last year. This means what we all banks in general have done is building under IFRS 9 and is Right thing is building buffer for the future NPLs if they happen. So that's why we say that the SaaS. The peak in the NPL ratio, I think, It's in 2021, a bit above where we are.
And then cost of risk will behave, in our view, going down, as I described earlier, and we'll continue to go down in 2022 to back to a more normal pace. So actually, the guidance I gave for 2021 is not back to normal, not back to pre COVID, so allowing for additional effects Sasse. With the current scenario, what we are seeing, with the levels of With including the challenge of the 3rd wave and the current lockdowns that we are seeing. This is our view.
Okay. Thank you, Ignacio. We still have time for one additional question. Operator, please.
Thank you so much. And the last question Term comes from the line of Fernando Hill from Barclays. Please go ahead.
Hi, good morning. Thank you for the presentation. All good luck in the future for you guys and thank you very much for this year. My question is On TSB, if you can provide at least some color for cost of risk going forward and volume growth that you expect For this 2021, thank you very much.
Thank you, Fernando. What the quarter in TSB As for growth has been, as you've seen in the presentation, outstanding. It's been very good. The market Interestingly, the market has behaved. The performance has been very good in terms of volumes and also Better than in previous quarters in terms of spreads.
So this is going to be a driver for Business activity and NII. And in terms of volumes, we think and in terms of cost of risk, sorry. In terms of cost of risk, we see the SaaS. Same path that I've guided towards in terms of the whole group. So I'm probably actually a little bit better.
The peak in provision has been In 2020 clearly, in 2020, and the decrease in TSB would be quicker towards the pre COVID With this scenario. So I think this is especially after What happened this quarter in terms of one of the uncertainties there was, of course, the Brexit outcome. As you have seen in the presentation, the change in the scenario, given that eventually there was an agreement, Meant a decrease in needs for provisions. And therefore, this will be also there for 2021. And if you look at other factors such as, for instance, How the macroeconomists are thinking about the U.
K. In 2021 and also How the reaction in the market and in the housing prices, SaaS. For instance, it's been lately, I think the outlook there is relatively With all the uncertainties, it's relatively positive.
Okay. Thank you, Guillaume. Thank you, Thomas. That concludes our Q and A session today. As always, the Investor Relations team is at your disposal, and we'll be happy to take any further questions you may have.
Thank you, everyone, for participating and for joining us today. Have a great day.