Good afternoon, and thank you for joining us for Sabadell's results presentation for the first quarter of 2020. I'm Cecilia Romero, Head of Shareholder and Investor Relations, and presenting today, we have our CEO, Jaime Guardiola, and our CFO, Tomás Varela. We will be covering additional topics this quarter, so we plan to spend a bit more time presenting the results, around 40 minutes, and then we will answer your questions. Today's presentation will follow a slightly different structure to last quarter. Our CEO will start by going through an update of effects and implications of COVID-19, and will then provide details about commercial activity, risk, and business performance. Our CFO will then discuss financial results, asset quality, liquidity, and capital. Before our CEO concludes with some brief closing remarks. I will now hand over to Mr. Guardiola to kick off our presentation.
Thank you, Cecilia. Good afternoon, everyone. We trust and hope you are all safe and healthy. Starting on page four, since our last earnings call, the global economy has suffered an unprecedented shock with extraordinary implications. The unusual nature of this crisis has made it very hard to estimate its duration, shape, and final impact, which introduces a high degree of uncertainty for the financial sector outlook overall. The ongoing response from authorities is proving to be sizable and coordinated in the monetary, fiscal, and supervisory areas. The speed and magnitude of this response, we believe, should provide effective relief for the economy and banks. Obviously, given this new macroeconomic reality, which is still evolving, our 2020 financial guidance will be impacted. The slower activity and volatile financial markets may have an effect on revenue in the year.
While revenue might be impacted by the current uncertainty, we expect to generate sufficient cost savings to mitigate this impact, so that the pre-provision profit is expected to remain flattish in the year. We will continue to monitor the situation as it evolves. Having said that, our business performed in line with our expectations during the first two months of the year. Most importantly, our solvency and liquidity positions remain solid, with buffers well above requirements. Moving on to page five. European authorities have provided unprecedented support to the economy and the banking sector. Therefore, financial institutions can focus their full attention on helping to minimize the economic consequences of the crisis for customers and society as a whole. The support focuses on providing flexibility in the supervisory approach, capital and liquidity requirements, and on giving banks the right tools to help customers.
On this slide, we summarize the measures taken by the authorities in the European Union and the U.K., our two most important markets, together with the impacts for Banco de Sabadell. We welcome the steps taken in both markets and the well-coordinated approach. The system is stronger for having received this support. I would like to emphasize that at Sabadell, we will continue to apply sound capital liquidity and risk management standards. Finally, following regulators' capital conservation recommendations, Sabadell has announced that it will not pay a 2020 interim dividend, and group senior management has foregone its 2020 variable remuneration.
As we announced in our 2019 year-end results presentation, we started the year with well-defined priorities for 2020. You can see this in slide six. First, preserve revenue growth. Second, continue to improve our non-performing exposures. Third, deliver on the restructuring of TSB, as outlined in the plan presented last November.
Fourth, maintain adequate capital levels. Last but not least, continue to create value for our shareholders. Since the sudden and unexpected arrival of the coronavirus crisis, we have emphasized four focus areas in addition to our 2020 priorities: responsibility, commitment, resilience, and digitization. We have ensured operational continuity without downsizing our service level, while taking care of our customers and employees. We have reduced the number of open branches, as well as the number of on-site employees in those branches. This temporary surplus of branch employees has been redeployed, for instance, to reinforce remote services. Meanwhile, almost 100% of the staff in our headquarters is currently working from home. This brings me to the resilience of our IT platform. It has been very reliable throughout the lockdown, providing good service for a large number of employees working from home and demonstrating its robustness and scalability.
Furthermore, our IT platform has endured a surge in activity with levels 50% higher than the previous record peak without losing the quality of its service. We were also able to implement quite quickly new end-to-end digital processes suited to the current context. Regarding commercial activity, we have shown commitment to our customers by focusing on supporting them to alleviate financial pressure while protecting our balance sheet against potential arrears. We have also taken initiatives to help mitigate the impacts of COVID on society in general. Finally, we are also focusing on accelerating our customers' digitization. We have made progress in this regard, which is expected to continue after the lockdown, and will bring us benefits in terms of efficiency and productivity. Whilst we retain our key strategic priorities for 2020, we're also taking action on COVID-19 related activities.
In slide seven, we show some of the key metrics that demonstrate that we are all well prepared to face the current challenges. Firstly, we are operating with a substantial capital buffer of EUR 2.6 billion or 322 basis points above MDA requirements, based on a CET1 phase in pro forma of 12.6%. Our liquidity position is substantial, with a liquidity coverage ratio of 172% and EUR 45 billion of highly liquid assets. We are also eligible to withdraw a substantial amount of TLTRO III and TFS should we wish to do so. Moreover, the significant progress made in recent years to the risk of our balance sheet leaves us with an NPL ratio of 3.8%. Finally, our volumes have continued to grow substantially at 4.4% year-on-year, showing continuous dynamism. Slide nine shows our performing loans region by region.
As you can see on this page, that loans grew year-over-year across all geographies. Volumes in Spain, including foreign branches, increased by around 2.6% in the quarter and by more than 4% in the year, including strong growth in foreign branches. TSB volumes grow by 2.7% year-over-year and remain flattish in the quarter. Volumes in Mexico grew by double digits both quarter-over-quarter and year-over-year. Half of this growth was customers driven, and the other half was due to the increase of the US dollar weight on Mexico's balance sheet. Overall, group performing loans grew by 2.2% in the quarter and by more than 4% year-over-year. In the following slide 10, you can see that we have a diversified credit portfolio. 46% of our performing loans are mortgages to individuals in Spain and the U.K., which are roughly evenly split.
A further 40% are loans to corporate and SMEs, 8% consumer loans and others, and 6% is lending to the public sector. Looking at our SMEs and corporates portfolio, you can see on the right-hand side that our credit exposure to the sectors most impacted by COVID-19 is limited, at around EUR 11 billion or 8% of the total. In terms of total risk or exposure at default, we have about EUR 13 billion, and 8% of the total. In addition, it is worth noting that about 25% of our corporate and SMEs book is secured. Finally, on the lower right-hand side of this slide, you can see the exposure at default of our corporates and SMEs portfolio broken down by rating, which is also published in our annual report. The graph shows that around 80% of our exposure at default is investment grade.
Next slide, 11, shows customer balances excluding TSB. On the left-hand side, you can see the breakdown of performing loans. Overall, performing loans increased by 2.5% in the quarter and by more than 4% year-on-year. The corporate and public administration segments were the strongest drivers of growth in the quarter. Our customer funds decreased by 2.2% in the quarter and were slightly up year-on-year, driven by lower off-balance sheet funds and lower deposit remuneration in the quarter.
The amount of deposits with negative remuneration increased from EUR 3.7 billion at the end of 2019 to EUR 4 billion this quarter. At the same time, term deposits continued to flow into current account, as is to be expected in the current low rate environment. Moving on to slide 12. In terms of commercial activity in the first quarter of 2020, new production in the main business lines has been resilient in Spain.
As you can see in the slide, both our products and our market shares have grown year-on-year. However, growth rates have slowed down since the second half of March. Due to the impact of COVID-19, as you can see in the month evolution, also shown in this slide. The loss of turnover in these businesses is expected to recover in the coming months as the lockdown is gradually lifted, and we move towards a new normal. Continuing with slide 13, on the left-hand side, we show year-on-year growth in new lending during the first quarter. New SMEs lending has increased by 6.8% year-on-year, and new lending to individuals has recorded a 0.5% growth. Meanwhile, our market share of loans in Spain has increased by six basis points year-on-year.
Looking at April, while we observe a reduction in new mortgage to individuals of around 50%, we also see an increase in new lending to corporate and SMEs of around 30%. This growth in SMEs is mainly driven by state guarantee lending, which is referred in the lower right-hand side of this slide. As you might already know, the Spanish government has launched a EUR 100 billion public guarantees program for lending to SMEs. Instituto de Crédito Oficial, ICO, a Spanish public bank under the Economic Affairs Ministry, is channeling public guarantees to banks. So far, EUR 40 billion has been released in two tranches, and we are being allocated more than EUR 4 billion of these guarantees. Finally, on the upper right-hand side of this slide, you can see that clients increased credit facility drawdowns by EUR 0.8 billion in the quarter.
In April, these drawdowns actually declined by 6%. On the following slide 14, we provide more details about the action we are implementing to support clients. In this regard, during the lockdown, we have been in frequent communication with customers, reaching an all-time high in the number of commercial contacts. Our portfolio of customer financial solutions includes government measures such as the ICO guarantee loans and the government moratorium for mortgages and loans. Our customers can also apply for principal repayment holidays, renewals of expired credit facilities, and extension of their working capital maturities, as well are also offering solutions beyond the scope of the government measures. On this slide, you can see some key performance indicators, I would like to highlight the EUR 7.9 billion application of the ICO guarantee loans to SMEs that we have originated in less than a month. Turning now to TSB, slide 15.
On the asset side, net lending remains stable in the quarter with an unsecured lending contribution of less than 6%. This quarter, core mortgage performance was stable as TSB continued to manage margins versus volume considerations and following an anticipated large fixed-rate maturity in January. Additionally, seasonality has impacted credit cards and overdrafts performance in the quarter. Overall, year-on-year net lending was up by 2.8%. On the liability side, customer funds increased both in the quarter and in the year, with growth across almost all products. In the quarter, growth was driven mostly by current accounts due to the current low-rate saving environment. Popping to slide 16, we can see TSB new lending performance in the first quarter and how the bank continues to make progress in delivering on its business plan.
New mortgages were lower in the qu arter in comparison to the sharp increase in the first quarter of 2019. This was mainly due to the extraordinary performance in last year's Q1 and the current focus on profitability. In terms of new customer lending, the year-on-year increase was almost three times higher than the production generated during the same period of 2019. This increase was due to the good performance of sales in both branches and in particular, the digital channel. As you can also see in the slide, in March, our new lending volumes were slightly impacted by the lockdown, especially new unsecured lending. TSB also continues to make progress on the delivery of its strategic plan. The customer-focused pillar of this strategy has been supported by the delivery of several initiatives. Customers are now benefiting from the new service capabilities and features.
Regarding simplification and efficiency, TSB announced H2 branch closures in 2020. The bank also continues to focus on identifying sustainable cost savings with a disciplined approach to discretionary expenditure and investment. Operational excellence benefits are also beginning to be delivered through TSB's IT transformation. Our partnership with IBM Services is supporting the consolidation and optimization of the IT infrastructure. TSB has announced it will be opening a new IT center in Edinburgh. TSB overall service performance remains stable, with customer service availability performing above the industry average. It is worth highlighting that TSB platform technology has allowed the bank to respond quickly and effectively to meet customer needs during COVID-19. On slide 17, we include the actions that TSB has implemented to support its customers during the COVID-19 crisis. TSB has responded quickly, implementing credit and payment solutions to alleviate the immediate financial pressures felt by customers.
That includes payment holidays for mortgages, personal loans, and credit cards. To date, payment holidays granted by TSB amount to over 30,000 for mortgages, over 19,000 for personal loans, and over 2,000 for credit card debt. For business banking, TSB is offering overdrafts through the CBIL scheme for lending up to GBP 250,000 . It meets the needs of the vast majority of our business banking customers. Prior to TSB CBIL product launching, TSB has provided over GBP 16 million of lending to more than 600 customers to support them through COVID-19. I would like to highlight other initiatives that we have put in place. For instance, we are proactively reaching out to vulnerable customers to advise them the support measures available to them and to how to access the bank. We are also implementing awareness campaigns to protect customers from fraud. Sorry.
To finish this section of the presentation, in slide 18, I would like to highlight our digital response and how we have deployed new end-to-end digital solutions to meet the needs of our customers. For instance, in Spain, we have deployed remote signatures for ICO-guaranteed loans and repayment holidays, as well as two remote contract capabilities specifically for companies. Meanwhile, in TSB, we have rolled out online forms for mortgage and loan repayment holidays, as well as 24/7 live chat feature. The indicators shown in the slide highlight, both in Spain and the U.K., the extensive use of these new capabilities, as well as the overall increase in the number of interactions through digital channels. The resilience of our IT and the efforts made in digital transformation in recent years have been key to overcoming the current challenge. Now, I hand it over to Tomás.
Thank you, Jaime. Good afternoon, everyone. Regarding our quarterly results in slide 20, we reported a net result of EUR 94 million in the quarter. The reported results were impacted by impairment charges, which included an additional management overlay of EUR 213 million in respect of COVID-19. I will go through the results in detail in the following slides. In slide 21, you can see that group net interest income dipped by 2.8% in the quarter and by 1.8% in the year. Relative to the fourth quarter, NII was positively driven by volumes and cheaper wholesale funding. Factors which reduced NII include lower asset yields, a lower day count, and a smaller ALCO contribution.
Finally, in terms of sensitivity to interest rates, based on the balance sheet as of the end of this quarter, an additional increase of 10 basis points in all relevant rates would increase NII by EUR 23 million, and a decrease of 10 basis points would lower it by EUR 18 million in the 12 months following the rate change. Turning to slide 22. Here we specifically look at front book credit yields ex-TSB. This quarter, the two products that contributed the most to new entry volumes were loans and credit lines to SMEs, which respectively amounted to about 60% and 20% of the new production, and therefore explained most of the total customer yield evolution in the quarter. This included a higher level of big-ticket corporate and public administration transactions in the quarter, which are usually priced at lower yields.
The yield drop was more noticeable in credit lines, while loan yields were more stable. In slide 23, you can see that overall, NIM remained broadly stable in the quarter as the effect of a lower yield ex-TSB was mitigated by a lower wholesale funding cost for the group. In the next slide, number 24, we show the changes in composition of our ALCO portfolio. On the left-hand side of the slide, we show how the size of the overall portfolio decreased by EUR 3.6 billion in the quarter. This is due to existing bond maturities, as we explained in our Q4 earnings call, as well as Italian and U.K. bond sales in the quarter. We generated EUR 150 million in trading profits.
Going forward, we will be assessing our opportunities to increase our portfolio and expect to compensate partially the NII loss from the bond sales by reinvesting in Spanish debt in the upcoming quarters. On the right-hand side of the slide, we show the composition of our EUR 6 billion of fair value through the OCI portfolio. As you can see, the risk is limited. Around half of the portfolio is composed of Spanish bonds with an average maturity of five years. There is also EUR 1.2 billion of U.K. gilts with an average maturity of 14 years, and the rest is mostly agencies, COVID bonds, and corporate or financial bonds.
There is almost no risk to Italy in our fair value OCI portfolio, and the average maturity of the overall portfolio is eight years. All of this means that the impact on capital of a one-time increase of 10 basis points in the Spanish and U.K. credit spreads would be around EUR 9 million and EUR 8 million net of taxes, respectively. In slide 25, you can see that group fees were down by 6% in the quarter, impacted by asset management seasonality and the effect of COVID-19 on customer activity. In the year, fees grew 1.9%. Asset management reduced the most due to the usual Q1 seasonality, and also due to the negative performance of financial markets during this period. At the same time, the lockdown lowered activity levels, which affected service fees. TSB fees were also impacted by new regulation affecting cross-border payments.
Finally, it is also worth highlighting that there was EUR 8 million less in fees this quarter as some payment services cost that previously had been netted off fees, accounted for in costs, were netted off fees for the first time in the quarter. In previous quarters, this cost was recorded in general expenses, as I said, for a similar amount. Moving on to slide 26. We reduced group total expenses by 8.1% in the quarter, driven by lower non-recurring costs at TSB, as migration-related expenses are left behind, as well as lower general expenses ex TSB, such as marketing and third-party advisory costs. Moreover, TSB recurring costs were also lower as we continued to make progress on our restructuring plan. TSB restructuring cost amounted to EUR 5 million year-to-date.
Overall, we expect total cost for the full year to decrease year-on-year, partially by a more favorable Forex currency rate in comparison with the guidance, what we initially thought. This doesn't affect significantly the comparison year-on-year. Also what is driving this decrease is some additional cost savings initiatives. In slide 27, we provide an overview of the different regulatory measures announced recently to help lenders operate in the current situation, impacting provisions, accounting, and NPL prudential treatment, just as reference. In addition, we also highlight some of the operational relief actions and announcements in relation to resolution. In terms of credit risk accounting, the EBA has stated that for the time being, debt moratoria, public and private, shouldn't entail any automatic classification into defaulted or forward IFRS 9 status, and that an individual assessment of the obligor is required to determine their likeness to pay.
It was also stated that public or private moratoria shouldn't automatically trigger a significant increase in credit risk. In this context, regulators ask banks to give more weight to the long-term stable outlook and take into account the relief measures granted by the public authorities when calculating provisions. Overall, regulators have guided banks to avoid procyclical assumptions in applying IFRS 9 and have given operational relief by postponing stress tests for a year and other regulatory work for six months. Well, with that, let me turn to how we at Sabadell have considered our credit books at 31st of March. In slide 28, regarding provisions, this quarter, we are starting to focus on the credit provisions excluding costs, as this metric will be the most important metric to watch in the current environment.
Our credit impairment charges, excluding costs, were at EUR 369 million and include a post-model adjustment of EUR 213 million intended to prepare for the impact of COVID-19 in the coming quarters. This adjustment was based on our estimated credit losses calculated using the macroeconomic scenario recently published by the Bank of Spain, and giving more weight to their long-term outlook, which is more stable. Overall, credit cost of risk was 93 basis points annualized, or 39 basis points when excluding COVID-19-related provisions. In the following section of the presentation, we start with asset quality on page 30. NPLs were down by EUR 29 million, driven by lower new entries in the quarter, as you can see in the chart on the top right-hand side. Over the year, they were down about 4%.
At the same time, the lockdown impacted recovery processes, which usually take place at the end of the month. Recoveries were also lower quarter-on-quarter, which prevented NPLs from being reduced further. Foreclosed asset exposure was EUR 1.3 billion. Finally, it is also worth noting that more than 60% of Sabadell's NPLs are secured loans. The next page, slide 31, focuses on TSB asset quality. Our mortgage portfolio in the U.K. is low risk and prudently underwritten. Buy-to-let exposure is in line with market, and the bank has fewer tracker and interest-only mortgages than the average in the market. Across the board, the average LTV is low. Our mortgage presence is also well diversified geographically, and we have a low sharing and secure consumer lending.
In fact, this means that 94%. Of the slide, you can also see that NPL ratio is very low at 1.2% and was stable quarter-on-quarter. Liquidity is abundant and at 256% LCR, and capital is robust at above 20%. Turning now to slide 32, group liquidity at the year-end. The group continued to have a strong liquidity position with an LCR of 172%. A loan-to-deposit ratio of 100% and a high-quality liquid asset of circa EUR 45 billion. Furthermore, in terms of TLTRO II, we currently have EUR 13.5 billion outstanding, of which EUR 3 billion are due in 2020, and EUR 10.5 billion are due in 2021. In terms of TFS, we have GBP 4.5 billion outstanding, of which GBP 3.6 billion is due in 2021, and GBP 0.9 billion in 2022.
With regard to TLTRO III, no funding has been drawn at this point, but we can take up to EUR 27 billion in addition, and at least GBP 3 billion are available through the TFSME. With regard to our funding plan in slide 33, we have no immediate pressure to issue as we are MREL compliant. Our eligible MREL securities as a percentage of total liabilities and own funds, stand at 9.3%, which is above the requirement of 8.3%. We have issued more than EUR 4 billion of MREL-eligible securities from the beginning of 2019 to date. Finally, we also meet our subordination requirement, which is 5.2%, as our current position stands at 7%, which was eight basis points higher in the quarter. Moving on to capital in slide 34.
On the following slide, we show the evolution of the group's fully loaded CET1 ratio during the quarter, as well as our pro forma position and pro forma phasing CET1 at the end of the period. Starting from the reported fully loaded ratio at the end of the fourth quarter and following to the right in the graph, we show the different drivers and capital impacts in this quarter. The organic capital generation deducted four basis points, and included net profit, net of 81 coupons, intangible assets, and other organic deductions, as well as the increase in organic RWA in the quarter. In addition, fair value reserve accounted for minus nine basis points. Taking all of this into account, our fully loaded CET1 ratio on a reported basis stood at 11.6% at the end of Q1.
In addition, there are a number of business disposals that bring us a pro forma ratio and add a total of 47 basis points. Firstly, the sale of our real estate developer, which adds five basis points. The disposal of Sabadell Asset Management will add 35 basis points. Lastly, the disposal of our custodian business announced during this quarter, which will add seven basis points. All of these three processes are progressing well on track and are expected to finish in the coming quarters. These elements will bring our fully loaded CET1 ratio to 12.1%, and this is in line with the pro forma CET1 reported last quarter. Finally, we arrive to our CET1 phasing pro forma as of the end of the quarter of 12.6%.
To conclude my part of the presentation, on the following slide, number 35, you have the details of our current reported capital base versus requirements. Our reported phasing total capital ratio stood at 16.2% at the end of the quarter, 322 basis points above our requirement of 13%. Our fully loaded total capital ratio stood at 15.78%. Our capital requirement has been positively impacted by several regulatory actions this quarter. Firstly, the Bank of England decreased the counter-cyclical buffer to 0%, which had a positive impact in group own funds, requirements of 14 basis points. Secondly, the change of P2R mix as per CRD5 will allow banks to partially use AT1 and Tier 2 to meet P2R requirements. In our case, up to 98 basis points of hybrid capital instruments can be used against P2R if there is AT1 or Tier 2 excess.
Sabadell has currently a Tier 2 and AT1 surplus of eight basis points. In addition, our phasing leverage ratio stood at 5.09% at the end of the quarter. With this, I will hand over to Jaime, who will conclude our presentation today.
Thank you, Tomás. Just to finish, I would like to reiterate two points. Firstly, that overall, our bank has ample liquidity and capital well above regulatory requirements. In this regard, we are much better prepared today than we were at the beginning of the previous financial crisis. Secondly, that we will continue to execute on our.
2020 priorities and key COVID focus area, which I explained earlier, and which include staying close to our customers as the current health crisis unfolds. That concludes our presentation. We will now be pleased to take your questions.
Thank you, Jaime. We are now ready for a round of questions. We kindly ask you that you keep your questions to two per person. Others can also participate. Operator, can you please open the line for your first question, please?
The first question is coming from the line of Carlos Peixoto from CaixaBank. Please go ahead.
Hello, good morning. Thank you very much for taking my questions. The first one will be on capital, basically, which will actually split into two topics. First one would be on the level of RWA inflation you expect to see from the duration of ratings within or basically the PDs and the LGDs within your internal models. How will that balance out versus the guaranteed loans that you have been granting? Within that topic as well, if you could give some details on the four basis points negative impact from organic capital generation, in the quarter, as I struggle a bit to conciliate the rationale behind it. Could it have to do with the fact that some of the trading gains were already reflected in the common equity Tier 1 ratio as potential gains in previous quarters?
Finally, in a different topic, I would like to ask you on revolving credit card exposure. Basically, how much Sabadell has, what type of litigation costs should we expect throughout the year? Sorry for taking a third question, basically on the cost of risk. Apologies. What levels do you expect to see throughout the year? Was this quarter a full anticipation of all the impacts you expect to see or just a small cushion ahead of additional iteration that you expect in the incoming quarters? Thank you very much.
Okay. Thank you, Carlos. I will try to be short on the answers because it's five questions here, and we need to allow time for everybody as much as possible. RWAs. What we see in the year as a consequence of inflation, but also the dynamics and the impact of the RWAs release of the guarantee of the ICO, which is of course, significant. We expect RWAs actually marginally decreasing. Okay. One thing to note is that, a factor that usually is taken a reference for RWA inflation in this situation is usage of undrawn credit lines. As we saw, we had EUR 800 million actually in April in a quarter. Actually in April, it receded a little bit. We don't expect on RWAs a significant growth.
I think I answered also the second one, because I included that in the answer, given that actually a substantial amount of the loan growth of the year will be covered by the ICO guarantee scheme. The four bits negative in terms of organic capital, in the quarter involve the usual, so net profit, deduction of AT1 coupons, intangibles, other deductions, and RWAs growth. In this case, we haven't accrued dividends, consistently with the announcement that we did. It's a combination of those. There has been some timing in the evolution of how the different factors have played out in the quarter. All of them were, except for the additional COVID provision in the quarter, included in our guidance at the beginning of the year. Revolving credit card exposure, we have EUR 300 million of exposure on revolving with deals above 20%.
We don't think there will be relevant costs going forward. Cost of risk levels expected throughout the year. I think Jaime, at the beginning of his presentation, gave a little bit of guidance for the year. He said, I won't extend on that because he already said it, but he said that while the environment provides uncertainty in terms of revenues, and might affect them, on the other hand, we have a focus on costs, and we expect the provision profit to be kept at least flattish in the full year. On provisions, given that this has been a post-model adjustment following the indications that the different authorities have given in the quarter, and trying to avoid excessive volatility, short-term volatility from procyclicality, we expect that this post-model adjustment hasn't captured the full impact.
We would expect that for the year, a total of between 90 and 95 basis points would be what we can expect for NPLs provisions for the full year. I hope this has answered your questions, Carlos.
Thank you, Tomás. Thank you, Carlos. Operator, next question, please.
The next question is coming from the line of Ignacio Ulargui from Exane BNP Paribas. Please go ahead.
Yes. Hi, good afternoon, and hope you and your families are fine and healthy. Just have two questions. One on the NII, on how the ALCO should help into the coming quarters and different moving parts of the NII, if you could help us to see where should we see NII moving within this flattest provisioning profit target? Quickly on costs, what cost-cutting measures are you planning on top of what you had already anticipated in TSB? Thanks.
Thank you, Ignacio. NII, we've seen in the quarter, we provide the cost of change analysis, of course. We've seen the impact of some of it we had anticipated coming from the ALCO portfolio. Some of it was due to decisions made in the quarter, like the sale of the Italian debt. We've taken the impact of this in full. As we said, we expect to have the opportunities to reinvest over the coming quarters and offset part of the loss of NII coming from the sale of this portfolio of Italian debt. Today, this is a headwind that we expect to offset, as I said. Of course, reduced activity that it's not clear for how long it's going to be there, might affect volume growth in consumer lending and mortgages.
On the other hand, as tailwinds, we have cheaper cost of funding, including the fact that we don't need to issue MREL, also including TLTRO III and TFSME in the U.K. Also in the U.K., we are reducing the cost of, or the yields that we pay for current accounts and savings, in case of the savings to unprecedented levels. On the other hand also, we are seeing Euribor significantly higher than where we thought it would be. If Euribor stays there, and we gave some sensitivity to increases in Euribor as well as a decrease in Euribor. If Euribor remains at this level, actually, this would also be a significant tailwind. All in all, it's difficult, but I think though all these factors might offset amongst them or even be marginally favorable.
We need to take into account also that volumes for corporates and SMEs will be high. I think NII, at the end of the day, will be supported. In terms of costs, our focus, that's right. In TSB, we are progressing into costs where we've accelerated plans for digitization, which will help the new way of working after this crisis. We haven't slowed down. On the contrary, we are accelerating the branch transformation project. We are also looking into several different projects where we have discretionary costs to make decisions on that. In Spain, there are a number of focus. You will have seen that the top management waived bonus, and there will be a policy on variable pay. Expectations for payroll inflation are now reduced.
Also there are a number, of course, travel expenses and some other related expenses are going down, and also a number of other initiatives.
Thank you very much, Tomás. Thank you, Ignacio.
Did I miss something? There was another. Jaime is pointing out that you made another thing about provisioning. Sorry for that. I'm not sure if I missed that, Cecilia.
I don't think so.
Okay.
I think he was in II on call.
Okay.
Nacho, are we correct? Thank you, Nacho. Operator, please, next question.
Next question is coming from the line of Mario Ropero from Fidentiis. Please go ahead.
Hi. Good afternoon. My first question is if you can give some details on the allocation of the COVID-19 charge by geography. My second question is, on the CET1 ratio expectations for 2020, an update on the regulatory impact in the year and whether you expect to generate capital in the next quarters. Thank you.
Okay. Thank you, Mario. The allocation of the COVID provision was out of the EUR 213, EUR 20 million in the U.K., a low amount in Mexico, and around EUR 190 million in Spain. As for capital, with the guidance that Jaime described, and I also detailed on expectations for provisions, CET1 fully loaded at the end of this year, with this scenario, with this view, would be around relatively close or above 11.75% or something like this, between 11.75% and 11.20%. This is without taking into account the potential impacts of the measure that has been recently disclosed. Whatever finally is approved by the EBA on IT software intangibles. We have currently around EUR 1.3 billion in these kind of intangibles. The amount that will be subject to this will depend on how the EBA writes or issues or designs the regulations for that, the rules.
Also the anticipation on the SMEs and project finance support factor for us will mean around EUR 2 billion in RWAs. This we were expecting for end of 2021 or beginning of 2022. Now apparently it will happen this year. This would represent close to 30 basis points. Also the IFRS 9 transitional arrangement in our case might mean around 10 basis points. Those are additional factors, but without taking into account those factors, the consistent level of capital at the end of the year with the other pieces would be this one.
Thank you, Tomás. Thank you, Mario. Operator, please, next question. The next question is coming from the line of Marta Sánchez Romero from Bank of America. Please go ahead. Marta, your line is open.
Hello. Sorry, I was on mute. The clarification on your capital target, you are saying 11.75%-12.20%. Would that be reported, or that includes the potential impact from all the asset disposals that may not be booked this year? A follow-up on risk-weighted assets. You said that you expect them to be down in the year. When do you update your PDs, LGDs, and all the impact from rating migrations? Is there generally a risk that banks in Spain will have an increase of risk-weighted assets in 2021, that everything on model updates will be delayed until 2021? Secondly, could you please update us on the restructuring costs related to TSB? It seems you didn't book anything this quarter. Has anything changed on that front? Thank you.
Thank you, Marta. The capital will be reported with the closure of the three transactions that, as I pointed out in the presentation, are progressing well towards closing, even in some cases before we expected. In terms of RWAs, the review of ratings happens throughout the year. There is some seasonality, mostly it happens quarterly, so to speak. Part of it, yes, part of it will happen in 2021, because there is always some delay. It will depend on the scenario. Necessarily won't be very significant. On the other hand, as I said, the ICO guarantees are providing a significant part of the new lending this year, so the loan growth, and this also plays a significant role in RWA's evolution. The third one on restructuring cost in PSV, yes, we are progressing.
The expected amount that we announced in the Investors Day for communicating the plan in PSV hasn't changed significantly. We expect that we might have some savings there, and the plan is progressing, and also there is some possibility that we could even speed it up by the end of the year. In the quarter, we've recorded EUR 5 million of restructuring costs.
Thank you, Tomás. Thank you very much, Marta. Operator, please, next question.
The next question is coming from the line of Britta Schmidt from Autonomous Research. Please go ahead.
Yeah, I've got three questions, these two are very quick. One is trading income expectations for 2020. Can you give us a view of what you expect there for the year? The second, just a clarification on the capital deductions. It did step up quite a bit this quarter, maybe you can give us a bit of color, in EUR millions, what were the moving parts? Lastly, you do show it on one of your slides, the investment grade share of your corporate and SME portfolio is relatively high given that there's quite a bit of SME finance in there. What do you think explains that? Is there a lot of collateral involved? Is there a lot of credit risk mitigation that you apply? Thank you.
Thank you, Britta. About trading income, of course, a relevant part of it had to do with the sale of the Italian bonds, but we also had another part that came from also the sale of other bonds that were expected already in the first quarter. We actually had some negative items. It's usual that there are also negative items there. The total trading income coming from the bond portfolio were in excess of EUR 165 million, I think. Expectations for the year, none in particular. We didn't sell these bonds looking for capital gains or trading income. The purpose of this portfolio is different. It's balance sheet hedging, is long-term. We actually rearrange the weightings of the portfolio, adapting to the environment, but not trying to crystallize trading income.
Far, we've exceeded the guidance that we gave for the whole year in terms of trading income. There could be some other items, but we don't expect anything very relevant there. In terms of capital reductions, neither there is something to call out. The usual things. Maybe there was some more of how the DTAs played out in the quarter, but nothing really that we can extrapolate or that is structural that will actually play out in the rest of the year. Yes, our proportion of investment grade is high. This is structural to our business model. We've always run with this kind of structure. Also in terms of collateral, it's true, we also have collateral, but the collateral doesn't determine the rating and therefore the creditworthiness of the customer.
The creditworthiness of the customer is established based on the customer or the obligor itself. The collateral, of course, reduces expected losses and so on and so forth. I couldn't say why this compares well in particular with other peers, because I don't know what they do or how they do it. Sorry for that, Britta.
Thank you, Tomás. Thank you, Britta. Operator, please, next question.
Next question is coming from the line of Fernando Gil from Barclays, please. Please go ahead.
Hi. Hello. Thank you for taking my questions. Two quick questions from my side. First one is, on your cost of risk guidance of this 90-95 basis points, what GDP macro assumptions does it include? The second question will be on TSB. How much of the budget loan growth that was presented in the TSB plan last year, is it changing? Can you refresh the sensitivity to 100 basis points move in the rates in the U.K.? Thank you very much.
Thank you, Fernando. As we described, the scenarios that we used for the post-model adjustment were based on the recently published, so were aligned, were consistent with the weighting of the recently announced scenarios by Bank of Spain. It's GDP, and it's also employment rate and housing prices, basically in 2021. The guidance for the year is based basically on an evolution of the weightings of these scenarios towards a little bit biased towards the more adverse scenarios amongst them. I'm not disclosing exactly the parameters, but I would say that they are aligned with this framework. In terms of the growth, I don't remember well the exact growth rate in the plan. We can get back to you with the exact growth level, but I would say it was between 2%-3%. I'm not sure.
What we've seen in TSB is that for some time in this first quarter, in the market, there has been a little bit of a slowdown in the mortgage market, whilst we've seen for TSB, significant growth of new lending in unsecured, as products and products distributed in the different digital channels have become available. In mortgages, all banks for some time pulled out of the higher LTV market. There was some stop there. Now this has resumed, and the expectations are that there could be, of course, some decrease in the evolution of this market, more coming from customers' demand than from liquidity or other market liquidity constraints, like it was in the last financial crisis. This is still to be seen.
Thank you very much.
Sorry, yeah, the sensitivity to the 100 basis points in interest rates, we are providing the sensitivity to 10 basis points. It's GBP 5 million. Is that right, Cecilia? Can you confirm this?
Yeah, it's all in the page of NII, Fernando. You have the sensitivity to the increase of 10 basis points and also to a decrease of 10 basis points.
Okay. Thank you, Cecilia.
No problem. Thank you very much for joining us today. That was our last question. My team and I remain available to answer any other questions you may have throughout the afternoon. Have a good day, and stay safe.