We'll present the main highlights and details of the commercial and financial performance of the bank in the quarter. The presentation will be followed up by a Q&A session. We are scheduled around one hour for the whole session. Before handing it over to César, we would like to apologize for the late availability of our information. As you are very well aware, there have been some technical difficulties out of our control this morning, and we were not able to make information available. We were planning on publishing at 6:30P.M. , but unfortunately, it's been published about one hour later. We will try to catch up through the Q&A session, but in any case, you have the IR team at your disposal. Let me now hand it over to César.
Good morning, everybody, and we know that this is a very busy day for you, so we'll try to be effective in our explanations. Let's start in slide four. As you will see during the presentation, our results remained strong in Q2. Let me highlight some of the key elements of this quarter. Firstly, we continue to make progress with our transformation process as set up in our strategic plan. Our efficiency plan is completed, and cost savings are coming through at full speed. Furthermore, we are implementing relevant digitalization and ESG initiatives. Secondly, our commercial activity improved further in the quarter, and performing loans grew by 2.2% quarter-on-quarter.
Thirdly, this positive evolution enabled Sabadell to post a net result of EUR 393 million in the first half of the year, increasing its core results by 13% in the quarter. Finally, we also improved our asset quality metrics in the quarter with our NPLs ratio at 3.31%, posting a 35 basis points reduction in the quarter. On top of these positive results, our core tier one fully loaded ratio reached 12.48%, and the return on tangible equity stood at 7%. We are confident on the evolution of our profitability looking forward. Therefore, we are upgrading our return on tangible equity guidance for the year to above 7%. We are not considering the potential impact of new Spanish tax on banks in this guidance.
In slide five, we share the evolution of the radical transformation we are undertaking at our retail banking business. In mortgages, savings and investments, and insurance, our strategy is based on personal and expert support to our customers. One example of recently implemented initiatives is the deployment of 600 specialized relationship managers, mostly in mortgages and insurance. These RMs are productive, more productive, and are already delivering increased sales per manager. In consumer loans, current accounts, and cards, our strategy is full digitalization of our offering to serve our customers in a more convenient way. One recent initiative is the launch of our new digital account in May. Another example is the evolution of our pricing and risk management models in consumer loans with greater price discrimination according to customers' risk profile. Moving to slide eight, we can observe the progress of our transformation in business banking.
We have a very solid position in this business line, and we are working to strengthen it. An example of this is the improvement of our risk management framework through intensive use of data analytics. As a result, we have granted 76% of our new lending to these prioritized customers. This is a significant change. We are proactively driving the growth of our volumes to our preferred customers, and we remain number one in NPS ranking in SMEs and in large companies, which is a source of sustainable competitive advantage. Slide seven. Regarding our efficiency plans in Spain, we are reaching all cost-saving targets in line with our guidance, and we have done so without affecting our commercial capacity. Our efficiency ratio, ex-TSB, has gone from 61% in Q1 2020 to 53.7% in Q2 2022.
This is a slightly better figure than the one of our peers in Q1 this year, which is the last available data. This comes as a result of growing our revenues by 3.1%, but especially by reducing our cost by 9.3%. This is a quite impressive jaws enhancement feature, no? Looking forward, efficiency will keep improving due to the expected growth of our income in line with the new interest rate context. Sorry. As you can see in slide eight, our loan book in Spain evolved positively, growing by 2.2% in the quarter and 4.1% year-on-year. The U.K. franchise maintained a solid growth dynamic on a year-on-year basis.
Quarterly, TSB loan volumes in euros decreased by 0.9%, but considering constant exchange rates grew by 0.6%. The loan book of our international geographies grew by 6.1% quarter-on-quarter. The commercial stance in these countries has been fully aligned with our strategy, increasing the focus on profitable growth. In terms of customer funds, on-balance sheet volumes grew by 1.3% in the quarter, bolstered by higher inflows to sight accounts. Off-balance sheet funds decreased by 4.4% in the quarter impacted by market volatility. Slide nine, review of the commercial activity in Spain. New mortgage lending increased by 19% quarter-on-quarter, posting a quarterly all-time high. Our market share on mortgage stock as at March 2022, which is the latest available data, decreased by 1%, one
Sorry, 1 basis point versus December 2021. This was the result of our decision to defend margins versus volume in a context of rising interest rates and highly competitive pressure on prices. We will see something quite analogous when we review TSB. However, we are fairly optimistic about our market share looking forward. We are already observing signs of pricing normalization, and we are undertaking the transformation of our value proposition, as I explained a few minutes ago. Moving to consumer loans, origination increased by 17% quarter-on-quarter and 12% year-on-year. Our market share as at March 2022 was up by 15 basis points versus December 2021. Slide 10. New protection insurance premiums were up by 5% in the quarter, following the evolution of mortgage origination and the cross-selling of life insurance that it generates.
Our market share in life insurance premiums as at March decreased versus December 2021. This is mainly due to the slowdown in mortgage lending in Q1, as I explained before, but it is also due to a shift in our commercial approach to life insurance originated together with mortgages. We are progressively moving from single premium insurances to life insurances with renewable premiums through the maturity period of the mortgage, which is better for the customer and better for the bank in the medium term. This results in a lower upfront payment by the customer, therefore impacting our market share today. This effect will continue in the coming quarters, but it is a desired effect. Regarding mutual funds, assets under management were impacted by market volatility. In this context, net inflows in the first half of 2022 amounted to EUR 271 million.
Our market share declined by 9 basis points in the year. There is an impact here of cancellation of fixed income mutual funds by enterprises now that negative interest rates are being left behind. In slide 11, you can observe that payment-related services keep growing strongly. In cards turnover, we reached a 16% increase quarter-on-quarter and 23% year-on-year. The turnover in Q2 was an all-time high. Our market share increased by 4 basis points in the year. Regarding payments processed through our point of sale devices, quarterly turnover increased even more, by 27% quarter-on-quarter and 43% year-on-year. We also reached our quarterly all-time high in this business line. Our market share increased by 33 basis points year to date. We keep managing for profitability.
Hence, our point of sale fees continue to grow above our point of share, point of sale turnover. Regarding business banking, in slide 12, origination of loans and credit facilities increased by 30% quarter-over-quarter and 2% year-over-year. On the other hand, working capital financing is performing well, posting double-digit increases both in the quarter and year-over-year. Regarding our market share of total business lending stock, it increased by 12 basis points year to date. This is at the core of our franchise, and it is performing in a stronger way. We see a brighter future here. Now let's have a look at the evolution of our performing loan book ex-TSB in slide 13. In Spain, mortgages and consumer loans grew in the quarter and on a year-over-year basis.
The SMEs and corporate book also had a positive evolution. This quarter has been outstanding in terms of loans to the public sector. The growth of other lending was positively impacted by social security advance payments of around EUR 600 million. This is a temporary effect. It happens every year, and it's reversed in July. As you can see on the right-hand side of the slide, Mexico grew by 8.1% in the quarter and Miami by 10%. Considering constant exchange rates, the growth in Miami was 3% quarter-over-quarter and 2% in Mexico. Looking now at TSB in slide 14, our U.K. franchise increased performing loans by 0.6% in the quarter.
We keep growing our mortgage book, which is up by 8% year-on-year, in line with our guidance of mid-single digit growth for the year. Our stock market share increased by two basis points in the year. We are achieving this despite lower origination volumes of new mortgage in the quarter as a result of the decision to protect margins versus volume. TSB has a competitive advantage in the way it manages the intermediary service channel, which represents more than 80% of new lending in the U.K. mortgage market. Therefore, as market prices normalize, our competitive advantage should allow us to capture a significant amount of new mortgage applications. In slide 15, we look at the TSB financials. Our British franchises show their remarkable performance across all P&L lines. We recorded a net profit of GBP 61 million in the first half of the year.
NII grew by 11%, fees and commissions grew by 11.4%, costs decreased by almost 6%. Provisions and impairments remain at similar levels to last year. As a result, we doubled our core results and increased our profit before taxes by 140%. Nevertheless, the profit, the net profit grew by 22.5% because of the one-time impact of the bank levy reversal. This is a one-time impact that we already anticipated last year when we shared this positive impact in 2021. Moving on to slide 16, here we take a look at the financials on a group basis. We recorded a net profit of EUR 393 million in the first half of the year. This performance is driven by a positive evolution in all the P&L lines.
It is worth noting that our core results grew by more than 18% when comparing first half of 2022 versus first half of 2021 and by 13% quarter-on-quarter in 2022. Regarding capital, our quarter one fully loaded was broadly stable in the quarter to levels around 12.5% while growing our loan book. Finally, our Return on Tangible Equity stood at 7%. With this, I will hand over to Leo, who will continue with the presentation.
Thank you, César, and good morning, everyone. Moving on to the financial results, I would like to start by emphasizing that, in my opinion, we present another solid set of results. Net profit in the quarter reached EUR 179 million, which when added to the Q1 results, drove half-year net profit to EUR 393 million. Allow me to highlight that all relevant lines present a very healthy quarterly evolution, which shows a good momentum of the business, as César explained before, as well as a solid year-on-year performance, which provides a good estimate of the expected evolution for the full year 2022. Core banking revenues, this is, net interest income and fees, grew by 4.3% in the quarter and 3.6% year-on-year.
Costs continued to reduce Q-on-Q, as we can now see the full quarterly contribution of the cost savings from the efficiency plan executed in Spain. The combination of core revenues and costs drove our core results upward to 13% in the quarter and 18% year-on-year. This, combined with a guided evolution of cost of risk, drove the aforementioned net profit figures. On top of this, good performance this quarter, the P&L includes the following items, which are worth mentioning. On the one hand, the Single Resolution Fund payment of EUR 100 million, which is usually booked in Q2 each year, on the other income/expenses line. On the other hand, the trading income and Forex lines recorded EUR 50 million, which is above the recurrent run rate.
This is explained by EUR 23 million of positive adjustments from the derivatives portfolio of our customers, and it is linked to the increases in rates. In any case, this positive adjustment has been deducted from capital following applicable regulation. Finally, I believe it's important to highlight that TSB continues to improve its profitability. As César just mentioned, making a positive contribution of EUR 35 million to the group net profit in the quarter, while the half year contribution reached EUR 54 million. We will go now through the different items of the P&L in more detail, starting in slide 19, where group NII increased by 4.8% on a quarterly basis. On the top right-hand side, you can see the bridge of NII evolution in the quarter.
Moving from left to right, customer NII contributed EUR 19 million, underpinned by higher volumes and better yields, while the benefit of Euribor repricing has not yet been material and will further contribute over the coming quarters. The additional day count represents an impact of EUR 6 million, and the ALCO portfolio added EUR 20 million in the quarter as we started to rebuild our portfolio in Q2, benefiting from the higher interest rate environment. Finally, a higher wholesale funding cost, as well as other minor factors, contributed negatively by EUR 4 million. In year-on-year terms, group NII outperformed our flattish growth guidance for the year and with a rate north of 4%. In this regard, let me highlight the NII drivers going forward and how we expect them to perform compared to our previous guidance.
In the first place, interest rates are currently higher than our initial assumptions in all geographies. Let me remind you that our budget assumed no rate increases in continental Europe and Bank of England rates only rising to 50 basis points. Secondly, as we continue to reinvest further in the ALCO portfolio at higher yields than previously expected, this also should be a tailwind for NII this year rather than a headwind as it was initially assumed in our budget. Finally, loan volumes are growing broadly in line with our expectations after a strong quarter, as previously explained by César. With all this in mind, we upgrade our NII guidance to mid-single digit growth for 2022. Leaving the NII line to one side and moving on to fees. This quarter, fees have increased by more than 3%. This growth has been driven mainly by service fees.
In particular, it was supported by commissions related to payments and cards as we had a higher transactionality during the quarter, as César explained at the beginning of the presentation. Also, credit risk fees made a positive contribution in the quarter, driven by a more dynamic lending activity. As it happened in Q1, asset management fees were somewhat weaker as the volatility of capital markets continued in the quarter, particularly in the fixed income products, which are the ones our clients are most invested in. When comparing year-on-year, fees increased roughly by 3%. In any case, with this year-on-year evolution, and despite the macroeconomic environment, we hold to our guidance of positive low single-digit growth for the year.
Moving now on to costs on the next slide, I would like to highlight that our cost base is down by 1.6% in the quarter and by 4.8% on an annual basis. This decrease in costs reflects the remaining cost savings from the second phase of the efficiency plan in Spain, completed during Q1 this year. The reduction of the cost base can also be seen in the evolution of group costs as a percentage of business volume, where we continue to reduce the weight of costs on our activity and already have converged to our strategic plan target of 0.8%. This is more than one year in advance. On the following slide, we take a look at our core results, which includes NII plus fees, minus costs.
This quarter, core results have increased by more than 13%, driving the annual variation to over 18% at group level. This positive trend, it's driven by wider jaws as we are seeing both NII and fees growing, while at the same time, costs are decreasing as savings from the efficiency plan materialize. On the right-hand side of the slide, you can see the bridge of core results evolution year-on-year. The increase of this metric is supported by the positive contribution from all lines. We see a north of 4% increase in NII, circa 3% rise in fees, and a decrease of almost 5% in the cost line. Going forward, also, we expect core results to continue improving in the coming quarters on the back of growing core banking revenues. This is NII and fees.
In slide 23, we describe cost of risk and the main remaining elements between pre-provision profit and profit before taxes. The group's credit cost of risk for the first half year stood at 40 basis points, while total cost of risk was 55 basis points. Both figures have remained stable Q on Q and performed in line with our guidance. Taking a look at the breakdown of total provisions on the top right-hand side, if we follow the graph from left to right, we can see, first, that we booked EUR 166 million of loan loss provisions in the quarter, EUR 13 million for charges on foreclosed assets, EUR 28 million of NPA management costs, and finally, other provisions, which are mainly related to litigations, stood at EUR 41 million. This item is subject to some volatility, and this quarter, for example, was impacted by two one-offs.
On the one hand, EUR 13 million related to the goodwill impairment of our investee, with no impact in capital, and EUR 11 million due to provisions for estimated charges related to the treatment of some TSB's customers in arrears. All in all, in any case, credit cost of risk is in line with our guidance, which is the range between 2019 and 2021 levels, meaning somewhere between 32 and 49 basis points. In fact, now that we have more visibility on asset quality for the remainder of the year, we expect total provisions for the second half of the year to be lower than those booked in the first half. Let's move now on to the next section, where I will walk you through asset quality, liquidity, and solvency.
Starting with asset quality, as we have done in previous quarters, I would like to begin with a quick look at the status of ICO loans. At the end of Q2, the total amount of ICO loans granted stood at EUR 13.9 billion, of which EUR 8.3 billion have been withdrawn to date. In the quarter, 86% of the outstanding grace periods expired, involving approximately 31% of total ICO loans drawn or EUR 2.6 billion, meaning that those customers had to resume principal payments in this quarter. The early indicators of default show that only 3% of these loans expired during the quarter are more than 10 days past due, which is a very similar performance to the existing ICO portfolio.
Finally, as you can see from the graph, the default rates of the ICO portfolio as a whole have remained contained with stage three ratio at 6%, when already 95% of the loans are paying principal and interest. Moreover, now we have four full quarters in which at least 60% of the portfolio has been facing principal and interest payments. As you can see, after an initial increase in the last quarters of 2021, stage three levels have remained stable. All in all, a good performance of this portfolio and certainly much better than what was expected back in 2020 when the ICO program was launched. I would like to remind you in any case that for those non-performing exposures, the state guarantee covers an average of 76%.
In the following slide, we take a look at the group's non-performing loans, which present a significant reduction of EUR 500 million in the quarter. On top of the organic reduction, approximately EUR 100 million, the decrease has been boosted by an institutional portfolio disposal of close to EUR 400 million of NPLs. This portfolio was composed of unsecured NPLs and were around 3 years in default, thus improving the mix of the remaining stock of NPLs. Therefore, after the transaction, the profile of the remaining portfolio has improved. For example, the stock of 90 days past due NPLs in Spain has been reduced by 2 percentage points to 46%. The unsecured exposure has also been reduced by 4 percentage points, down to 35%, and the vintages has been also improved, coming from 3 years to 2.8 years.
All in all, we have seen a positive evolution of asset quality ratios, bringing the NPL ratio down to 3.3% at the end of the quarter, while total coverage on NPLs stood at 55%. Moving on, in terms of foreclosed assets, it is worth mentioning that the stock continued to decline while coverage improved. This portfolio still benefits from having a sound risk profile, as 95% of total foreclosed assets are finished buildings. In terms of NPAs, which include both NPLs and foreclosed assets, these were down by 7%, which drove the gross and net NPA ratios down to 4% and below 2% respectively. Now turning to liquidity.
At the end of the half year, the group continued to have a strong liquidity position with an LCR of 225%, a loan to deposit ratio of 97%, and high-quality liquid assets of EUR 55 billion. In terms of credit ratings, it's worth mentioning that during the quarter, two rating agencies, S&P and DBRS, upgraded their credit outlook for Sabadell to positive and stable respectively. In terms of TLTRO III, we remain having EUR 32 billion outstanding, and in terms of TFSME, we have GBP 5.5 billion drawn. Moving on to capital, we ended the quarter with a CET1 fully loaded of 12.48%. This is increasing by 3 basis points Q on Q, despite the negative fair value adjustments as well as the contribution to the single resolution fund in the quarter that I mentioned before.
Looking at the graph from left to right, you can see the different drivers that brought our capital to this level. First, organic capital generation, including the accrual of 31.8% dividend payout, this is 2021's distribution, represented 10 basis points in the quarter. The fair value reserve adjustments had a negative impact of 8 basis points. Finally, the evolution of RWAs was fairly neutral in the quarter, adding just 1 basis points. From a regulatory perspective, the CET1 ratio stood at 12.61% on a phasing basis, which implies an MDA buffer of 415 basis points, which comfortably beats our target of maintaining a buffer above 350 basis points. This capital generation, mostly driven by the retention of earnings, has its reflection in the evolution of our tangible book value.
In the right-hand side of the slide, you can see the tangible book value per share has increased by 6% in the last 12 months when we add both tangible book value per share and the distributed dividends. Finally, to conclude this section, the next slide shows our MREL position. We are compliant with our current MREL requirements based on both risk-weighted assets and leverage ratio exposure. As explained in previous quarters, our funding plan will be focused on optimizing the funding costs and funding sources, as well as keeping capital buckets full and an MREL management buffer. With this, I'll hand over to César, who will conclude our presentation today.
Thank you, Leo. To finish our results presentation today, I would like to recap on the key messages of this quarter. We are doing what we set ourselves to do in our strategic plan, and we are delivering on it. Firstly, the transformation has been visible and radical in retail banking and business banking also moving forward. Secondly, commercial activity remained strong across products and segments. Thirdly, our efficiency in Spain has improved significantly as a result of increasing revenues and also of a significant cost reduction. Fourthly, regarding asset quality, we reduced NPAs by more than EUR 500 million in the quarter. Cost of risk is in line with our guidance, and we are not seeing signs of credit quality deterioration.
Finally, we are capable of generating capital organically, having increased our quarter one fully loaded, reaching a level of around 12.5%, which implies an increase of 30 basis points year to date while we remain, maintain an MDA buffer of 415 basis points, well above our 350 target. All in all, return on tangible equity stands at 7%, and we have upgraded our guidance to deliver an above 7% return on tangible equity this year, excluding the potential impact of the new Spanish tax on banks. With this, I will hand over to Gerardo to kick off our Q&A session. Thank you very much. Half an hour, exactly.
Thank you, César. We will now begin the Q&A session. Given the late availability of the information, we will not dramatically
Restrict the number of questions, but please remember that there is many of you in the queue, so try to keep them to as few as possible. Please let me also remind you to properly identify yourself in the system. We cannot give you access if you are not properly identified. With that, operator, could you please open the line for the first question?
First question is coming from Maksym Mishyn from JB Capital. Please go ahead.
Hi, good morning. Thank you for the presentation. I have two questions. The first one is on ROTE target. We appreciate the improved guidance for 2022, and I was wondering if there are any implications to your 2023 targets. How should we think of profitability evolving next year? The second question is on the disposal of your payments business or stake in your payments business, if you could just update us on the situation. Thank you.
At this point in time, we are not giving guidance on return on tangible equity for 2023. The only comment that I think we can make fairly and confidently is that we see that the tailwinds of interest rates are higher than the potential headwinds related to inflation and related to potential increases of cost of risk. In that sense, we cannot foresee any reasonable scenario in which the headwinds will not be better and overcome the potential headwinds. The tailwinds should be better than the headwinds. With this said, I think we are postponing any more clarity to see how the market evolves and especially the macro environment. I don't know if you want to complete anything on that, Leo. We've discussed.
No, I think it's clear, no.
long about it, no?
As of this date, we have visibility for the rest of the year. That's why we upgraded our guidance both on NII and also in cost of risk, because we believe the second part of the year should be lower than the first half. That's the visibility that we have right now in asset quality. All things are going well, but we need to have a little bit more visibility at year-end, and then we will upgrade certainly for 2023, no? But as César mentioned, we cannot really foresee any scenario now where, you know, bad news coming from the asset quality and therefore cost of risk could outweigh the good news coming from interest rates for 2023.
Yep. On the merchant business, I think we are looking much more for a partner than anything else. Therefore, what moves this potential alliance is much more an industrial and efficiency reason than anything related to capital. Therefore, we should not expect neither a big upfront payment nor a big loss of fees and commissions going forward. What we are seeing is a great interest by the big players in this franchise because it's a very attractive one, no? We have a 19% market share in point-of-sale devices, and as you have seen in the presentation, it's growing very handsomely, and it's growing even more handsomely in terms of income and in terms of turnover, no?
Nevertheless, it requires big technical capabilities that are better provided probably by players that have a broader footprint than what we have at Banco Sabadell. Combining our very strong commercial franchise with technical abilities that could be greater than ours and that could provide more better service to our clients, we think that's a good idea. It's evolving well. We are seeing a lot of interest, and we will communicate if any transaction occurs in due time. As I mentioned, we are looking more for a partnership and cooperation than for a disposal that would generate capital at this point in time. Thank you, Max. Could we please move to the next question, operator? Thank you.
Next question is coming from Sofie Peterzens from JP Morgan. Please go ahead. Please press key six to activate your microphone, and you will be able to ask your question.
Okay. Yeah, thanks. Sorry about that. Your Common Equity Tier 1 at 12.5% is quite strong. With the first quarter results, you mentioned share buyback that is something you're considering. How should we think about the potential future share buybacks? That would be my first question. The second question would be on TSB. Do you consider TSB core, or would you consider selling TSB if the price was right? Thank you.
Thank you very much, Sophie, for your question. There was a lengthy debate at the board, and the very clear position from the board is that it has the intention of increasing payout as results improve. Nevertheless, at this point in time, it has decided to postpone a clear guidance on dividends for next year based on this year results. The reason is very clear. There is a lot of uncertainty out there. The message should be very, very clear. The intention is to increase the payout with an increased set of results. In terms of the structure, certainly it will consider at a certain point in time share buybacks. It might be this year, it might be the coming year.
What it will always do is share buybacks out of ordinary profits, not out of extraordinary disposals, or reduction of capital per se. Okay. You were present in the discussions, Leo. I don't know if you want to complete anything.
I think it was precise, no, what you mentioned. I think we discussed this in Q1 results also, no? One thing, it's the total distribution to shareholders. This is what the payout, you know? In this regard, as we increase profitability, well, we should be thinking on going towards where the market is. The second one is the format of that payout, whether it's cash or whether it's through a buyback or through a combination of both. That has no impact in capital ratios, and it serves well what the two big groups of shareholders may be asking for, no? On one hand, it's retail shareholders. We're probably more inclined towards a cash payout, no?
For institutional shareholders, when a company is trading below book value as it is the case, well, certainly there is a financial rationale behind a buyback, no? This will be discussed in due time.
As per your TSB question, I think we've answered this question many times. TSB is performing extremely well. Furthermore, we continue to believe that it has a very significant potential going forward. We see its evolution quarter on quarter for the last six quarters in a growing trend, and we think that this trend would continue in the future. We consider that TSB is part of the Sabadell group, and that's how we see it going forward.
Thank you. Let's please move on to the next question.
Next question is coming up from Andrea Filtri from Mediobanca. Please go ahead.
Thank you for taking my question. I would like a bit more color, if possible, Leo, on the interest rate sensitivity. If you could actually isolate it, either giving us an idea of what would be the NII impact for 2023 if you plugged in forward rate curves with a 0% deposit beta, or something that basically we can relate to because the 100 basis point parallel shift is always very artificial. Also, if you could elaborate on what you're planning to do on the ALCO portfolio going forward. Finally, if you have any comments or indications on an event on the banking tax. There are some news today as well on that front. If you have any comment or any color on it.
Thank you.
Okay. Shall I start with NII? Basically, yes. I mean, the sensitivity that we have on NII, it's strong, obviously, towards rate hikes. What's even more important is that we have quite a large operational leverage. You know? Despite the final impact on NII, it's worth mentioning that around 4% increase in NII drives through the P&L towards, all things being equal, obviously, 20% increase in net profit and therefore one percentage point of return on tangible equity. You know? It's pretty leveraged. Now, on the distribution of our balance sheet, basically we have around, I would say close to EUR 40 billion, which are directly floating loans. Okay? Those will come through 2022, but especially through 2023.
Please remind that when we are repricing loans towards rates, for example, in the case of mortgages, there is a delay of approximately two months. You know? In other words, those mortgages which are repriced in June were repriced in June with the official Euribor rate of April, no? Which, if I recall correctly, was 1 basis point. Okay? Effectively, basically June was the first month where we have started to see the repricing of Euribor, because May was repriced with March, which was still minus 20-something basis points. In other words, for 2022, we have lost half a year, if you wish, no? Talking broadly in terms of repricing.
We're gonna see some good news coming out of this repricing in the second half of this year, but more, even more in 2023 because of the reasons I just mentioned. On top of this EUR 40 billion, we also have around approximately, I would say around EUR 22 billion of loans which amortize in the coming 12 months, especially coming from SME and corporate space, no? All these loans should be, if we are able to do so, reprice with the current rate environment, no? All this is also floating, no? On top of this, there's many other moving parts in the balance sheet. We have a part of the ALCO portfolio which is swapped to variable rates.
All that increases also with the evolution of rates. We have a lot of cash and liquidity, which will also move with the rate movements, no? At the ECB, for example, no? As I said, there is a high beta, if you wish, no? At the end of the day, I am reluctant to say a final number because as you very well mentioned, Andrea, it depends very much on the pass-through, whether we banks are able to do the pass-through on the asset side of things, but also on the liability side of things, no?
Even if in a I don't know very conservative approach, I think the evolution will be quite significant both for 2022 and especially for 2023.
As per the tax on banks, that you asked, Andrea, I think it's early. I think, as early as today, we might have some more information of the initial proposal, that is going to be put forward, although then it will have to go through discussion in parliament, in the fall. At this point in time, the only thing that we know is that the Spanish Prime Minister announced, a special tax on banks with an expected amount of EUR 1.5 billion per year, and that it would be, and this is very important, a temporary tax, applied just during the years 2022 and 2023.
We are confident that based on the clear rules around competition, that the tax will be founded on level playing field between players, and we have to wait a bit further. We will have some more news today, but certainly it will be during the fall that the final structure of the tax might be better defined after the discussions in parliament.
Sorry, Andrea, I forgot. I think you asked about the ALCO portfolio, no? In the quarter, we have bought a little bit below EUR 5 billion, which taken into account the amortizations of the period, have increased our book by EUR 23.4 billion towards the 25, and the change that we have right now. We expect to keep on building this portfolio in the second half of the year towards the numbers that we shared with you at the beginning. Basically, around EUR 8-10 billion will be bought this year towards the 30 billion figure, which is what we had in September 2020.
This is previous to the disposals that we made in order to fund the efficiency plans that have been carried out in 2021 and 2022. What I mentioned at the NII slide is that while when we were budgeting last year, this was the idea, but we thought we were going to buy these portfolios at a much lower rates. Therefore, the total contribution of the ALCO portfolio compared to 2021, that is total 2022 to total 2021, was negative. That is, the contribution would be lower. Currently, with the yields where we are right now, we believe that this contribution will not be negative but positive, no?
It's another of the tailwinds which should help us to improve our NII guidance from flattish to the mid single digit number that I mentioned before.
Thank you. Operator, could you please give access to the next caller?
Next question is coming up from Britta Schmidt from Autonomous. Please go ahead. Please press key six to activate your microphone.
Yeah, I hope you hear me now.
Yep.
Okay, great. I've got some questions on asset quality, please. Have you done any analysis on energy sensitive exposures? Maybe you can give us a bit of color on that. Also, what is the current stage of your overlay provisions, your IFRS 9 macro provisions? Have you booked anything there? What sort of scenarios are you incorporating in your IFRS 9 modeling? Maybe you can also briefly comment on the developments in your stage two loan.
I'll take the first one on energy sensitive. I think we have looked at the whole portfolio, not only energy sensitive, but inflation sensitive, customers that were able to transfer their cost increase and customers who were not able to transfer their cost increase, sensitivity on the mortgages, on interest rates. We have reviewed 100% of the portfolio with a lot of detail. Of course, the future is by definition unpredictable, no? What would be the levels of the shocks? At this point in time, there are two things that we can say with confidence. The first one is that we have seen no deterioration and no signals of deterioration year to date in the book whatsoever.
Looking forward, having done all the sensitivity analysis based on all the potential negative impacts, it's difficult to assess, but we are confident that our portfolio is resilient for what might come. In that sense, I think it's very important to realize that the sectors that have been affected by the pandemic are very different than the sectors that are being affected by the second crisis derived from the war, the energy crisis, and inflation. Therefore, the switch in the customers that are impacted makes them both more resilient because none of them is impacted twice.
In that sense, yes, we have done the analysis and, with the information that we have at this point in time, and including macro scenarios that should not be extremely positive, we are confident of the resilience of the book going forward, but certainly we live in a world of uncertainty.
As per your questions related to the overlay provisions that we booked in 2020, those remain broadly in our books. The only ones that have been released were at TSB, and not all of them. I think TSB booked something like EUR 120 million, something like that. Of which perhaps 80 or 90 were released actually in 2021, not in 2022. Those provisions are still in our books, you know, the ones that we booked for ex-TSB, if you wish, you know. When we look at the portfolio, as César was mentioning, it's hard for us to come to numbers right now, you know.
On the one hand, mortgages, we will see what happens, you know, but basically 50% of this book was granted before the previous crisis, so basically it has already have been amortizing for over 12 years, principal. Certainly the loan part of the loan-to-value ratio has decreased significantly. On top of that, the value, the other part of the ratio, has improved since those mortgages were granted, you know. On top of that, these mortgages have been able to pay even through very harsh times, you know, where in Spain, for example, the unemployment rate was at 27%, you know, while now is at 13%, you know.
Of course, we might see some surprises in this book, but honestly for me are basically triple A mortgages, you know, pretty secured. The remaining 50%, it's basically half and half of the book has been granted in the last, probably 5 years, you know, since 2016. Now on average, this book has also paid principal for a couple of years or three years, and the value has certainly gone up since they were granted, you know. On top of that, it's important to mention that in the case of Sabadell, around, I'd say 75%-80% of these mortgages were granted with a fixed rate payment, you know, so the increase of rates will not affect this portfolio.
We have done an overview of the remainder, if you wish, you know, the part that was granted on a floating rate, and we're monitoring very closely that book, which is, as you can imagine, small, and so far we have seen no signs of deterioration, you know. Again, I don't wanna sound bullish at all. It's just that right now, I'm sorry, but we don't have any further visibility, you know, to go further than year-end, you know. From now to year-end, I think it's going to be very difficult to see material deterioration nor on the retail side of things, this is mortgages, for example, nor on the SME and corporate space, which I think is what César was referring to more broadly before, you know.
Regarding your question on stage two loans, we have increased the stage two loans in the quarter. Basically, putting or taking into account a more cautious macro scenario, but not because we've seen you know specific signs of specific companies, because otherwise those would have been booked obviously as subjective you know stage three unlikely to pay loans. You know so it's more a general view of sectors, as César was mentioning before, that has driven us to move you know these amount of loans towards this stage two. As I said, I'm sorry to say, but we'd have no further visibility on this topic yet. Things have performed well in the first half.
We're gonna have to wait until year-end, you know. Another pretty good source of good news for me has been the evolution of the ICO loans in the quarter, which is something that we were all expecting, you know, to see how these close to 90% of the remaining grace periods expired and how they would evolve, and the evolution has been pretty good. Of course, we need to wait a little bit more time because they've just started to pay principal.
These loans, we must remember, that were granted in general terms towards sectors that were more affected by the lockdown, such as, for example, tourism and services, and those sectors in Spain right now are booming, you know, because of how things are going and we expect a pretty good evolution, at least in the summertime. We will see after that. Another piece of good news, in my opinion, is that, you know, the sectors that can be affected more by inflation going forward are different to the sectors that were affected more by the lockdown, no? We're not putting the pressure again on the same sectors. Again, I would very clearly like to convey the message that we're not trying to be bullish here, no?
It's just that right now, unfortunately, we have no further visibility to give you more details.
Thank you. Let's please move on to the next question.
Next question is coming up from Borja Ramírez from Citi.
Hello. Good morning. Thank you very much for taking my questions. I have two quick questions, if I may. The first one regarding the NII for the guidance provided for the year. I would like to ask what pass-through of rate increase on deposits you are assuming? Also, what percentage of the ALCO portfolio is swapped into variable rate? My second question would be regarding the recent NPL disposal. I would like to ask how was the buyer appetite for NPLs in Spain, and also any views on outlook? Thank you.
Okay. On NII, basically why I think we've included some numbers of pass-through of deposits in those numbers. I think probably I don't know looking at the numbers of the banks, no. I believe that as I mentioned before we our loan-to-deposit is below 100%. In other words, all our credits are more than funded by our deposits, and that's the case for the rest of the sector, no? As opposed to what was the situation back I don't know in 2010, no? Where loan-to-deposits of banks were above 160%, no? In other words, I don't see the need for deposits in the banking system.
In other words, unless we see a hike, a significant hike in loan demand, which we're not foreseeing now, I think things are going well, but we don't expect that. I don't think banks will be eager to gain volumes of deposits, no? I don't think there's gonna be such a situation as the one that we had in 2020, no? Now, our other big competitor here, it's probably, or it was historically, the twelve-month T-bill, no? Twelve-month T-bill was yesterday around 0.6%, no? I don't expect a lot of movement on deposit pricing in the short term. Of course, at some point it will come, and it's very difficult to say when.
I think what we will first lose is what we are yielding, the negative yields that we're yielding on SMEs and corporates, and that once the rate is positive, as it is today after last week's meeting, will probably start to disappear, if you wish, no? In our case, that's around EUR 17 million per quarter, roughly speaking, no? I think that's the first thing that's gonna happen, you know? As per the deposits, we need to monitor that. We have included some numbers. Allow me not to share them with you because that's part of our commercial, if you want, approach. The numbers that we've included are reasonably, in my opinion, conservative, if you wish, no?
I think this will probably be more a thing of 2023, although we have included them in 2022. As per the question regarding the ALCO portfolio, basically, what we have is a book which has, it's EUR 25 billion book, out of which, EUR 5.8 billion are in fair value, and the remainder, close to EUR 20 billion, are in hold to collect. The total maturity of the book, it's 7.5 years. But with the hedges that we have in the book, we reduce that maturities to a duration of 2.4 years. So as you can see, it's pretty hedged.
Finally, regarding the NPLs, the truth is that we saw quite some appetite for the portfolio that we put in the market, which, as a reminder, was unsecured loans. Okay. There was a good competition. We managed to sell the portfolio without an impact or a further impact on P&L, so basically, matching the coverage levels. The prices that we got were matching the coverage levels. I think it was a good transaction in our case, and I think there's appetite for more transactions going forward, no? I think we already said this in Q1.
We don't foresee a major, big, massive transaction, but it's part of our business in terms of recovering NPLs to obviously always monitor the market to see if there is appetite for this kind of, you know, hundreds of millions transactions, no? Probably going forward, we shall see more transactions of this type. Thank you, Borja.
Thank you. I think we have one last caller. Operator, could you please give access to this one last call?
Last question is coming up from Ignacio Ulargui, from Exane. Please go ahead.
Nacho.
Hi. Hi. Yeah, thanks very much for the presentation. I just have two questions. One, a bit theoretical, but just wanted to get a bit of a sense on the 7% ROTE guidance that you have given for 2022. If you assume on a scenario that you probably have run with the tax, what would be that kind of level of ROTE that we should expect for the bank? Just to get a bit of an order of magnitude of what kind of hit we are expecting from the government. The second question on trading income.
I know it's quite volatile, but I mean, should we expect second half to be in line with the first half, the level of the increase in GNCs giving the opportunity to generate more trading gains going forward, or that was a bit of a one-off in the quarter? Thank you.
On the first one, I'm sorry, Nacho, but given that we have no numbers on the tax rate, it's impossible for us to give you an estimate, no? I think in any case, if you make yourself some assumptions on how much the tax can be, you can play with numbers. It's not that complicated, I mean, once you make an assumption of the number. Allow us not to make that assumption, because we really have no clue, no? Of what's the final input going to be. That's why we provided a return on tangible equity guidance based ceteris paribus. Basically, based on the information that we have and what it is in our hands, no?
To produce this year. On top of that, we'll have the tax, and we will need to wait and see what the number for that tax is, whether that tax is deductible or not, et cetera. I mean, there's a number of uncertainties on the table now which don't allow us to give you a number. Sorry about that. As per trading, no, I think trading in the second half of the year, it's certainly not gonna look like or we don't expect it. We don't expect it to be as first half, no? I would say second half of the year should be pretty low.
We have been surprised in Q1 and Q2 by the amount of trading that we've done, especially through the derivatives of clients, which, as I tried to explain before, in any case is deducted from capital, no? That's not in our hands and depends very much on the rate movements, no? All things being equal, as per the management of the portfolios, if you wish, no? Of the ALCO portfolio, which is in our hands, we do not expect significant numbers in the second half.
Okay. Thank you. Thank you all for your questions, and thank you, César and Leo, for your answers. We now wrap up the Q&A session. As always, the full IR team is available for any further questions that you may have. Once again, thank you all for your participation and for joining us today. For those going on holiday soon, have a good break. Bye-bye.
Thank you. Bye.
Thank you. Bye-bye.