Earnings Call: Q4 2018

Feb 4, 2019

Good morning, and welcome to Unica Habanko Final Year Results Presentation. We have published the quarterly financial report and this presentation this morning before market opens. Today, Our Chief Executive Officer, Enrique Sanchez del Villar and our Chief Financial Officer, Pablo Gonzalez, We'll explain 2018 annual results and the main trends of the Q4. As usually, following the presentation, We will answer the questions received through the webcast and in the IRI inbox. I will leave the floor to Enrique now. Thank you, Jaime. Good morning, and thank you all for attending the presentation. I will start in Page 4 with a summary of the results. Starting with the business in loan volumes. This trend was supported in the continued improvement of new loan production, mainly in SMEs On the other hand, in Corporate and Public Sector segments, the new production slowed down due to a prudent pricing policy as we will see later. Total customer funds remained almost flat due to our conservative pricing policy Corporate clients, while our balance sheet funds were negatively affected by market trends, mainly in the 2nd part of the year. Regarding results, net interest income in 2018 was 3% above 2017. Fee income adjusted by the acquisition of Union del Duero also grew by 2%. Total costs fell by 2%, mainly driven by a 3% drop In personnel expenses. As I will explain later, we have taken some measures that should enable us to further decrease personnel expenses until 2021. Regarding impairments, It's worth noting that we released close to $10,000,000 in loan loss charges and foreclosed assets, among others owing to a relative high coverage levels. All this led to an Attributable net income of €153,000,000 which is 7% above 2017. On asset quality, liquidity and solvency, NPAs Fell by 22% in 2018, almost reaching the target that was set for 2020 when we executed the IPO, so 2 years ahead. Also, our solvency position Allowed us to anticipate 2 years the payout target of 40% because this was another target expected for 2020. On liquidity, as you all know, we continue to have a very comfortable position With the loan to deposit ratio at 73% and the liquidity coverage ratio at 4 68%. Finally, regarding our solvency, CET1 phase in was 15.4% 13.5% in fully loaded terms, Maintaining a significant buffer over its rep requirements. In Slide 5, we show the details of the dividend that we will ask for approval in our Annual General Meeting, which is significantly above the previous years. As you can see in the presentation, our CET1 fully loaded Per share ratio and the tangible book value per share ratio, both are at around 2x the stock price. Both ratios were stable in 2018 despite having much lower and realized capital gains. This was possible owing to the positive capital generation through results. So taking into account our solvency position, We decided to anticipate 2 years our cash dividend payout target of 40%, which was initially expected for 2020. The 7% increase in net attributable income and the higher Payout will be translated in a much higher dividend yield, almost 2x the one off last year, representing almost a 4% dividend yield when considering Friday closing prices. This improvement is explained by the 76% increase in the dividend per share, Which in absolute terms means that we will increase the dividend from €35,000,000 to €61,000,000 If we move to Slide 6, You will see something that we believe is quite relevant for coming years. We have reached an agreement with the unions to implement a voluntary reduced personnel expenses until 2021, something that will enable us to increase IT investments while still reducing overall costs. As you probably know, we were going to crystallize almost all previous synergies from the acquisition of Espana Duero by the end of 2019. So we decided to work in a new plan to lengthen and increase the savings until 2021. During previous 4 years, we managed to reduce our personnel expenses by 12%, Mainly owing to an 11% reduction in the number of employees. The new plan We'll go from 2018 to 2021. In those 4 years, we want to further reduce the number of employees of the group To a level close to 6,000 full time equivalents, something that we expect to generate gross cost savings of around €55,000,000 in these 4 years. The restructuring costs associated to this plan will be around €180,000,000 At the end of 2018, we have already booked 78% of such With the remaining provisions around €40,000,000 to be booked through the horizon of the plan. Now Pablo will continue explaining the rest of the details of the quarter. Please, Pablo. Thank you, Enrique. I will continue with the results and business section in Slide 8. Starting with the quarterly trends. As you can see, the Q4 'eighteen results were in line with previous quarters, although with higher trading gains that we have used To mitigate the restructuring costs that Enrique just mentioned, both Net interest income and fees were a bit higher compared with the previous quarter. On net interest Income, it is worth noting that the higher income from loans compensated the lower contribution from the debt portfolio as we will see later. Regarding the rest of the revenues, it is worth to highlight The usual seasonality from the contribution to the deposit guarantee fund this quarter. Total costs Decreased 1% compared with Q3 2018, mainly due to the lower general expenses. On impairments, as it had happened in the first half of the year, loan loss charges and foreclosed assets provisions We're positive. As you can see, credit and loans impairments were close to 0, and we released €8,000,000 from foreclosed assets. On the other hand, other provisions were high Owing to the €100,000,000 provision booked for restructuring costs. All these together explain the 14 €1,000,000 before taxes and the €10,000,000 of net income in the quarter. Now looking at the annual P and L. Core income trends were positive. Net interest income grew 3% year on year. Fees were flat in the year, although growing at about 2% when excluding the impact from Unian del Duero. Income from associates fell 24%, explained By the change in the counting of Uniand del Duero that contributed with $11,000,000 in this line of the P and L last year. Trading income was strong over the last 2 years, which in 2017 helped To mitigate the impact from the reorganization of the life insurance business, while in this year, It has been used to compensate the restructuring costs. In other operating income expenses, The contribution to gross margin in 2018 was below the previous year, mainly owing Two different reasons. On one hand, in 2017, we had a positive €25,000,000 impact from an insurance Earn out and on the other hand, owing to the lower income from our real estate servicer, which contribution to this P and L line fell from €62,000,000 in 2017 to €24,000,000 in 2018. Now moving to costs. Total expenses Decreased by 2% compared with 2017. On one side, personnel expenses and amortization Fell by 3% 12%, respectively. However, this was partially compensating with 1% higher general expenses. Finally, despite the extraordinary restructuring costs booked in 2018, impairments fell significantly Owing to a very positive trend in loan loss charges and foreclosed assets provisions, leaving the net attributable Income at €153,000,000 that is 7% above the previous year. If we move to customer funds in Slide 9, you can see that total customer funds, both Off and on balance sheet funds were stable in 2018. It is worth noting that off balance sheet Funds fell in the quarter to levels very close to 2017, mainly owing to market trends. On the other hand, The on balance sheet mix continues to improve with site accounts representing 79% of the total on balance sheet Funds by year end. In Slide 10, we show the credit and loans trends. Total gross loans fell 3.8% in 2018. As in previous quarters, The big bulk of the decrease was explained by lower nonperforming loans. On the right hand side of the slide, you have The details on performing loans, as you can see, they grew 0.2% quarter on quarter, Although still 1.1% below the previous year, with private sector loans falling Only by 0.5% in 2018. By segments, as you can see in the bottom right, mortgages Fell 3.8% year on year. However, corporate loans grew by 6.7% and consumer and others were Almost 3% above 2017. All in all, similar trends as in the previous quarters with performing loans pretty stable, although showing steady growth in some segments. As you can see in the bubbles on the top Of the chart, the year on year decrease continues to improve every quarter. In Slide 11, we show the new loan production details. New production in individuals and SMEs grew 21% in 2018. However, in public sector and corporate loans, the new production was below the previous year. Among others, as we have explained in previous occasions, owing to the significant knee production in corporates formalized in 2017, But also due to the prudent and conservative commercial strategy focused in pricing. This strategy is reflected in the loan yields. As you can see in the bottom of the slide, The yield of new loans grew by 19 basis points in individuals, by 13 basis points in SMEs And by 11 basis points in corporate loans compared with 2017. This is a very positive trend. In Slide 12, as we usually do, we start to review the P and L in more detail. As you can see, in the top right, the lower contribution from the debt portfolio following the realization of capital gains Was mainly compensated by higher interest income from net loans, including nonperforming loan recoveries, but also Owing to a slightly lower cost of deposits, leaving net interest income and net interest Margin pretty stable in this quarter. Regarding the customer spread, in the bottom of The slide you can see that front book remains well above the back book owing to the prudent pricing policy followed by the bank. In Slide 13, you have an update on our debt portfolio. The size, excluding forward sales, showed a small decline in the quarter similar to the drop in the year. The big bulk of the exposure remains sovereign and is classified in the amortized cost portfolio. Most of the forward sales that we used to have in the past were realized this quarter, explaining That the contribution from this portfolio to net interest income went down from €59,000,000 in the previous quarter To the EUR 55,000,000 in this 4th quarter, a contribution level that is more normalized. If we move to Slide 14, you can see fee income trends that were pretty stable this quarter, Something positive because asset under management fees were weak this quarter, although compensated by higher payment and collections fees Usually strong in the Q4. In year on year basis, fee income fell 0.6%. However, When adjusted by the full acquisition of Union del Duero in the Q1 2018, they grew Slightly above 2% in the year. Now moving to costs. As you can see in Slide 15, operating expenses fell 2.2% in 2018 compared With 2017 and 5.6% compared with 2016, driven Mainly by lower personnel expenses, a trend that following the new personnel cost plan previously explained by Enrique One part of these savings will be mitigated by higher general expenses owing to IT investments and the automation of processes. In Slide 16, we have included impairment details. As you can see, total impairments, despite the significant restructuring costs booked in 2018, Improved significantly compared with 2017 from €224,000,000 to 170 €4,000,000 Such a positive trend was mainly explained by the release of provision related to loans and foreclosed assets, Something that has been possible owing to the strong coverage levels and the market improvement for this type of assets. As you can see in the right hand side of the slide, the annualized cost of risk year to date, Including disposals was just 5 basis points. If we move now to the asset quality section. In Slide 18, we have details on the evolution of our non performing loans where you can see that the trends were very positive in the 4th quarter. Non performing loans fell by 13 percent quarter on quarter and almost 30% year on year in the Q4 this year. The annual drop went from €300,000,000 in 2016 to €500,000,000 in 2017 To the almost €800,000,000 in 2018, quite a positive trend. In the bottom of the slide, you have quarterly nonperforming loan variation. Gross entries were stable and similar to other quarters of 2018, but slightly below the ones in 20 17. Cash recoveries, including disposals, were strong in the Q4 'eighteen, leading to one of the highest Quarterly drops in nonperforming loans of last year. As we usually do in Slide 19, we have updated our non performing loan coverage details. Overall, the coverage was 53% by year end with 89% of our nonperforming loan Balances being secured and with and almost 80% of the non performing loan balances secured By Finnish buildings, we give us the quality of the coverage that we have. If we move now to Slide 20, you will see an update of the foreclosed assets trends. In the left side of the slide, we have the coverage details. Overall coverage was 62% in December 2018. And on the right of the slide, you can see the provisions released and the outflows details. In 2018, we have released €64,000,000 of provision from disposals, Representing 29% of the net book value of the assets sold. In the bottom, we show that we had 85,000,000 outflows in the quarter, all in all, positive trends as a Result of the coverage levels. In Slide 21, we show together The nonperforming loans and foreclosed assets trends. As you can see, in 2018, we have reduced by a significant 22% Or by close to €1,000,000,000 the gross nonperforming assets balances to €3,600,000,000 At level very close to the 2020, a level that is very close to the level To the target that we have for 2020, so almost 2 years ahead of the initial plan. NPA coverage remains at 57%. In net terms, foreclosed assets and non performing loans balances Now represents 2.7 percent of total assets by year end. In the bottom of the slide, you can see that the tech ratio continues to decrease quarter after quarter, reaching 61% in December. In terms of liquidity, you have the details in Slide 22, where you can see very little changes One more quarter. Our loan to deposit ratio remains very low at 73%. On the top right, you have the liquidity ratios that continue to be among the highest of the sector. Regarding the amount of liquid assets, as you can see, in the bottom left, they represents 24% of our total assets, so there are very little changes in this front. In terms of wholesale maturities, as I usually do, let me remind that until the end of 2019, we won't have significant maturities. However, at the end of this year and the beginning of 2020, we have around €1,000,000,000 at an average cost Close to 2.5% maturing, something that will be quite positive in 2020. Finally, moving to Solvency. In Slide 23, you have all the details. As you can see in the top left, current regulatory capital ratios are well above the SREP requirements With €1,500,000,000 buffer over seat 1, close to €1,000,000,000 buffer in total capital. SEAT1 phase in was 15.4% in December, while total capital was 15.7%. As we have explained in previous conference calls, for us, the regulatory solvency is very relevant because the phasing calendar that we apply finish in 2023 rather than 2019. In fully loaded terms and excluding the unrealized gains, the CET1 fully loaded grew 10 basis points quarter on quarter to 13.5%, which is 70 basis points above the previous year. Now I will leave Enrique with the usual final remarks. Thank you, Pablo. Let me finish, as we usually do, with some final remarks. In 2018, we have been able, one more time, to report resilient results generation capacity. We have managed to compensate significant extraordinary charges in PNNL. In 2018, despite Booking the restructuring costs, we have been able to increase our attributable net income by 7%, Something that, together with our strong solvency position, has allowed us to anticipate 2020 payout target of 40%. As we also saw in the presentation, The commercial activity continues to improve quarter after quarter, with performing loans stable following a significant increase in new loan production. And most important, we did it following a prudent pricing approach. Also, it is worth noting that NPAs, Nonperforming assets continued to decrease at a significant pace during 2018. The €1,000,000,000 decrease in gross NPA has left the problematic exposure close to our 2020 target. Such positive trend was possible and explained among others owing to a best in class coverage. And finally, as we have been doing since we became listed, we have been able to keep an extraordinary comfortable solvency and liquidity position. Thank you very much. We will now answer your questions. Thank you, Enrique and Pablo. We will start with the Q and A now. The first one, Enrique, is for you. We got several questions regarding the potential deal with Liberbank. If we can provide an update on the situation, please. Yes. Okay. As you know, on December 12, we published A relevant fact confirming that we are maintaining contacts about the potential integration with Liberbank. At the moment, these contacts keep ongoing, and we have nothing new relevant to communicate to the market. Therefore, we will not comment or answer questions regarding this potential integration. Thank you, Enrique. Another one for you regarding the new cost cutting plan, if we can clarify the timing for booking the pending €40,000,000 of restructuring provisions. 1st of all, bear in mind that this is a voluntary exit plan That is still in progress, so we cannot be much more specific. However, we understood that It was helpful for you to have some details on the plan. Among them, as we show in the presentation, we estimate that the plan will require close to €180,000,000 of restructuring costs. We already had €40,000,000 in the Q3 2018 booked and we have booked another €100,000,000 this last quarter of 2018. So under our estimates, there is still around €40,000,000 to be booked in the Horizon Auto Plan. The timing and the final amount will depend on the final outcome of the plan that, as I said before, is still under progress. Thank you, Enrique. Another one also related to the cost cutting plan. They're asking us that we have explained in the presentation the expected trend for personnel expenses, but if we can provide more details on what we expect for general It's true. We have provided personal cost details because the savings will come in this line, and provisions booked this quarter are related to such savings. The plan has 2 targets. One side, it will be implemented to lengthen the cost savings from 2019 to 2021, which we believe is very positive. On the other hand, one part of the personal cost savings will mitigate additional investments in IT and processes. Take into account that we want to run the bank with fewer employees and others, we need additional Investment in order to increase the automation of processes. Regarding the amount of investments needed, All I can say is that they will be below the personnel cost savings, enabling the bank to continue reducing total cost until 2021. Thank you, Enrique. One more regarding on this plan, too. If we can please clarify the horizon for the €55,000,000 of savings, And how much how many savings were already achieved? In 2018, we have already started to benefit from the savings. The around €55,000,000 savings are for the period 2018, 2021, and they are gross of wages, inflation and new hiring that we estimate at around 1% to 1.5% per year. This means that the net savings will be below the mentioned net gross savings. Thank you, Enrique. Moving to P and L now. Pablo, There is a question on if we can asking us if we can update the situation on mortgage flows, please. Balances with active floors fell in the quarter to A number close to €200,000,000 to a final amount of around €1,800,000,000 at the year end. As it already happened in the 3rd quarter, lower balances with floors didn't have a significant impact in net interest income this quarter. In terms of provision, the situation is also very similar to the previous quarter. We continue to have around €300,000,000 for legal issues with around twothree of that related to mortgages floors. Thank you, Pablo. There is another one on the ALM on the ALCO portfolio. We can update the size, strategy, contribution and sovereign exposure Yes. The size of the debt portfolio, net Of forward sales decreased at the end of 2018 as we executed some sales in the fair value To OCI portfolio as part of the regular management of this portfolio. The amortized cost Portfolio size and duration remained pretty stable during last quarter. As we explained in the past, There is a structural portfolio in the amortized cost portfolio, which is much in terms of size With the structural liquidity position of the bank, we can expect additional medium short term purchases In the next few months, on this portfolio to invest the transitory excess of liquidity that we have at the moment. European government bond exposures remain in 4th quarter very similar to previous quarters And sovereign debt represents 77% of the total debt portfolio with most of it being Spanish debt. Regarding the holdings on BTPs and PGVs, remain also stable during the quarter, Been almost all the bonds accounted in amortized cost portfolio with no impact in capital or P and L. Regarding to NII, as we explained in previous quarters, once the forward sales Have been executed at this last quarter of 2018. The bond portfolio will normalize its contribution to NII to levels close to the €55,000,000 per quarter, which is close to the ones that we have in 2017. Thank you, Paolo. The next one, probably for Enrique, if we can please Update our loan growth guidance or expectations. As we said in the presentation, the trend continued to improve. In the Q4 of 2018, the performing loan book grew 0.2% quarter on quarter. In fact, in 2018, 3 or 4 quarters showed A quarterly increase in performing loans confirming the improving trend. However, mortgages continued to decline, Also, new production improved significantly. We expect to maintain this positive trend in the coming quarters, And this should enable us to reach a low single digit growth in 2019. Thank you, Enrique. The next one is related to this one is if we can update the net interest income guidance for 2019. Pablo, probably you can answer. Okay. This is always hard question. On one side, we expect to have A positive impact from the mix of loans. Also, you saw during the presentation, Our front book yields remain well above the back book, something that together with higher volumes We'll continue to help the NII projection. On top of this, we expect the repricing effect to become positive this year, Although the rates curve has flattened further this quarter. On the headwinds, The contribution from the debt portfolio will be lower and mortgages with floors will continue to decrease. Also, we don't expect a significant improvement in the cost of liabilities until the end of 2019 When some expensive covered bonds mature. So net net, depending on the size Of the increase of the loan book and if rates evolve as we expect, net interest income into 2019 should be very similar to the 2018. Thank you, Pavel. The next question is if we can update Interest rate sensitivity, please. Okay. And the balance sheet remains positively positioned Towards an increase in interest rates, especially for the period of 2019 to 2021. Under a parallel increase of the curve of 50 basis points, the NII in the 2nd year Will be 12% above the last year level. As we have mentioned in previous quarters, this calculation Is considering a constant balance sheet and conservative but realistic assumptions like, for example, changes in the mix between term and site deposits In a rising rates environment. Thank you, Pablo. The following one is on the TLTRO, if we can update the situation and the date of maturity of such funding. As you all know, our ECB funding is all currently related to the TLTRO 2 facility. We went in full to the last auction. So our TLTRO funding matures in March 2021. In terms of liquidity, this won't be an issue because The funding was invested in sovereign bonds with the same maturity and with the same amount that we obtained from the ECB. Thank you, Paolo. The next one is also for you, is regarding the NREL levels. Are we expecting to see an increase in the wholesale funding cost next year because of MREL issuance? We can elaborate a little bit on MREL, please. Regarding MREL, we haven't received the final formal details. However, As you probably know, considering our size and the type of bank that we are, we won't follow the bail in approach. This means that we will need to meet relative lower requirements, probably In the range of 20% to 21% of risk weighted assets, although this hasn't been formally confirmed so far. That said, our current regulatory total capital ratio of 15.7% Leaves us in a comfortable position and with enough time to meet the future requirements. Bear in mind that I said The phasing ratio, not the fully loaded. And this is important because our phasing deduction calendar finishes In 4 years, in 2023, our initial aim is to meet the requirement issuing senior Non preferred and Tier 2, but final decision will be taken considering the evolution of our solvency position and minimizing the cost. It is also worth noting that if we consider the approval of IRB models, the issuance will be much lower, Enabling us to meet all the pending requirements issuing much less eligible liabilities. However, we haven't decided the timing and the final type of instruments that we will use. So we will do it depending on market conditions and in the best way to preserve our P and L. In this sense, It is very important to highlight that we have expensive liabilities maturing in the coming quarters that will help to mitigate the cost Of new NREL liabilities. As a reminder, we have close to €1,000,000,000 of covered bonds A 2.5% cost maturing by the end of this year, the 2019, and another €1,300,000,000 of expensive client deposit at 4.3% cost maturing at the end of 20 2020 and the beginning of 2021. These maturities will more than compensate The issuance of NREL instruments helping to improve our profitability and results. Thank you, Paolo. Moving on through the P and L. The next one is on fee income, if we can provide some kind of guidance for this year. Net fees remained almost flat in 2018. However, excluding the accounting reclassification of Unions del Duero, They grew 2.4% year on year. In 2019, we won half this reclassification impact, so we Expect to continue improving fees. In the Q4, fees from non banking products fell €4,000,000 owing to market conditions, But this effect was compensated by strong payments and collection fees. Going forward, if market conditions improve, we Could expect overall net fees to grow close to mid single digit. Thank you, Paolo. The next one is regarding associates. If we can explain the low level in the 4th quarter and what should be the quarterly be seen in this line going forward. Associates' income was below previous quarters in the 4th quarter mainly because of seasonal factors and some nonrecurring and positive results last quarter. However, we believe that 2018 levels should be a good reference going forward, even improving from those levels in 20202021. The next one, similar This one is for the details on if we can provide a breakdown of other revenues and expenses. Please, Paolo. Yes. This line includes several issues. Let me explain you the main ones. On one side, we Here the income from our real estate rentals that compensates in full the maintenance cost of such assets that are also included. Other relevant impact this quarter is the deposit guarantee fund. Such contribution, together with the DTA levy, represented €51,000,000 this quarter. The remaining results are explained by the real estate servicer And Uniand del Duero, which together amounted to $7,000,000 in the 4th quarter. Finally, There were other smaller results that altogether represented a negative €2,600,000 So altogether, explain the EUR46,000,000 charge in this quarter. Thank you, Pablo. Moving to Asset Quality. We got some few questions regarding the cost of risk. As you saw, the loan loss charges in 2018 were very positive. We released €4,000,000 in the year, which is really good news and consequence of our coverage levels And secure position of the nonperforming loans. So Going forward, we expect the cost of risk to remain very low in the coming years. Thank you, Paolo. Also regarding the nonperforming assets, We've got a question asking us to say that they fell significantly in the quarter, mainly NPLs. If we can provide details regarding That decrease, the quarterly decrease of nonperforming assets and specifically nonperforming loans. Yes. In this quarter, we sold some small portfolios, including 2 small NPLs portfolios That together represented close to €200,000,000 This is why the NPL balances accelerated its pace of decrease in the quarter. This is part of the ongoing disposal strategy. These portfolios, together with the regular management Also on the problematic exposure, they're asking us that once that we have almost reached 2020 target, what will be the new target going forward? What they can expect for these balances going forward? We will continue to reduce our NPAs. As you saw, our strategy is to continue selling small portfolios, Although if we see interest in to sell a bigger portfolio, we will do it. We analyze all alternatives, And we go ahead with those that we believe add more value, trying to balance the pace of decrease with the results of the disposals. This strategy implies that some quarters, the nonperforming loans fell more than the foreclosed assets and the opposite. It is not a regular decrease because it depends on the characteristics of each quarter disposals. Following this strategy, we have managed to reduce by 22% or close to €1,000,000,000 our gross nonperforming assets In this year, bear in mind that in the last 4 years, we have reduced our gross nonperforming assets By almost €4,000,000,000 half of the balances we used to have in 2014. It is also important to realize that owing to our coverage levels in terms Non NPAs represent only 2.7 percent of total assets, meaning that the book value of these assets €1,500,000,000 of which only €600,000,000 are foreclosed assets and €900,000,000 nonperforming loans. The pace of decrease has been very positive, and we expect this trend to continue next year. Although it's somehow already answered, there is a specific question if On this matter, asking us if we are considering carrying out a big deal as other competitors have already done. I think I already mentioned, we analyze all opportunities, and we will execute Those ones that we believe add more value considering the two priorities that I mentioned. On one side, To continue decreasing the problematic exposure and on the other side, the results of those disposals. Thank you, Pablo. The next one is for Enrique, if we can update the dividend policy going forward. Okay. We don't have a formal dividend policy. The dividend is proposed in the General meeting every year considering the solvency position and their results. As I mentioned during the presentation, We will propose a 40% payout this year. This was the payout target for 2020, But we have generated more capital than we expected. And under our view, this is a good way of improving shareholders' return. Going forward, this could be a good reference, but it will be decided every year. There's some other questions on solvency issues, Pablo, regarding TRIM Or IFRS 16, if we can expect some impacts from these other issues ahead. TRIM is related to the review of the IRB models. So we are still applying standard models to all of our portfolio, We won't have any impact from TRIM. Regarding IFRS 16, we own most of our branches and So we don't expect any material impact from IFRS 16 either. So It is worth noting that most of the sector headwinds in capital, like the mentioned TRIM or Basel IV, in our case, are more a tailwind rather than a headwind. So we have, as you know, very high risk weights. So all these changes will be even positive for us. Enrique, there is one question on the situation. We can update the situation regarding the migration to IRB models. We have been working on developing our IRB models for some years. We have a calendar that, for the time being, we are accomplishing. We already used the models for management purposes, and we have already taken the first steps towards formal application. If things evolve as we expect, we don't face any obstacles. We believe That we might have the approval next year, although this always depends on the supervisor reviews. Thank you, Enrique. One final question, Paolo, maybe for you regarding the SREP levels, If we expect any changes or an update on this requirement? We have not received the formal letter yet, so we cannot be more specific regarding this. But under our view, there shouldn't be changes. But we will need to wait for the official confirmation in the coming weeks