Good afternoon, ladies and gentlemen. Welcome to the Banco Comercial Português Q2 2020 earnings conference call. At this time, all participants are listen-only mode. We will conduct a question and answer session, and instructions will be given at that time. If anyone should request assistance during the call, you can press star then zero on your telephone keypad. Just to remind you, all this conference call is being recorded. I would now like to hand over to the chairperson, Dr. Miguel Maya. Please go ahead with your meeting and I'll be standing by.
Good afternoon. This is Miguel Maya speaking. Welcome to the first semester earnings conference call. The activity of the bank on the first half of 2020, mainly on the second quarter, was as expected, strongly affected by the overall reduction of the economic activity in Portugal and by a less pronounced decrease of GDP in the remaining geographies where we operate. Despite still dealing with a high level of uncertainty, as shown by the significant reviews that institutional entities are doing to their previous forecasts, we have no doubt, though, that we are facing a deep recession. It is important to underline that the confidence and activity indicators of June and July may support some optimism regarding the recovery of the economic activity.
It is, however, too soon to take for granted that we have already started a solid and sustained recovery. BCP's priorities remain focused on the reinforcement of the bank's resilience and adaptation capability. As highlighted on the last earnings presentation, we promptly adjusted the bank's priorities in anticipation of the pandemic impact, having switched our focus from a growth-driven mode to a defense balance sheet mode, mainly in the admission and monitoring of credit, the protection of capital, the reinforcement of liquidity, the control of costs and investments, and the additional preventive charge of impairment to face foreseeable losses caused by the pandemic.
The earnings in the first half were also influenced by a lower contribution from Bank Millennium Poland, but I want to highlight that Bank Millennium showed a resilient commercial and operational performance in the second quarter and the synergies of the integration of Euro Bank have been delivered. Unfortunately, and due to well-known reasons which we still believe could turn into a fair and balanced outcome, the FX mortgage litigation risks have overshadowed relevant achievements of Bank Millennium in other major fronts. The earnings of our subsidiary in Mozambique were quite consistent, showing once again the resilience of that subsidiary's business model. I want to stress that the granting of loans in Portugal has been centered on the credit lines backed by the state to support the economy.
We achieved a market share on those credit lines that almost doubled our natural market share, counting on strong commitment from our commercial and operations teams and benefiting from the investments already made in automation technologies. Let me also underline that due to the changes we have been making these years in the risk appetite and in the loan underwriting standards of the bank, we have now what could be considered a prudent level of exposure to most vulnerable sectors of the economy, which represents around 7% of the performing loan book and from which I highlighted the low exposure to real estate promoters, around 2.4%.
On the credit segments we foresee as potentially more effective, namely the SMEs and the unsecured consumer loans, our exposure to SMEs has adequate collateral levels and most of them mainly work for the domestic market and our unsecured loans in Portugal just represent less than 11% of our total loan book and less than 5% of total loan book. We are still moving in a high uncertainty environment, having our teams focused on the priorities we defined for the near future. The economic impact of the pandemic will depend heavily on the evolution of the global sanitary situation, some optimism is currently being sustained by recent news about the testing results of vaccines under development and the positive signs for the envisaged economic recovery pace being particularly relevant for Portugal, the recent agreement for the European Recovery Program and the multiannual European budget.
We have important challenges ahead, fortunately, BCP counts on teams that already proved their resilience, their ability of adaptation to new realities, their capability to recover credits, and their relationship skills. In the first semester, our consolidated net profit reached EUR 76 million, affected by additional provisions and impairments to face the major risks ahead, including EUR 180.8 million of impairments to mitigate the economic impact of COVID. The core income on the second quarter was mostly influenced by a decrease on commissions. Year-on-year, the core income grew 2%. Let me highlight that on the second quarter, there was an inversion of previous quarters NII downward trend in Portugal, showing a positive evolution of more than 3% from first quarter.
Our high-intensity commercial activity played a crucial role for the year-on-year growth of business volumes, with both the performing loans and the customer funds having a similar growth around 5%. The support BCP provided to the economy in Portugal during the most critical confinement period is a clear example of such commercial intensity. We stand out as the principal bank that financed more than 12,000 companies with the COVID lines backed by the state guarantee, and we swiftly implemented moratoria to more than 120,000 loans of households and companies. During this period, we have expanded our mobile customers base by 36%, and the digital sales have boosted to 35% of total sales.
Looking at the net income of EUR 76 million, we see an year-on-year decrease of 55%, which as I just mentioned, was influenced by the impairment charge in Portugal, Poland, and Mozambique due to COVID, but also by provisions of EUR 38 million this year in Poland to mitigate FX litigation risks. Therefore, the cost of risk increased to 85 basis points in the first semester. NII was negatively affected on the second quarter by reference interest rate cut in Poland and Mozambique, while in Portugal we saw, as I already mentioned, 3.5% increase of NII inverting previous quarters downward trend. The commissions remained stable year-on-year despite have decrease on the second quarter as it was hit by the lockdown and social distance measures in full.
The recent legislative measures in Portugal will put additional pressure on the commission's evolutions, although these political headwinds could be reasonably mitigated by an increase of the relationship with our clients, with a model supported in transitional package and actively managing the bank's price policy. As a result of this evolution, the core income grew 2% year-on-year. The customers confirm their positive feedback regarding their satisfaction with our digital approach, and that satisfaction continues to be reflected in a growing number of mobile customers. Overall, the number of mobile customers on consolidated basis grew 36% year-on-year with the mobile customers already representing 44% of our global customer base. In Portugal, we reaffirmed the leadership in customer satisfaction, having recently been elected as Best Digital Bank in 2020, and our app is receiving top recommendation ratings by Google Play Store users.
In June 2020, 43% of our digital customers in Portugal use exclusively our app, a growth of 10 percentage points since June 2019. They are responsible for 87% of digital interactions the customers have with us. The app's high degree of satisfaction and utilization level by the customers is driving the growth of mobile business, that is shown by the 70% increase this semester in the number of sales, 79% increase in the number of payments, and almost doubling the number of transfers. We have established as a priority to put our innovation competence at the service of the customers as to provide them better convenience and user experience, aiming to exceed their expectations and obtain their confidence and preference.
The onboarding on the apps is simplified and enables a streamlined day-to-day management of the customer's banking needs, a best in class that provides innovative and digital exclusive products and service that is open to integration with other complementary digital platforms while promotes aggregation and initiation of payments on the customer's accounts in other banks. These innovation priorities reaffirmed Millennium bcp as the customer's first option when they want to start a digital relationship with a bank, and this first-mover choice is of utmost importance to retain customers on the long term. We are getting more than 1,200 mobile customers daily. Although operating in a tougher environment due to COVID-19 pandemic, we managed to increase our business volumes without compromising our risk management standards.
I want to highlight the EUR 2.4 billion increase in the performing loans, 4.7% growth year-on-year, of which EUR 1.5 billion was achieved on the first semester of 2020. The customer funds also have grown 5% year-on-year, increasing EUR 4 billion since June 2019, of which EUR 1.5 billion also achieved on the first semester, mostly on balance sheet resources from depositors, which reveals the customer's confidence on BCP on the edge of a global crisis caused by the pandemic.
We did not refrain our commitment to improve the quality of the balance sheets, having reduced EUR 1.1 billion of NPE since June 2019 while improving even further the already good coverage levels we had. As usual, this effort has great relevance in Portugal, where we reduced EUR 1.2 billion of NPEs, of which EUR 338 million on the first half of 2020. In the second quarter, the reduction capability was severely restricted by the lockdown measures.
However, we managed to compensate the inbounds and even able to achieve a small reduction. We have a solid recovery now as we already proved, and we will prove once again. The NPE coverage increased to 58%, considering just the impairments. If the collaterals are included, the NPE's total coverage reach 109%. The impairment charge done this year due to foreseeable losses related to COVID pandemic justify the increase on the cost of risk in Portugal and in the international subsidiaries. Our suitable capital position and our resilient business model, capable of organic generate capital even under current circumstances, made possible that we have accommodated risks as the ones we are facing without disruptions in the capital ratios. Total capital stayed at 15.5%, standing 2.2% above the regulatory requirements, percentile points above regulatory requirements.
While the fully implemented CET1 improved to 12.1% vis-a-vis 12% in the previous quarter, which stands at 3.3 percentage points above regulatory requirements on a conservative approach, without considering the temporary flexibility permitted by regulators since March. We continue to have a very comfortable position in terms of liquidity situation, as shown by the liquidity ratios. The additional EUR 2.2 billion in ECB net funding resulted from our take-up at last TLTRO auction as part of our NII management and optimization policy. This increase in net funding was followed by the increase in eligible assets as well.
As a final remark, I would like to underline our priority in defending the quality of the balance sheet, our commitment to stand out as a benchmark in operational efficiency, the investment we are making in the customer relationship model, highlighting the mobile as a distinctive element of our franchise, use we are making of technology to leverage automation and operational efficiency. Most of all, the remarkable commitment of BCP employees with the process of transformation of the bank to the new environment. I now give the floor to Miguel Bragança.
Thank you. Thanks very much. Thank you very much, ladies and gentlemen. As you see now on page 16 in our income statement, we show a growth of 2% in our core income, driven basically by the NII that grows 2.6%. The operating costs grow 4%. Both of these factors, the core income, the operating costs, and also the impairment are somewhat influenced by a small change of perimeter that is acquisition of Euro Bank in Poland. The core earnings are stable. In terms of the non-usual operating costs, which are basically severance payments, they decrease somewhat. The other income very much influenced by the mark-to-market of funds in our balance sheet and by the lack of capital gains in real estate that we had last year, decrease EUR 17 million. This makes our operating net income decrease around 12% when you compare with the same period of last year.
The major impact now of the COVID, and of the legal risks that we have mainly in Poland, is this growth of 45% in impairment and provisions that imply then that our income before tax decreases 53% and our income after tax and minorities decrease 55%. Let's go a little bit more in detail in terms of these movements. We see that the NII grows 2.6%. This NII is linked to a growth in volumes together with some margin compression that the NIM decreases by 13 basis points. In Portugal, what you see is that there is some decrease in margin that is basically explained by the excess liquidity that we have. We have been generating a lot of customer resources that then have been invested at negative rates at European Central Bank or in short-term money market instruments.
We already see some growth from Q1 - Q2 in Portugal of 3.5% growth that we expect will continue with the tailwinds of the TLTRO. In international operations, there is a growth of the NII to a large extent explained by the acquisition of Euro Bank in Poland. There is some margin compression and this is also explained to a large extent by the decrease of interest rates in Poland and in Mozambique. The fees and commission, in spite of a very adverse environment, show a lot of resilience with stability both in consolidated level and in Portugal, and a growth in international operations due to the change of perimeter that I've commented.
In terms of the other income that is explained in page 19, we see a small growth in mandatory contributions, around 6%, as you see in the left-hand corner, and a decrease in the net trading income to a large extent due to the mark- to- market of restructuring funds and a decrease in the other net operating income. This other net operating income is basically a net effect of the capital gains in real estate and mandatory contributions. as this year we did not have almost any capital gains in real estate, the number that is there is basically the negative number of mandatory contributions both in Portugal and in Poland. Operating costs. You see some decrease in spite of the challenging environment of the recurring operating costs in Portugal of 2%. when you consider also restructuring charges, the operating costs decrease even more.
We would think that until the end of this year, the level of operating costs that we saw in this first half of the year will continue. We are not expecting any type of cost inflation and the positive numbers that we have in the first half of this year is something that we expect to continue. In the international operations, we have here the perimeter change of Euro Bank. Here, I would like to stress that the capture of the synergies is going ahead of the plan, so we expect it to deliver more cost-cutting than what was announced when Euro Bank was acquired. Cost to core income. In spite of all these adverse movements, we continue to show best-in-class numbers when you compare ourselves both with our competitors in Portugal and with the main banks in the Eurozone.
In terms of impairments and provision charges, there is an increase in the cost of risk. The cost of risk in Portugal grows from 76 basis points in the first half of last year to 82 basis points. If you consider the quarter in an isolated way, you see that we are very close to 100 basis points, as was somewhat anticipated in our last call. This is a trend that we expect to continue. The provision that we had this year already reflected the anticipation of the IFRS 9 scenario modeling. We have already registered, according to the IFRS 9, the different scenarios with the probabilities, and there was a provision of around EUR 70 million allocated to stage 1 and stage 2 credit based on the new scenarios.
In the international operations, there is also some increase in the cost of risk from 69 basis points- 92 basis points, which has increased our loan loss reserves from around EUR 518 million to around EUR 630 million. In terms of other provisions, we see here an important increase that is basically linked to legal contingency fees in Poland. Credit quality. If you see here the last 12 months, you continue to see here a decrease in the NPE number of around EUR 1.1 billion. What you see is that our NPE ratio, according to EBA, including off balance sheet, so the whole exposure, including security, is already below 5%. If we consider only loans, we have here a ratio of 7%.
Going forward, as we have already anticipated, we do not have more information than you have in terms of when a vaccine will come through and exactly the extent to which this crisis will affect our income statement. The visibility that we have is until year-end and as anticipated. Our normal rhythm would be a decrease of around 30% if it were not for the COVID. In this environment that we live today, we do expect until year-end a maintenance of the NPE with the positive efforts that we are doing and the positive recovery performance that we are having being compensated by some increase of non-performing exposures due to the crisis that we are living. In terms of customer funds, you see that our franchise is very healthy.
You see that the individual customer funds grow 12% in Portugal, the total of 5%, and even in the international operations, we see here a growth of around 5%. This, of course, has a cost. We are trying to be very disciplined in terms of the pricing, so our cost of deposits is very close to zero, but we are individual banking driven because we think that for the future, it still makes sense to have deposit clients. In terms of loans, we see a growth of the performing loan book that is more than twice the reduction of NPEs. The performing loan book increases EUR 2.4 billion, while the reduction of NPEs is around EUR 1.1 billion. Mainly in Portugal, in international operations, the book was quite stable.
What we also see right now is that the new performing book is having, in Portugal, a more positive impact in the NII than the reduction of NPEs. In terms of capital, we have increased since March our capital ratio around 16 basis points. This has many effects, some of them more relevant, some of them less recurrent. What I would say is that our organic capital generation coincides with this increase in the capital ratio. As we have commented, we have a positive capital generation quarter after quarter. In the positive quarters, we have an organic capital generation in excess of 20 basis points.
In this situation in which we are facing this crisis situation that we all know, we were still able to generate capital by around 16 basis points. Leverage ratio and RWA density showed also the resilience of our banking model, of a liquid banking model with an RWA density that is quite high, which shows, hopefully, the conservativeness of our risk models. In terms of the pension fund liabilities we had here, we try to manage the pension fund in a way that tries to give a good balance between return and risk management. The profitability of the fund was slightly negative, around - 0.2%, but there was an increase in the discount rate because the reference discount rates have increased in the period that more than compensated this effect so that effectively we are more than covered for the liabilities that we have.
I will pass now the floor here to Bernardo.
Okay. Just take my mask. Good afternoon, ladies and gentlemen. On page 32, starting with the Portuguese operation, net income decreased by 38% year-on-year to EUR 45 billion, affected mainly by the COVID-19 context. Net earnings were influenced by lower NII, that I will detail on the next slide. Lower commissions and other operating income due to the lower level of sales of real estate assets compared with the first half of 2019, and by a devaluation as well on the restructuring funds, as well as higher impairments charges that more than offset lower operating costs. On the cost side, costs went down by almost 5% and were positively influenced by lower recurring costs as well as lower restructuring costs compared with the first half of 2019.
On page 33, looking to NII evolution in Portugal, net interest income amounted to EUR 379 million in the first half of 2020, compared with EUR 399 million in the first half of 2019. Favorable impacts of the expansion of the credit portfolio account for almost EUR 10 million. That more than compensate the negative impact of EUR 7.7 million from the NPE reduction. The reduction of the wholesale funding, as well as the continuous reduction of deposits, had a positive impact of more than EUR 15 million, that was not sufficient to offset negative impacts of the securities portfolio of EUR- 30.6 million, which reflects the lower yield on the amounts invested in securities. The reduction of the credit rate of EUR 11 million and the application of the surplus liquidity that had a negative contribution of EUR 8 million.
Let me also highlight that it was possible to see a turnaround on NII in Portugal when we compare Q1 with Q2, where there was an increase of 3.5%. On page 34, regarding spreads on term deposits, back book spreads to that 48 basis points compared with 53 basis points on the first half 2019. It is also important to consider that there was a decrease on the three-month Euribor of four basis points that happened during this period. Spreads on loans stood stable around 270 basis points. NIM in Portugal stood at 153 basis points lower than last year, reflecting the impact from guaranteed loans related with COVID-19, as well as lower production on the personal loans.
Moving to page 35, regarding commissions and other income, you can see that banking commissions decreased 3% in the year due to COVID-19, related mainly with impacts on payments, transfers, and cards. Market-related fees went up as a result of securities and asset management fees. Looking to other income, the strong decrease was mainly explained, as Miguel mentioned before, by lower gains on real estate sales, the devaluation of the corporate restructuring funds that affect the trading line, and on the opposite side, there was a strong contribution from the equity earnings due to the reversal of the liability test on insurers. Going to page 36, looking at costs, there was a reduction of 6% in staff costs and of more than 7% in other admin costs, partially explained by lower one-offs and lower admin costs due to the lockdown. All in all, recurrent costs went down 2%.
There was also a reduction in the number of employees as well as reduction on the number of branches. Moving on to page 37, which refers to asset quality, NPE reduction was strong since June 2019, with more than EUR 1.2 billion decrease. On the first half of 2020, there was a reduction of more than EUR 335 million, mostly concentrated on the first months of 2020 before the increase of the pandemic. Cost of risk increased to 22 basis points due to the update of the macro scenarios on credit models. Let's move to page 38, which looks at the NPE coverage breakdown. You can see that total coverage stood at 115%, whereas coverage for individuals with high levels of real estate collateral stood at 100%. For companies, at a high level of 119%.
As you can see in this slide, coverage by loan loss reserves is high in loans for companies because real estate collateral is lower for this segment than for individuals. On page 39, looking at foreclosed assets and restructuring funds, there was a decrease of more than EUR 354 million and EUR 144 respectively, compared with the first half of 2019. To what concern with restricting funds decrease was influenced by the COVID-19 context, affecting the net asset value of the units that we hold. In terms of property sales, there was a slowdown in the first half of 2020 compared with the previous year, once again influenced by COVID-19 outbreak. As you can see, even on this challenging environment, sales are still above the book value of the assets. Moving to page 43. Customer funds were up by 5%, mainly due to the increase of demand deposits.
Off-balance sheet products stood at the same level as previous year. In terms of gross loans, there was an increase of 3.3%, mainly related with loan to companies that increased 6%. In this period, performing loans, as mentioned, increased at 2x , the high level of the decrease that we have in terms of the reduction of the NPEs. Going to page 41, we have a detailed overview of the evolution of the performing book, which increased 7.2% year-on-year as a result of the strong support to companies which accounted for 83% of the total performing loan book from June 2019. On page 42, you can see our support to companies and families on this difficult period. As mentioned before, since the first days of the outbreak, BCP were close to our customers, supporting their needs and helping them to make the most adequate decisions.
On companies, BCP have more than the double of the natural market share in terms of loans. Credit lines with state guarantee that we provide have a share of 38%, and we already provide more than EUR 2.2 billion of funds to our customers. Related with moratoriums to households, moratoriums reach EUR 4.1 billion and mortgages account for more than 92% of the individual moratoriums. Moratoriums for companies, we see it as a prudent measure regarding the uncertainty of the situation, companies are taking advantage of this measure to manage their needs. It's important to highlight that out of those EUR 4.7 billion, 1/3 are related to what we consider the most vulnerable sectors and only 1/3 of those have LTVs above 80%.
Moving to page 44, with regards the results of the international operations, we can see that there was a significant reduction of the contribution from the international operations to net income, that were mainly explained by the lower contribution from Poland due to the COVID-19 provisions and additional provisions for FX legal risk and integration costs from Euro Bank. Moving to page 45. Net income in Poland was impacted by several one-offs, including EUR 38 million for legal risks. Net profit when adjusted for extraordinary items was down 7.7%. Net operating revenues increased by 14%, which includes the accretion value from Euro Bank, as well as the strong franchise of Bank Millennium. Operating costs in Poland increased year-over-year, mainly impacted by the Euro Bank acquisition and CET1 ratios stood at 17% and total ratio at 20%, well above the regulatory requirements.
Return on equity, excluding the effect of the one-offs, stood at 8.7%. Moving to page 46, regarding integration costs of Euro Bank on the first half of 2020 stood at EUR 8 million and total integration costs incurred up to June 2020 account for 77% of the overall plan. Euro Bank synergies of EUR 14 million more than compensates the integration costs and are expected to total EUR 35 million for 2020 as a whole. On page 47, some detailed information about Bank Millennium. NII up more than 22%. We have to bear in mind the 140 basis points of interest rate cut from the recent rate cut from National Bank of Poland. NIM stood close to the level of previous year. Operating costs were higher than first half of 2019 due to the Euro Bank acquisition, mainly related with staff costs and other admin costs.
It is possible to observe some significant decrease in trends when compared with the first quarter of 2020. Fees and commissions increased 10% and on the opposite side, other income was lower due to high mandatory contributions as well as lower trading gains. Moving to page 48, related with asset quality in Poland, NPL ratio was slightly higher, once again, reflecting the Euro Bank acquisition and the more consumer loan portfolio. Cost of risk was higher as a result of COVID environment and the coverage ratio by loan loss reserves stood at 108%. On page 49, looking at volumes in Poland, customer funds increased almost 10% with the highest impact resulting from demand deposits.
In terms of loans, gross book went up almost 6% and it is registered and important to mention that the new production in mortgage reached, on the second quarter of 2020, the highest level that was registered in terms of production and cash loans are also on the good trend, achieving the levels of production before the lockdown. With what regards to Mozambique, turning to page 50. Net income was lower than the same period of 2019, driven by lower net operating revenues associated to last year gains on securities as well as lower NII resulting from a lower interest rate environment. Costs increased compared to first half 2019, mostly explained by staff costs considering the expansion of the network. Capital ratios stood above 41% and return on equity of more than 17%. Moving to page 52. NPL ratio, 90 days past due stood at 20%.
Cost of risks stood at 190 basis points, reflecting COVID-19 provisions. Coverage by loan loss reserves stood at 67%. Moving to page 53. With regards to volumes, we can see that customer funds grew 13% and loans were broadly stable, according to June 2019, or with a small increase year- on- year, reflecting our conservative approach under the challenging environment in Mozambique. Thanks for your attention. Before we move to Q&A, I will return to Mr. Miguel Bragança for some final remarks.
We like to present to you exactly how we are evolving according to our long-term strategic objective and intent. The key message that I would like to highlight is the following. First, in terms of franchise, we are clearly over-delivering. In terms of the transformation of the bank, in terms of turning our customers more and more digital and mobile, in terms of customer acquisition, we are having positive surprises and for the long term, for the value generation, this is very important. In terms of NPE and cost of risk, this asset quality world that was one of the weaknesses of the bank, what we were seeing is that we were clearly on track to achieving our objectives, and we have shown the operational capabilities to manage NPEs and to reduce NPEs.
These operational capabilities that we have nurtured in the past and developed in the past years will be crucial in this new environment that we will live in the next years. We sincerely hope that this will be a key competitive advantage in terms of maintaining the asset qualities at acceptable levels. In terms of CET1 and liquidity risk, we are also on solid foot grounds, and we do not expect any deterioration in this regard. In terms of ROE and cost to income, this is an area that, of course, will suffer more in the next periods, without compromising the long-term objectives of the bank. A bank such as ours with the franchise that we have with the client preference and client loyalty that we have, clients that, as I often stress, like our service as much as they are prepared to pay for it.
We are not a free bank. We offer quality, client preference, and the clients recognize it and pay for it. We think that a bank such as ours should be capable of earning its cost of equity that we estimated around 10%. In this short-term period, of course, we will live a period of more turbulence and it's more difficult exactly to forecast on a quarter-by-quarter basis exactly what will be the impact in terms of top line and consequently through the leverage effect in terms of bottom line. Nevertheless, this key value generation for our shareholders, both in terms of development of the franchise and in terms of having the capabilities and the core competencies to achieve this ROE, we think that we are evolving on a good track. Thank you very much, ladies and gentlemen. I will open the door now to Q&A.
I have opened the floor to Q&A, so please feel free to ask questions.
Ladies and gentlemen, if you wish to ask a question, you can press star one on your telephone keypad. Once again, it's star one on your telephone keypad to register for question. We have one question and it comes from the line of Ignacio Ulargui from Exane. Please go ahead with your question.
Hi, good afternoon. Thanks for taking my questions. I have two questions and one very detailed one on the restructuring funds. The first one, how do you see your pre-provisioning profits evolving from here in the second half? 2Q, it's normally the weakest part of the year and have had the effect of the pandemic. How do you see that evolving from here? Secondly, on costs, whether you could be able to take any additional cost-cutting measures, particularly thinking about Portugal, even though the situation is very challenging, if you could take some measures there in order to protect your pre-provisioning profit. The last question is on the restructuring funds. How do we need to expect the restructuring funds performance in terms of trading income, whether we should see additional provisions and additional hits in coming quarters?
What should be the main drivers that we need to look to expect this type of negative trading income that we have seen this quarter? Thank you.
Ignacio, thank you very much for your questions. Very useful questions. In terms of the pre-provision profit until the end of the year, we see here some tailwinds in terms of NII, namely with the TLTRO. We took EUR 7.5 billion, and we expect this EUR 7.5 billion to be able to increase our NII in, it's easy to do the numbers, in the next two quarters, around EUR 15 million per quarter, compared with the last quarter. It's basically an arithmetic operation. The remaining effects will basically cancel each other. In terms of commissions, we are taking also some measures. We expect some marginal growth. The growth would be higher if it were not for some headwinds due to legal limitations. We nevertheless expect some small growth in Portugal.
Going to the pre-provisioning profit, in terms of costs, we had a very good half year in terms of costs this half year, and we expect to maintain more or less the same cost level for the second half of the year, which is good because this was quite a low cost level. Until year-end, that's what we are expecting. In terms of the restructuring funds, we had in the past some restructuring funds that were more linked to construction. Right now, our restructuring funds are more linked to tourism, and they have good assets in the tourism business. The assets are good. For some of the people that know Portugal, good hotels in the Algarve coast region. With good quality, with good franchise and so on.
Of course, in a moment where tourism is leaving what it is leaving, we have to market the hotels and of course, at least they lost a large part of the cash flow of this year. With this, we still feel bullish over the long term about tourism in Portugal, but at least the cash flow of this year is gone, or almost gone, so to say. Our base case right now is that tourism will be reasonably back to normal in the summer of next year. If it is reasonably back to normal, we would not expect a higher devaluation. If it is not, probably, this would have another impact in terms of the restructuring funds valuation, because, a business is what it is. I would like to recall that these funds are not managed by us.
They are good hotel, of course they suffer in tourism, as any other business. What are the key drivers for it? I would say, the vaccine and whether we'll have a normal summer year next year or not. Okay. Hope I've answered your questions, Ignacio.
Thank you. Thanks very much.
Okay, once again, ladies and gentlemen, that's star one on your telephone keypad to register for questions. We have some questions coming from the line of David Kezeke, Juve Avag, Samira Dacha, and Sofie Peterzens. Your lines are open.
Hi, here is Sofie from JPMorgan. I don't know if you can hear me.
Yes, we can hear you.
Okay, great. We saw one of your Iberian competitors this morning take very large DTA write downs. How should we think about potential DTA write downs for BCP? Is this something that we could potentially see coming your way as well, how should we think about that? My second question would be, the CRR quick fix or the SME supporting factor. Did that help your CET1 in the second quarter? If not, how much tailwinds should we expect going forward? Also, if you could remind us of the IP intangible software benefit that you expect, and if you're expecting any headwinds on capital. My final question was, the cost of risk guidance for 2020 is 100 basis points, right? Thank you.
Okay. Thank you very much. In terms of DTA write down, in these accounts, we have already made our projections until the relevant period or the end of the relevant period. These projections that we have for DTAs already reflect the COVID. Of course, these are always projections, but they already reflect the COVID. I would also here like to highlight that in Portugal, in the context of this COVID, there was a deferral, so to say, of the period that we have for tax loss carry-forwards for two additional years. For the tax loss carry-forwards generated in 2020 and 2021, we will have 12 years now, this was a recent legislation, that somewhat protects our DTAs. Having said that, I would like to highlight that DTAs are already deducted from the capital ratio.
This has absolutely no, whether we write them down or we write them up, this should not be relevant in terms of capital ratio and so on. We feel quite comfortable that our present projections already reflect the COVID. As I was commenting in terms of capital ratio, we have grown 16 basis points of capital ratio, and this coincides reasonably well with our organic capital generation. There were a lot of movements that more or less cancel each other, but one positive movement was the SME factor. The SME factor in our case is very small, and the software is also very small. It is irrelevant. They also got canceled by other small effects. In our case, this is relatively negligible from a capital standpoint. They got somewhat canceled for the other way for market risk.
There were a couple of movements that cancel each other so that effectively our increase in the ratio coincides with the organic capital generation. In terms of the cost of risk. In our last call, I said that from now on, for this year and for next year, and based on some simulations and sensitivity analysis, we were expecting something between 90 basis points and 120 basis points. This was exactly what I said in my last call, between 90 basis points and 120 basis points for this year and for next year. We still maintain this view, even in spite of these new scenarios that we are seeing.
As we have shown also here last time, our business model is not tremendously sensitive to the GDP evolution. Even in the last crisis, as you've seen, our mortgage cost of risk on the top of the crisis with unemployment at 16% was around 50 basis points. This is around half of our book. For the time being, we maintain this guidance. Of course, this could be closer to 90 basis points or closer to 120 basis points. Let's see exactly where we will be. In this quarter, we have done, as you've seen, around 110 basis points, which is reasonably aligned, already anticipating through the IFRS 9, the scenarios, I would say more extreme scenarios. One second.
Thank you.
Okay.
That was very clear.
Okay, we have another question coming from the line of Jonas Floriani from AXIA Ventures. Please go ahead with your question.
Yes, hi, everyone. Thanks for the presentation. I have two questions. One is, again, on your capital, and just having in mind the recent changes from the ECB side, kind of allowing the banks to run more time with a lower capital level. Does this change in anything your strategy, and how do you see your capital levels going forward, at least over the short term? Second question is more related to asset quality. I was just wondering how you're thinking about the day after in terms of the support measures. What do you expect to see in terms of asset quality dynamics once we see these support measures being phased out towards the next year? Thanks.
Okay. Thank you very much. In terms of capital, we still think that a bank with our business model and with the strength in the market that we have and being a retail bank, we should have over the cycle and structurally, a CET1 of around 12%. Having said that, we are not, I would say, on a totally automatic mode, so that if we are a little bit below 12%, we immediately do a cash call, or if we are a little bit above 12%, we immediately try to decide a share purchase program. The way we see it is the following. With more flexibility from the regulator, as long as our business model remains capital accretive as we think it is, we think it gives us more time to cope with some fluctuation around 12%, and it gives us more time to think over the longer term.
We will fluctuate around this level. We think that it may come somewhat down before it goes up. What this gives us is more time and more serenity to think over the long term and exactly what we have to do. In terms of asset quality, as I commented, until year-end and based on the assessment that we do until year-end, we do think that it is possible to not increase the NPEs in spite of the crisis. Our base case, and this may fluctuate, is a base case of stability of the NPEs from now on. I am speaking basically about Portugal. Next year, it is very difficult to make a projection. What we know is that the most sensitive factors are, as was already shown in our last presentation, slightly above 7% of our book.
If we take a look at the moratoria that we had, only one-third are in these most sensitive sectors. As Bernardo commented, of this 1/3, only 1/3 have an LTV that is worse than 80%, which gives us some comfort in terms of recovery and in terms of potential LGD. Of course, we don't want to sound complacent, but we think that our business model, the internal capital generation that we have, the diversification in terms of grade portfolio and in terms of business mix that we have, will allow us to be within the most resilient banks in Europe.
Thank you.
Another point that I would like here to highlight, probably a colleague of mine is here, touching your point. I would say that for individuals, the moratoria is very efficient in the sense that almost all the moratoria that we have, as was presented, is in mortgages. In mortgages, basically what we have is somebody does not pay the installment during six months. Let's say the person has a 25-year mortgage. The 25-year mortgage translates into a 25 years and six months mortgages. This will be extended over time and will not create a cash flow problem for the client. It's a very long term, okay?
We have a question coming from the line of Noemi Peruch from Mediobanca. Please go ahead with your question.
Good afternoon. Thank you for taking my questions. I have two questions on my side. The first question is on loans. As the remaining parts of the guarantees are unlocked during the second half of 2020, do you expect to end up with a market share closer to your natural one on state-guaranteed loans by the end of the year, i.e., only marginally increasing at the EUR 2.2 billion loans already granted? My second question is on asset quality. Can you share with us the evolution of stage 2 loans in Q2 vis-à-vis December 2019? Thank you very much.
In terms of loans, the large part of the loans with state guarantee were front-loaded. In this situation, or in this tranche, we have had a market share that was twice our natural market share. The remaining part will be much lower. Unfortunately for us, because we like to think of ourselves as more efficient and more performant, in these recent tranches, the government has created a quota so that every bank can only originate, so to say, its marginal market share. In the new loans, we will have probably a market share that will be our natural market share. Of course, the average between our natural market share and twice our market share will be higher than our market share.
We expect at the end of this process, it depends on how much new loans there will be, but at least 50% above our natural market share. In terms of stage 2 loans, let me just here check. Basically, stage 2 loans, were basically stable vis-à-vis March. Okay. At around EUR 5.8 billion. Even a small reduction. Okay. From March to June, a very small reduction in Portugal.
Thank you very much.
By the way, in consolidated terms, it's also basically the same at EUR 6.9 billion in March and June.
We have a follow-up question coming from the line of Jacob Leifer from RBC. Please go ahead with your question, sir.
Hi there, sorry I didn't get your to ask a question before. So on the question on the moratoria, once again, a few things. Number one, you're saying that, please do help me understand if I'm actually getting something wrong, but you're saying that you're closer to higher rates than COVID sectors, about EUR 2.6 billion. At the same time, it seems like you have about EUR 4.7 billion in public company loans under the moratoria at the moment. But I just wanted to get a little bit of a dynamic there.
Why do the companies need the moratoria? Is it precautionary or what's the dynamic that you're seeing there? And again, I mean, I understand your, you know, your justification there for the moratoria, and how much consumer loans do you have collateral. But you know, as a note, it does seem high, because I mean, together, the more aggregate, it looks like there is a 25% of loans that are under some sort of moratoria, which, you know, so far based on the banks that have reported the analytics, are comparable figures.
Okay. Thank you for your question. I think first, in terms of the loan book, it is important to distinguish the individual banking from the corporate banking. As I was commenting, in individual banking, as you see on page 42, mortgage is more than 92% of the volume, and in mortgage, the moratoria, I would say, is very diluted over time, because effectively you basically convert a 25-year loan or a 30-year loan, and a 30-year loan plus six months. I would say this will almost surely not pose any type of problem in terms of the aggregate. If you see what happened to mortgages in the last crisis in Portugal, that was much tougher than this crisis, with the unemployment going up to 16%.
Unless we think there will be a total catastrophe with one virus after the other for the next years, which we will have another type of problem, I would not be too much worried about it. In terms of companies, I would say there is a little bit of everything. The companies don't lose anything by asking the moratoria. They do not get marked as NPE, they do not get marked at the central bank, they do not pay any special moratorium fees. In the context of uncertainty, a prudent company would typically ask for a moratoria because they do not have anything to lose, basically. I think this is the main question. There are a lot of prudent companies that ask the moratoria for, as you say, precautionary reasons. We have to look at, let's not be, I would say naive.
Of course, there are also some companies that are in distress that ask for the moratoria. Not necessarily. This is probably not the explanatory factor, but of course, if everybody asks, also the companies that are in distress or that could be in distress would ask for the moratoria. Mainly because also the criteria for the risks with state guarantee have to be, of course, stringent criteria because this is new money. Even having only 10%-20% at risk, it has to be new money. We have to do it very prudently, and we do it. The total size, of course, of the guarantee package is also not that large when you take a look at the whole economy. What we try to look at is this number of the moratoria. This number is EUR 4.7 billion.
Trying to give you some information, we cannot go too much in detail due to regulatory reasons. What we can tell you is that of this EUR 4.7 billion, around 1/3 is in the higher-risk segments. Okay. Around EUR 1.6 billion in the higher-risk segments. Having said that, not all the companies in higher-risk segments are potentially bad loans. We try to give you here some highlight in terms of this one-third. Where are the areas where we are less guaranteed, where the collateral is not high enough to give us comfort? Just as a rough thumb, taking the collaterals or the loans that are either uncollateralized or with an LTV above 80%, we see that of this 1/3, 1/3 have an LTV above 80%. Basically, what we are speaking is around EUR 500 million- EUR 600 million.
This is the number that we think, based on the information that we have right now, could be entries from these high-risk segments in terms of NPEs. Of course, in the meantime, we will have some decreases of NPEs also, as we have been showing in the past. This is the reason why we said that we expect our NPEs in the next quarters to be broadly constant. Okay?
Okay, thank you.
We have a question coming from the line of Gabor Kemeny from Autonomous. Please go ahead with your question.
Hello. I have a few follow-up questions on asset quality, please. First one is on the debt moratoria. Have you assigned any provisions so far to the debt under moratoria in the sensitive sectors at all? If you will, at what stage would you consider doing so? Q3 or Q4, perhaps? Second question is on the restructuring exposures. As I understand, you would only do further impairments if the tourism sector doesn't recover by next summer. Does it mean that you are not expecting impairments on the restructuring front in the next two to three quarters? Finally, can you remind us what drove the reversal in the other asset impairments in Portugal? Thank you.
Okay. We have created, based on IFRS 9, that has to do with a scenario analysis and with the macroeconomic scenario impacts on the different clients that we have. For our stage 1 and stage 2 clients, and the clients in moratoria are typically not stage 3, because clients that are already with 90 days past due, they typically cannot access the moratoria. We have created, I would say, a provision of around EUR 70 million that has to do with stage 1 and stage 2 clients, including the clients in moratoria. We have not segregated specifically the clients in moratoria for any specific purpose, but they are also part of our generic provision of stage 1 and stage 2.
Of course, as the situation evolves, we will assess the credit risk of the clients, and if some clients increase their risk and go from stage 1 to stage 2, for instance, to give an example, of course, this will increase the cost of risk. Of course, this will be one of the key drivers for our cost of risk in the next quarters. That's why I have already commented that our natural cost of risk in a steady state will be below 50 basis points. What I was saying a couple of minutes ago was that in this scenario for this year and the next, what we expect is a cost of risk between 90 basis points and 120 basis points, and this reflects exactly this movement of clients that deteriorate their risk because they have less cash flow or they have more debt vis-à-vis their capital generation. Okay?
This is the first issue that I would like here to highlight. The second issue here that I would like to highlight is regarding the fresh. The research funds are not managed by us. They are market funds. They are supervised by the Portuguese SEC, by the Portuguese CMVM. They are independently managed, and their valuation is overseen by the Portuguese regulatory authorities. Basically, what we do is that we register in our accounts the value that is of the mark-to-market of the funds. Okay. This is, I think it's important to tell that these are funds listed in Portugal and Luxembourg, and that's what we do. This is a very transparent way of looking at this.
As far as we know, this valuation that was given to us was based on the assumption of a degradation of the tourism this year, but a recovery for the summer of next year. We were told that. We did not perform the valuation ourselves, but we were told that. In the next quarters, the asset management companies will do their assessment, and will have their own views and change or not their views in terms of what will be the tourism sector development going forward. Of course, if they, by December, suddenly see that we have the tourism in normality before March, there will be probably a positive sign. If they say that we will lose, if they somewhat see that we will lose, or if they expect that we will lose the next summer, this will have another impact.
We here are more recipients of information than anything else. In terms of the other results, now this is basically the, I understand, the other income, the positive impact of the other income. As you know, we have a 49% participation in Ageas Portugal, in an insurance company. What this is, this is the impact of their net income this year that was positively influenced by a liability adequacy test that was particularly positive this year when you compare with last year. Yeah.
That's all I have. Thank you.
We have a question coming from the line of Carlos Peixoto from CaixaBank. Please go ahead with your question.
Hello. A couple of follow-up questions on my side, I would say. If I understood correctly, you expect the third Q and fourth Q NII to expand EUR 15 million above second Q solely on the account of the TLTRO effect. Would there be any positive effects from volumes or other moving parts to complement here? On the cost side, you mentioned the second half costs being aligned with first half. My question is whether that includes the specific items, the EUR 13.2 million, if I'm not mistaken, that were booked in the first half or should we exclude that from the equation? On moratoria and, well, basically on the COVID-19 impacts on provisions and moratoriums and so on.
Basically, could you shed some light on in terms of the way that the mechanics that are on the model translates into provisions or whether basically what type of expectations you have in terms of GDP embedded in the model right now? What could be the sensitivity to a 100 basis points additional drop in Portuguese GDP this year? Thank you.
In terms of the next quarters, you're right, there will be a lot of effects, a positive volume effect. It is true there will be a positive volume effect. These state-guaranteed loans also had a lower spread than our normal margin. They are typically at 125 basis points, 130 basis points, where our normal margin in companies is twice as much. This is something that, based on our best guess right now, there may be here some movements, but they will be relatively immaterial when you compare them with the EUR 50 million. There will be a positive volume effect. There will be a negative margin effect on the asset side. We expect them to, there will be a negative effect from the recognition and from the additional impairments. As you know, once we impair more, the amount of margin that we recognize is lower.
We expect these movements broadly to cancel each other. In terms of costs. Right now, what we have announced, actually, Ignacio had asked the question, and I was not totally clear on this. Right now, what we have announced is that a further tougher, I would say, cost-cutting in terms of people will not occur this year. We are not expecting any major restructuring this year, but it is possible that we do this by next year. This will be properly announced, and we will probably show to you what will be the investment and the payoff. Of course, if we decide to go forward with such an initiative, it will be something that will be strongly in the shareholders' interest. Okay? Up until now, we do not have any program of this sort approved. Okay?
In terms of how does the impairments, how does the scenarios work. As we had here explained last time, we have models, as you would expect, based on which we do our impairments, we calculate our impairments. In terms of these models, we typically have a central scenario, then we have an optimistic scenario and a downside scenario. Okay. Our models in the central scenario, that we associate a probability of around 60%. Assume a GDP decrease in Portugal of -9.5%, with an increase next year of around 5%. Our models are based on this scenario. Based on the downside scenario, I would say, to which we associate a probability of 30%, is a GDP decrease in 2020 of around 13% with an improvement of around 6% next year.
To the central scenario associated with a weight of 30%, to the downside scenario associated probability of 30%. This is the assumption.
60%.
This is the base of our models, and it is with these numbers that we reach the EUR 70 million provisions. We did a sensitivity analysis this morning based on the scenarios that the ECB showed and communicated to the market yesterday, whether this would materially change our IFRS 9 provision, and it does not. Our scenarios are broadly in line with the scenarios that the ECB has communicated to the market, and the scenarios of ECB would not change this IFRS 9 provision. Okay?
We have a question coming from the line of Hugo Cruz from KBW. Please go ahead with your question.
Hi. Thank you. Just to ask around the guidance for your tax rate for the rest of the year. It's been very volatile. Any guidance would be much appreciated.
I think the way we do it, there is some volatility inter-quarter, I would say, in terms of tax rate because this has to do, for instance, in this quarter, we have contributions that are not tax deductible, just to give an idea. In the tax rate of this specific quarter where we have a part that are not tax deductible, of course, our tax rate is higher than anything else. The tax rate, it's best if you take a look at it from a full year perspective. Based on a full year perspective, I would say the normal tax rate in Portugal is 30%. There are some costs that are not tax deductible. For the tax rate in Portugal, I would here assume values between 30%-34%, depending on what is tax deductible and what is not tax deductible.
It's on a full year basis. We do have, and we will continue to have, some volatility inter-quarter based on the quarters in which we receive income that is not taxable, such as dividends or costs that are not deductible, such as contributions. Okay?
Okay, thank you.
Okay.
We have a question coming from the line of Maksym Mishyn from JB Capital Markets. Please go ahead with your question.
Hello, good afternoon. I hope you are all well. Thank you for taking my question. I have a couple. First, I might have missed, but could you please explain the increase in risk-weighted assets in the second quarter? I've noticed that they increased by 1.4%, I believe most of growth in loan books came from corporate loans with state guarantees. Also, if you could quantify the impact of the SME support factor, that would be helpful. I would also kindly ask you to provide more color on the impact of the regulatory government measures that will limit some of the fees that you expect on your fee revenue. Thank you.
In terms of your first question, actually, this was one of the first questions that was asked here in the beginning of the Q&A session. As I was commenting, there were a couple of non-recurrent factors influencing our capital ratio. The growth of 16 basis points in our capital ratio is basically explained by our organic capital generation. I commented that both the SME support factor and the software issue and so on are not particularly relevant for us. The other way is an increase that has to do with the market risk factor that is a one-off this time, so it is not particularly relevant also. I think over the longer term, what is important is the organic capital generation. In terms of the government measures, of course, it's always there to have the government interfering in fees and commissions.
To be fair, when you compare with what is happening in other countries, this is not particularly high. What is here particularly there is a precedent. There are here two types of measures. One that receives a lot of attention, that has to do with a national payment scheme called the MB WAY, that people like a lot, and that banks were charging somewhat. This gained a lot of, I would say, public interest, and in our case, this has an impact that is around EUR 500,000 per year, so it's not particularly relevant. In other cases, we are speaking about mortgage payment processing and mortgage payment fees, the government, the way it did, is applicable only to the new business, not to the book. Of course, if it is applicable to the new business, we can compensate it, of course, with higher spreads.
Because it does not affect the back book, it will only affect the new book. This was a part of the business model of our mortgages. We knew that we charge a spread, and we charged a mortgage processing fee. If we do not charge this mortgage processing fee, for the same economic income, we would, of course, try to find other ways of getting our appropriate return on capital. In any case, if for competitive reasons, we are not able to increase other fees or the spread in this amount, we are speaking about impacts that would be around EUR 2.5 million per year. Nothing particularly relevant. Everything helps, but I would say it's nothing particularly relevant in terms of our business model.
Thank you very much.
Ladies and gentlemen, once again, it's star one on your telephone keypad to register for your questions. Once again, star one on your telephone keypads to register for questions and the hash or pound key to cancel. We have a question coming from the line of Sofie Peterzens from JP Morgan. Please go ahead with your question.
Yeah. Hi. You're with Sofie again from JPMorgan. Just a very quick question. On the FX mortgage provisions in Poland, how should we think about these going forward?
Okay. This is a difficult question because if I were to decide alone right now in terms of the FX mortgage risk, I would say this is a non-quantifiable risk that should not merit, based on the information that we have right now, a provision, but should only merit a note in the accounts explaining the risk. Because effectively, up to now, we have not lost in final terms one single case. Effectively, in second instance, what we have right now, even since October of last year, in second instance, not final, we have won one case and lost the other case. Hardly statistical material to develop a provision. In any case, the way we should look at it is the following.
If all the market is doing a provision, we cannot be the only ones not doing a provision because there are always comparative analyses, there is always a sensitivity of the supervisors and the auditors to a situation in which everybody is doing a provision. I would say the best guidance that I can give you in terms of this provision is that we will do something aligned with what the market is doing because this is effectively, I would say, our constraining factor right now. Having said that, the situation in which we are right now is a situation in which there are some headwinds.
There are, of course, since the decision of the European Court of Justice, there are, of course, some signs that this could invert because there are some other questions in the European Court of Justice in the case of Santander and in another case of Raiffeisen, that if they are answered in a way that we think that is fair, I would say, this may revert, I would say, the more recent headwinds. We don't know whether this will happen or not, but right now we are with headwinds. There are new questions in the European Court of Justice in other cases of other banks. These headwinds may turn into tailwinds. I would expect the market, while we are having such type of headwinds, to continue to provide more or less the same level that we are having in the last quarters.
This is what I would expect the market to do. If the market does so, we will also do it most probably in spite of the fact that the cases are different and so on. Most probably, if the market continues this way, we would also to continue this way. If the winds turn, of course, we will adjust our provisioning strategy to this new direction in terms of decisions of the courts. I think it is very important, we are doing something very much because we cannot be the only ones being right. We do not have statistical material for our own model. We have two cases, one we won, one we lost in second instance.
Additionally, what we can tell you is that, of course, you are the analysts and you know much better than I do how to do valuations and how to do valuations for market purposes. This is already reflected, I would say, in the market price or probably even over-reflected in the market price of our bank in Poland. I would strongly suggest you to do a sum of the parts and to analyze our bank in Poland based on the value that our bank in Poland has in the market, and then to see what is left for the remaining part of the group, and to compare it with our pre-provision profit generation. Because of course there is a challenge in Poland, but this challenge is already reflected in the price of the bank in Poland.
I will now... notice that there is no more questions. I'm going to hand over to Mr. Miguel de Bragança. Please go ahead, sir.
Okay. We really appreciate your interest and commitment and effort in analyzing our equity story and our investment proposition. We feel genuinely optimistic about the long-term prospects of BCP and about the shareholder value creation strategy that we have. We strongly think that investors that are able to stick with us in this time will benefit from this shareholder value generation. This will not be possible without your effort, without your communication, without your engagement in explaining exactly what and how we work and how we accrue value to our shareholders. Thank you very much.
Ladies and gentlemen, thank you for your participation today. This concludes this conference. You may now disconnect your lines. Thank you.