Banco Santander, S.A.

Good morning everyone and thank you for joining Santander's first half 2026 results presentation. Today's presentation will follow the usual structure. First, Hector will talk about our results with a special focus on the performance of our global businesses. Jose will then cover the financial results in more detail. Finally, Hector will close with the outlook before we open the line for Q&A. Before we start, I would like to highlight that this is the first quarter in which TSB is included in our results after the acquisition closed on the 30th of April. Our underlying metrics exclude the impact of Poland and TSP integration-related restructuring costs to provide a clearer view of the underlying trends. With that, Hector, over to you.

Thanks, Rahul, and good morning to everyone. Q2 was another record quarter for Santander, demonstrating again the strength of our strategy and the resilience of our business models. Our quarterly profit hit a new record of $3.8 billion, making H126 the best half ever, driven by strong revenue growth across global businesses and our growing franchise of 182 million customers, up by more than 12 million year-on-year, including the 4 million TSV customers we welcomed to the group in May. We achieved this while executing one transformation, making excellent progress towards a simpler and more integrated model. This is translating into tangible results, with efficiency improving by 3 percentage points and underlying ROTE increasing to 15.6%. Our balance sheet remains very solid, with robust credit quality and a strong CET1 ratio of 14%, which includes the impact of TSB. In this context of high capital levels, underlying ROTE adjusted for excess capital is close to 17%. All of this continues to translate into strong shareholder value creation with TINA productivity per share growing 19%. Before I move on, let me make a brief comment on TSB. As already mentioned, TSB closed on April 30th, only contributing with two months of results, so the impact on year-on-year trend is limited. Jose will provide more detail where relevant later in the presentation. Our P&L remains very solid. with underlying profit growing 14% year-on-year. We delivered strong total growth with revenue of 6% in costs and euros supported by NII increasing 6% on the back-of-margin resilience and profitable volumes growth as well as record fees of 7% rising across all businesses and countries. This reflects structural trends driven by deeper customer relationships and stronger connectivity across the group. Revenue grew while we reduced costs once again, showcasing the possibility and the positive effects of our transformation. LLPs were affected by Argentina, reflecting sector-wide trends in the country. Excluding Argentina, provisions were broadly stable year on year. Finally, in H1, we recorded 245 million gross impact related to motor finance in Open Bank Europe, most of it booked in Q1. All in all, As we have shown over time, our results are sustainable and less volatile than peers, even in challenging environments. What we are seeing again this quarter clearly reflects the strategy we presented at Investors Day. Our unique business model combines global and in-market scale with customer focus and diversification across Europe and the Americas. and the model keeps delivering consistent results. Higher revenue, lower cost, improved profitability and stronger shareholder value creation. Now, let me talk about our customers. Three structural trends continue to strengthen the quality for our results. First, we are attracting more customers. Second, customers are doing more with us. Active customers are growing faster and fees per active customer increase by 3%, reflecting higher engagement and broader use of our products and services. Third, we continue to improve our efficiency across the group. Together, these three trends make our profitability improvements increasingly sustainable over time. As you can see, we continue to deliver on our transformation, driving operational leverage for structural improvements that are under our control. Simplification and automation have delivered more than one percentage point of efficiencies. Our network businesses are generating strong positive jobs, and our global technology platforms continue to improve productivity while we start to capture benefits from AI. Our five global businesses continue to deliver strong and balanced growth, driven by customer activity, diversification, and scale. Retail and open bank illustrate the power of our model. Revenue grew 4% and costs fell by 3%, driving higher profitability through operational leverage. At the same time, CIB, wealth, and payments demonstrate the power of our global capabilities and connectivity, driving strong revenue growth and improving efficiency. Together, these businesses combined with our focus on disciplined capital allocation are driving high returns and solid progress towards our targets. Let's now look at each of them. In retail, we continue to transform our model, combining cutting-edge technology with the expertise and proximity of our teams to deliver the best customer experience. Our customer interaction platform is live in five markets and is ready to roll out in Spain. It helps us to personalize customer interactions at scale, improving conversion and strengthening customer privacy. In commercial, our new model is delivering excellent results in Spain, with revenue up 17% and cost down 3% year on year. We are better aligning our service model with customer needs, improving their experience while reducing our cost base. Using advanced analytics, we identify high-growth companies and connect them with more valuable solutions, deepening relationships and capturing a greater share of their financial needs. Following this success, we are now rolling out the model across Brazil, Mexico, UK, Chile and Portugal. As a result, retail fees grew 6%, cost per active customer declined 6%, and productivity keeps improving. Overall, retail's underlying profit grew 12% year-on-year, driven by strong operational leverage, while asset quality remained robust, with cost of risk improving, excluding Argentina. As you probably know, Webster also reported another strong quarter yesterday, demonstrating again the quality of the franchise with a 17% rotting, excluding transaction costs and continued volume growth. Overall, these results were in line with market expectations. Looking ahead, we expect profitable growth to continue as we scale our model, deepen customer relationships, and capture additional efficiencies from TSB and Webster. This quarter, we close the acquisition of TSV, a highly strategic transaction, and we have taken the first steps in the integration process, which is progressing according to our plan. It adds scale in the core market, strengthens our funding needs through a high-quality deposit base, and enhances our risk profile through a low-risk mortgage portfolio. The combination accelerates the execution of our strategy, enabling us to simplify the business Capture significant efficiencies and improve the profitability of Santander UK. This will help us deliver an ROTE of around 16% in Santander UK by 28, supported by at least 400 million of scenarios. With OpenBank, we are building a more integrated, scalable and efficient business supported by our global digital platform. We are broadening our customer proposition to become our customers' primary digital bank. In mobility finance, we are expanding beyond traditional auto lending with new solutions, while we continue to scale our embedded finance business through open bank pay, which already serves more than 2.6 million customers. At the same time, our focus on funding optimization keeps supporting profitability through significant cost savings, especially in the U.S. This is already translating Thank you very much. Looking ahead, we expect profitability to improve as we continue to scale the business, optimize funding, and deliver further efficiencies. In CIB, we continue to build a world-class business for our corporate and institutional clients, leveraging the strength of our global network. We are now moving from building capabilities to scaling our franchise, translating them into stronger client relationships. What differentiates us is the connectivity to our franchise, bringing together Santander capabilities to serve our clients in a much more integrated way. A good example is a client aerospace sector, where commercial banking, CIV, and private banking have worked together throughout the company's growth journey, from day-to-day banking to financing, advising on the latest capital raise and connecting it with private investors. At the same time, we continue to transform our operating model Through global platforms and AI delivering high productivity and better customer service. For example, our automated pricing in global markets allows us to serve more clients and improve funding decisions. Even in a more challenging environment, strong client activity continues to drive profitable growth as we focus on efficiency and capital discipline. As a result, profit grows 17% year on year while maintaining one of the best efficiency ratios in the sector and originating new business at a ROT of around 23%. In wealth, we continue to deliver solid growth while executing our strategy, leveraging our global scale and capabilities. In private banking, we're strengthening our advisory proposition for ultra-high network and family office clients, while leveraging our international franchise to connect clients with the best of Santander globally. As a result, Customer assets and liabilities grew 15% and client cross-border referrals increased by more than 20% year-on-year. In insurance and asset management, we are increasingly operating as one integrated platform to deliver a more differentiated value proposition. Insurance is one of the biggest growth opportunities across the group. We continue to strengthen our position in Spain and Portugal while extending our model to other markets such as Brazil, Mexico and Chile. We have integrated life and pensions in Brazil and Portugal. In health, we continue to roll out the innovative solutions such as OneCare in Portugal and Saúde Compara in Brazil. This is already supporting double-digit premium growth across our core insurance businesses. Together, these initiatives are making our business more scalable, more resilient, and increasingly fee-based. As a result, profit rose 19% driven by strong commercial momentum across all our business lines. Finally, payments, our high-growth platform business. We continue to combine scale with innovation, strengthening our position across the global payments value chain. In GetNet, we launched the first agentic payments use case in Latin America, positioning us at the forefront Thank you very much. On the financial side, with revenue of 17%, EBITDA margin improving to 33%, and profit increasing fourfold year-on-year, resulting on a Rule of 40 score of about 50%. Overall, the business keeps building strong momentum with clear upside as we continue to scale. Our strong operational and financial performance continues to drive capital generation, higher profitability, and double-digit value creation. Our CET1 ratio rose to 14% on track to achieve our year-end target comfortably above our 12 to 13 operating range. Underlying routing improved to 15.6% and is close to 17% at normalized CET1 levels with further upside from M&A and One Transformation. Underlying earnings per share grew 20% and TINA plus cash dividend per share increased 19% Reflecting strong profit generation and the impact of buybacks. We have received the approval from the ECB for a new buyback program for up to $1.8 billion against 26 results. Once the corresponding corporate approvals have been obtained, total share buybacks, including the program currently underway, will reach around 9 billion euros, close to our commitment of distributing at least 10 billion euros for T25 and T26. With that, I will now hand it over to Jose, who will take you through the financials in more detail.

Thank you, Hector, and good morning, everyone. I will now take you through the group's P&L and capital performance in more detail. But before I begin, let me make two brief points. First, as Hector and Raul mentioned, the Group's P&L includes two months of TSP's results, following its consolidation in May. I will only refer to its impact, where material. Second, as usual, we present growth rates in both current and constant euros. This period, the difference was not relevant. Turning to performance. As Hector mentioned, we are yet again delivering record results in the first half, with solid commercial activity and structural cost efficiency generating strong operational leverage. Revenue grew 6% on the back of a solid business activity while costs declined even after incorporating TSP. Loan loss provisions were impacted by portfolio deterioration in Argentina reflecting sector trends in the country. Excluding Argentina, provisions were broadly stable year on year. The other results line includes motor finance provisions in Open Bank Europe of around 245 million, largely booked in the first quarter. As a result, profit grew 14% year-on-year in constant euros, keeping us firmly on track to deliver our guidance of more than 14.1 billion of profit in 2026, excluding M&A. Total revenue increased 6% year-on-year in line with the target we set for 2026. This growth was underpinned by deeper client relationships, higher levels of engagement, and a total of 12 million new customers over the last 12 months. All global businesses contributed to revenue growth, which was mainly supported by another record period in CIB, Up 16%, backed by growing client flows across business lines with a notable acceleration in global banking fees, in retail on the back of a stronger customer engagement reflected in solid NII and fees, and in open bank which performed well supported by higher net interest income and fees. Payments and wealth did well in fee-generating activities Customer inflows in wealth and strong volumes overall. Fee growth continued to outpace NII, in line with our guidance, reinforcing the quality and diversification of our revenue base. The group's net interest income increased 6% year-on-year. The vast majority of our net interest income comes from retail and open bank, At this time, CIB also contributed significantly to the overall growth, supported by capital-efficient high return activities mainly in global markets. Additionally, NII was resilient in retail across most countries, driven by volumes and active balance sheet management. Open Bank delivered solid NII growth, supported by higher volumes and margins, both in Europe and South America. On a quarter-on-quarter basis, net interest income was up 3%, excluding TSV, for similar reasons particularly in retail in Spain and Chile. By country, Spain delivered a particularly strong quarter, with NIA up 8%, versus the first quarter, driven by solid commercial momentum, improving margins, and active partnership management. Brazil NII grew 2%, both quarter-on-quarter and year-on-year, even as interest rates are normalizing more slowly than initially expected. All in all, this reflects a stronger and more resilient NII profile than anticipated in investor-day guidance, as the benefits from higher-for-longer rate environment in most markets more than upset the more moderate contributions from Brazil. Net fee income increased 7% year-on-year, supported by customer growth, increased activity, and a better mix towards higher value-added products, driven by our network, businesses, and one transformation. This is visible across the group. Retail rose 6%, with solid performances widespread across our footprint, backed by customer growth. Open banks fees increased 6%, especially in Europe and Brazil, Thank you very much. We saw 8% growth in payments, driven by high activity levels across all business lines, with total payment volumes increasing 10%. Quantum formation remains a key driver of our profitability improvement, leveraging our global platforms and connectivity to deliver operational leverage. This is reflected in our efficiency ratio, which improved year-on-year to 42.8%, supported by strong underlying business dynamics, with revenue increasing and cost declining 1% year-on-year, down 5% in real terms. In retail and open bank, which are leading our transformation and represent 75% of our cost base, cost declined by 3%, Even after incorporating TSB, and as we continue to roll out our global platforms, and revenue grew 4%, resulting in very positive operating jobs. In our network businesses, CIB wealth and payments, costs grew below total revenue on fee income, reflecting targeted investments in capabilities to drive capital-light growth, maintaining high recurrency levels. This excellent performance resulted in an 11% rise in net operating income, up from already very high levels last year. Looking ahead, we remain on track to reduce costs despite inflationary pressures. One transformation and our targeted cost management actions are the two levers that remain firmly within our control. Our balance sheet risk profile remains low, with some credit quality across our footprint, even in a more complex environment, supported by prudent risk management and resilient labor markets in general. Having said that, metrics in the first half continue to be impacted by Argentina, reflecting sector-wide trends in the country. However, the cost of risk declined quarter on quarter, showing the first signs of stabilization as the impact of lower new production begins to feed through. Excluding Argentina, the group's underlying credit quality remained very solid. Loan loss provisions were broadly stable year on year, and cost of risk improved two basis points, even after absorbing less favorable FX movements. This reflects the resilience across most of our markets, which more than offset the pressure we are beginning to see from a slower-than-expected rate normalization in Brazil, particularly in corporates and SMEs. Our non-performing load ratio remained low, as the impact from Argentina was broadly offset by the contribution from TSB. Our NPL portfolio has collateral guarantees and provisions that account for almost 90% of its total exposure. Retail and consumer represents over 90% of the group's loan loss provisions. In retail, cost of risk improved, excluding Argentina, with solid performances in key markets such as Spain and Brazil. In open bank, cost of risk was stable, even with the impact of Argentina's supported by continued strong trends in the U.S. CIB was affected by a limited number of single names in Europe and Brazil. As of today, we are not seeing a significant deterioration in employment and credit quality remains stable. As long as labor markets remain solid, we would not expect material impact in credit quality as resilience across most developed markets is expected to keep offsetting pressures in Brazil and challenges in Argentina showing the benefits of diversification. Moving on to capital, we delivered another quarter of a strong capital generation. Our CT1 ratio stood at 14% after absorbing the 55 basis point impact from TSV. Excluding this impact, the CT1 ratio increased by 20 basis points, demonstrating once again our ability to generate capital while investing in profitable growth. We generated 27 basis points of net organic capital in the quarter, driven by disciplined capital allocation to high return opportunities, with a new business roti of around 21%, and by a strong contribution from our risk transfer initiatives, which offset 31 basis points of risk-weighted asset growth. This strong capital generation keeps us on track to end the year in line with our 12.8% target, after absorbing the impact from Webster in the second half of the year and further regulatory impacts during the rest of this year, leaving us close to the upper end of our 12 to 13% CT1 operating range. Hector, back to you.

Thanks, Jose. In conclusion, this has been our strongest first half ever, putting us in an excellent position to deliver our 26 targets with our performance running slightly ahead of plan. Our businesses continue to show solid momentum with one transformation improving both revenue and cost, driving strong operational leverage. As a result, we delivered record underlying profit, a robust capital position, and double-digit value creation. Even excluding TSB, we are generating more underlying profit than last year when Poland was still part of the group. In summary, our result remains consistent and predictable, with very positive trends that we expect to continue in the second half of the year. On the back of this strong first half, we remain confident in our delivering sustainable growth and creating value for our shareholders. Our financial north star is clear, to deliver an ROTE above 20% by 2028. This is about execution with precision. Discipline Capital Allocation, One Transformation, and Scaling Our Global Businesses to Accelerate Value Creation. And that is exactly what we are consistently delivering. And now, we are happy to take your questions.

Thanks very much, Hector. Let's begin the Q&A session. Operator, could we have the first question, please?

The first question comes from Francisco Riquel from Alantra. Now your line is open.

Yes, thank you for taking my questions. I want to start with Spain, particularly NII. If you can update on your guidance for the year, the low-to-mid single-digit growth, because first half has been above expectations, and particularly also comment on two points here, which is and many more. My second question on Spain is if you can comment on the early retirement plan just agreed with the trade unions, and if you can update on your cost-to-income target for Spain once this plan is fully implemented. Thank you.

Hello, Francisco. Sector, good morning. Thank you for your question. So, in Spain, NII, I'm going to give you, I mean, as you have seen, The first half profit is up to 8% year-on-year. It's mainly driven by 4% revenue growth with an increase in active customers. It's very important that you see that we're growing 200,000 customers per quarter on a net basis. It's very important to acknowledge the benefits of one transformation. Cost is down 3% and efficiency ratio improves 240 basis points. General Year to 33.6. So you're going to see what you're seeing is exactly the operating leverage that we promised on One Transformation, which is more revenues and less cost. That is helping us quite a lot. Trading gains, about $132 million year-on-year from the lower activity markets in CID after a record first half in 25. The quarterly drop is driven by a one-off from stake valuation in Q1. LLPs fell by 1% with strong asset quality and the portfolio sales in retail offsetting single names in CID and other results were around 33 million worse even by the transformation cost, okay? On the alcohol, Jose will tell you. Let me talk a little bit about the loan growth. So what we're concentrating in here is always profitability, okay? When we see the margins and an opportunity, we see it on a weekly basis. It's a very dynamic process, and what we're doing is managing capital in such a way. So when we see opportunities, we deploy capital. So that's exactly what we're doing and how you see the portfolio growing. And we started, for example, in the first half of the year, growing in mortgages in California. in a really strong way because we saw an opportunity when the rates basically helped us out in that sense. So with that I will give it to Jose to explain about the ALCO as well.

Morning Paco. Let me split my question or take the question into two different parts. So the business, the client business Obviously, rates went up slightly in the quarter, and we have positive sensitivity to rates, which obviously helped, particularly with the very good management of the client base. We are adding around 5% new clients on an annualized basis, and many of these are transactional. So when you look at the cost of deposits, Because we are growing transactional accounts, it has performed very, very well. So the first component of the very good performance in NII is the consequence of our commercial strategy. Second, the ALCO portfolio, we have 60 billion euros of ALCO at an average yield of 3.3% six-year duration. This is slightly more than we had anticipated because We are, as I said, we are growing in current accounts more than expected, more than planned, because of the success of our strategy, of our commercial strategy, and because we want to keep the interest rate sensitivity stable around 500 million per 100 basis points, we increased the ALCO portfolio to this 60 billion. We plan to keep it at this level. We don't plan to increase the ALCO portfolio above this level. Right now the interest sensitivity is below 500 million, it's 450 million, more or less, so we want to keep it at this point. And the third point is that the other hedging strategies that we commented in the past are doing very well. The liability, repricing of mortgages, or prefixing the repricing of mortgages, all of this is also contributing very well. So the first half NII was up 7.7% and we see these trends continuing to the second half. So we see no reason to see a different trend in the second half relative to the first half.

Great, thanks very much Paco. Next question please.

Ladies and gentlemen, I would like to remind you that if you want to ask a question, press Part 5 on your telephone. And the next question comes from Ignacio Hulargui from BNP Paribas. Now your line is open.

Thanks very much for the presentation. Good morning, everyone. I just have two questions, if I may. The first one is on the activity levels. I mean, we have seen a very strong NIMP We have highlighted in the presentation the strong activity across the board in retail, CAV, most of the units. I just wanted to see how do you see that activity going forward, especially in terms of lending and deposit growth. And I was quite curious to see the strong retail deposit growth in the quarter. So if you could elaborate a bit more on the strategy in terms of gathering deposits, I think that would be very helpful. And the second question is on cost of risk evolution. So, for the first half, you have had a stable 115 bps, which is slightly above the initial target that you gave for the plan of 100-110 bps. You flagged in 1Q results and graduated now that Argentina has been a big driver of that increase in cost of risk. How should we think about that in the second half? Should we expect a normalization? And I would also like to... If you could give a bit of color on how should you think about the cost of risk in Brazil in the light of the comment that you made, Jose, about SMEs and corporates being a bit more stressed given the level of rates, and also if you could elaborate a bit on the U.S. performance, which has been very strong in the quarter in cost of risk. Thank you.

Okay, thank you, Ignacio. So, very big questions, eh? Okay, let me give you, first of all, The activity levels, we are on track to delivering. I mean, I think it's important to say, as Jose said in his presentation, that 1T is a key profit generator and it's exactly what we are delivering, okay? We're exceeding, I would say that we have a strong momentum within our business and we are on track to exceed some of our targets set up for the year. NII Outlook is looking better for the retail and commercial businesses in Europe, as well as for Open Bank. We continue to expect fees to grow faster than NII. This is one transformation at a need to hide single digits, excluding the M&A. Also, I would say that on asset quality, we continue to expect a broadly stable outcome with the cost of risk around 115, right? The acquisition of TSV and Webster will improve the cost of risk towards, I would say, one to 1.1 range over the 2728. In the second half, we expect some improvement in the cost of risk in Argentina. So the hardest was the first quarter. If you remember, it came down a little bit on the second one, but it's still hitting us. But we have under-controlled the portfolio. We stopped lending in Argentina, and actually we are much better than our peers there. We're going to see that the cost of risk in Argentina is being upset by the usual seasonality of the U.S. in auto. So that basically tells you how strong is the diversification in the group, helping us out in some places when some places get hurt by some things. So all in all, I expect in 26, PVT to continue to improve in the H2 over H1. We expect an effective tax rate for the year around 27%. and at the lower end of our usual 27 to 28 range. And as I said, we're on track to exceed our above 14.1 billion net profit XM&A guidance for the year, all right? So in terms of where we see cost-for-risk evolution, I already explained to you what do we see there. In particular, in Brazil, I think it's important to say the following. In Brazil, what we have seen is a dynamics of the single lanes that I explained to you. But it is important to say that, nonetheless, we see that the worst is over, in my point of view. Why do I see that? Because we have been taking really good decisions in terms of how the mix of the portfolio is going. If you take a look at, for example, our CIB portfolio and the commercial portfolio, both of them are 30% in dollars and 40% in dollars respectively. So what that basically tells you is that we're going much more to the exporters, trade finance, and those kind of things. And that's why you see margins diminish a little bit in the overall portfolio. On the individual side, we're basically going much more to the affluent segment and concentrating in auto loans. So margins constrict a little bit, but the cost of risk, you control it a little bit more. So I don't see cost of risk basically getting worse than the 4.2 that we expect for the whole year. So I see that is where Brazil is going. And then you asked me a little bit about the U.S., correct? So, U.S. is a great example of the one transformation benefits. Each one, the profit is up 26% year-on-year at $989 million. Efficiencies improved four percentage points to 45.8. ROTE is two percentage points to 13.2, all right? Q2 total revenue is up around 9% year-on-year. Q2 26 fees are up 22% year-on-year. This is CIB and Wealth helping us out in here. and Q2 2016 II is up 4%. This is driven mainly by CIG and the funding optimization in OpenBank. If you remember, OpenBank now, and I explained that last quarter, the whole of our funding is not anymore wholesale. It's funded by the deposits in SB&A and OpenBank. So actually, that is helping us quite a lot. In terms of... Cost of risk is 12 months, 10 basis points, quarter to 1.47. Remember that in auto we always have seasonality. So third and fourth quarter will be higher on those, but we see that the labor markets are quite strong in the U.S., it has been, so we have a good outlook on those. Thank you.

Thanks, Hector. I think we left out in terms of the first question on early retirements. So just going back to Paco Raquel's question. Apologies, Paco. Hector, would you mind addressing that?

Yes. So basically we signed yesterday the agreement with the unions. I think it was a pretty good result. This is going to help us out to do what is needed to be done towards the end of the year. and I think it would help us in delivering exactly the one transformation that we told you about and that's going to help us managing much better what we're doing in Spain all the way.

Thanks very much, Hector. The costs of that are already in the other results line within restructuring. Can we have the next question, please?

Thanks for taking my questions.

The next question comes from Alvaro Serrano from Morgan Stanley. Now your line is open.

Great. Good morning. Thanks for taking my questions. Kind of all up on Brazil, another one on capital. I mean, I take note of your comments around cost of this sector, but Invo was a pretty good result for the group, and and, regionally, Brazil, in terms of revenues, wasn't great either. The question is, sort of, how much of that, the weaker fees and trading, you think is due to, sort of, company-specific, i.e., potentially disruptions from implementation of gravity, or do you think it's purely macro and, more importantly, what to expect on the revenue front over the next few quarters? and as we think about Brazil, can gravity offset those revenue sort of headwinds as we look forward? And the second question is on capital. You've had another good capital print this quarter. I can't help but see that the model updates are now turning to tailwinds second quarter in a row. and from memory I think Jose you've given us the guidance for the full year of 20 baseball headwinds which I suspect needs updating so I don't know if you can give us any color on that and should we expect any regulatory headwinds from now on given the changes from the ECB policy? Thank you.

Thank you Alvaro. I mean overall Brazil I believe that given current macro scenario I think we have had a really good performance. As you can see, 1T is delivering, and I believe there's still more to come. So the macro environment, you know it quite well. The economy is experiencing a soft landing. Growth is expected to remain resilient in 2026, we believe. And several discussions on sustainability of growth after the October elections with our best case is that Mr. Lula repeats. Activity continues to surprise on the upside. I mean, it's very supported, as you have seen, by strong markets. Fiscal stimulus, the resilient household consumption, favorable exports, and still very tight labor market, as you have seen. Although credit is increasingly reflecting restricted monetary policy, the central bank has started a really gradual easing cycle. Both tighter external financial conditions and steep inflation expectations are limiting the room for significant cuts, as you have seen. So the curve is basically flat at the levels that it is today. Our business in Brazil is important to say represents 9% of the group loans and remains very resilient. Diversification is working. Higher rates and inflation in Brazil are upset by strong performance in Europe and other businesses. So it's very important. Again, the model of the group, diversification. NII increased by around 2% year-on-year. It's basically mainly driven by open bank and CID, as I explained what we're doing with the mix of the portfolio. We are really focused on profitable products, profitable segments, and we need to lower the pressure from the ALM portfolio. And we expect a similar run rate for the second half. Cost is very important to take a look at. This is one transformation. Cost is increased by 3% below the rate of inflation. is higher, as you were saying, because of the higher IT costs related to one transformation and the gravity migration, and as well a little bit of Traballistas. Remember that Traballistas, we send them to the cost, so now we have it in there. The cost of income ratio, because of that, is 14 and a half, and we continue to focus on improving the principality. It's very important. and Transactionality as part of one transformation to lower the deposit cost. And this is helping us out. Nonetheless, the margin is less because of what I was explaining about how we manage in the mix on the portfolio. So this is very important to take into account. All right? So in terms of all provisions, increased 3% year-on-year on the quarter. This is basically the single names and provisions from Open Bank because Open Bank, since we're increasing auto loans, is actually giving us a little bit more of provisions But nonetheless, the cost of risk remains stable at around 4.14%, and it will remain stable at no more than 4.2% for the rest of the year. So it's important to acknowledge the scenario that we have in Brazil. Inter-rate curves have shifted higher for longer, and we continue to believe that the business in Brazil can improve its returns faster. in the next few years to around 20% driven by the execution of One Transformation. We also changed our new CEO came in on the 6th of July, so we have very good outlooks and I think we'll do the right changes in order to make the business much more into One Transformation and concentrate on that. On the capital, Jose.

Morning, Alvaro. The positive impact of what we call supervisory regulatory charges in the first quarter had more to do with the implementation of CRR as we updated some of our models. It was not really related to direct supervisory actions. We still think that we will have around 15 to 20 basis points charged Thank you very much. Thank you very much. Operator, could we have the next question, please? The next question comes from Cecilia Romero from Barclays. Now your line is open.

Thank you very much, Jose and Hector, for taking my questions. My first one is rates. Since yesterday, we've seen rate expectations have generally moved higher across the coal markets. So, despite the potential headwind in Brazil, do you see the overall change as a net tailwind to the group's low-to-need single-digit NII KVAR target for the 2025 to 2028 period? And if so, could you give us some guidance of where within that range you now expect NII growth to land? And then my second question is on Mexico outlook. Mexico macro and policy backdrop has become more absent, particularly following the most over the annual SMCA reviews. Do you see risk to your Mexico growth expectations as a result of prolonged trade uncertainty affecting investment decisions? More recently, also, Nubank has received approval to operate as a bank in Mexico. How do you expect that to affect the competitive environment? And do you see any implications for pricing, deposit gathering, or customer acquisition across the sector? Thank you.

Thank you, Cecilia. I would tell you that in terms of the guidance, I already explained a little bit the dynamics of the NII. How do we see the second half? I think that... We're still in line to deliver what we said on the investor day in terms of the NII until 28. I think that the group is very strong, also executing one transformation, as I said. So I think we're slightly better, given the dynamics that we have seen. But, I mean, still a long way to go. But I think that the group is basically doing what needs to be done to deliver on what we have said. So all in all, I think that I'm positive on everything. In terms of the Mexico competitive environment and everything that you have said, let me give you a little bit of an overview of what I believe in Mexico trends are going to be. First of all, the negotiations are going to start in the following two weeks. I do see that there are going to be hard negotiations, but the treaty has a particular clause in which basically says that if there are comes not an agreement between the three parties, the treaty will renew itself automatically for one more year and on and on until 10 years. Okay, so I'm not so worried about that because I do believe that if they don't come to an agreement, they will basically repeat it one more time. My view is that Thank you very much. I was in Mexico a couple of weeks ago. The dynamics are good. Consumption is picking up. So I see a better outlook for the second half of the year. Nonetheless, it's important to acknowledge that this is going to play out in some sort of way. On the other side, the competitive environment, I mean, as you know, we don't discuss competitors, but I see that the competitive environment is under control. In what sense? That I do believe that even though cost of risk went a little bit up in some of our peers, we have maintained the discipline to play on the portfolios that we believe are the right ones. We continue to see that there is a lot to do and a lot of profitable things to do in Mexico. We are deploying a little bit more capital to CID and to the midsize corporates and SMEs because we believe it's the right play to do. Thank you very much. Not that they would damage, but they could basically not be as profitable, some of the others, because of the cost of risk. So we've been cautious on those, but we've been increasing in terms of lending in auto and mortgages, which are much more secure, and also a little bit on payrolls. All right? And so that's the dynamics. I'm positive in Mexico. I think it's going to be second half that is going to be hard because of that, but nonetheless... I do believe we're going to be able to deliver our numbers and deliver the year in quite good for the next few years. On the competitive environment, what I would say is that it's good that some of our competitors are becoming banks. That makes the level play and fit the same for everyone. and I see a lot of competition for deposits but I mean the prices that have been paid for time deposits are pretty big but there are not substantial players I mean not substantial movements of clients towards those higher yielding deposits given some past situations in the market so I mean all in all our deposit growth has been really good if you see the funding cost of our Mexico franchise is becoming much more competitive and this is the cost one transformation again. I'm sorry to take so long to answer your question. It's concentrating on transactional deposits and this is exactly what we're doing. Becoming number one bank to our customers and that's why if you see margins are basically becoming much better in Mexico as Jose explained before. Thank you.

Let me add some color on net interest margin. The group's net interest margin in the second quarter is the highest of the last 12 months. So Obviously, we have structurally a positive sensitivity to rates, basically driven by the positive sensitivity in Spain, and now with TSD in the UK. We have negative sensitivity in Brazil, but rates in Brazil are stable or high. So this level of net interest margin is first explained by the levels of activity which again are doing very very well and we would expect that volumes are sustained as the activity with these clients remain but obviously the way we're structuring the balance sheet management again with an overall positive sensitivity to rates means that the net interest margin that we are seeing in the second quarter is explained by that. So looking ahead, looking into the next three years, it's very difficult. But obviously the first year of the next three years, it's better. And clearly the outlook for net interest margin for the rest of the year, as I said for Spain, net interest income, I see no reasons that these trends should change in the second half of this year.

Thanks very much. Operator, could we have the next question, please?

The next question comes from Ignacio Cerezo from UBS. Now your line is open.

Hi, good morning. A couple of questions, actually. First one is if you can give us a bit of an overview or some opinions, basically. When do you think the headcount numbers on a group basis are going to start falling down? So you're cutting costs, actually, in many Geographies already, but headcount numbers, I think they're stable quarter on quarter. They're still down year on year, actually, but a little bit of information on how that metric basically can be evolving in the future. And the second one is on Western. I mean, if you can give us an update, basically, on when do you think the closure of the deal is going to happen? And, again, we've obviously heard the risks about the possibility of delays or even, in extreme case, actually cancellation of the deal because of political interference. You can give us your view basically about that. Thank you.

Thank you, Ignacio. So, I mean, in terms of headcount numbers, what we're doing is, first of all, executing one transformation. We're going through simplification, automation, and you'll see that numbers are going to start being better on and on. I mean, the last number I have seen on the group

I think it's 180,000 down from... Yeah, obviously TSV is incorporated in the second quarter. So even with TSV, if we look at December 25 to June 26, headcount is down over 2,000 people. And if we obviously take TSV into account, headcount is down 3 or 4%. But the headcount reduction is the consequence of implementing one transformation. And as we've discussed in the past, this is a long-term trend that should continue going forward. So the focus is not the headcount reduction per se. The headcount reduction is obviously the consequence of implementing one transformation.

Thank you, Jose. In terms of Webster, what I would tell you is that yesterday we got the authorization by the ECB to continue with the transaction. We have a very constructive engagement with all the supervisors, and the approvals needed to close the transaction during the quarter. Also, as you know, we received the OCC approval, and we have just received, as I said, the ECB approval. The process is proceeding fully in line with our expectation, and to close on the second half of the year, as we have said. So, no news on that, Ignacio.

Thanks very much. Operator, could we have the next question, please?

The next question comes from Andrea Filtri from Mediabanca. Now your line is open.

Yes, thank you for taking my question. The first is on capital. It looks like it's trending ahead of targets, and we're seeing signs from Brussels The first question for you is, do you feel like you will have a capital reserve soon? And where are you on the Danish compromise approval? I seem to recall that you were expecting approval by June 2026. The second question is on your other provisions. They have been higher than expected. I wondered if these provisions are reflecting restructuring charges to accelerate one transformation. And if it is so, can you quantify how much sooner you could hit your cost targets or if you could even go beyond your objectives? Thank you.

Thank you, Andrea. So on capital level, Jose will ask you in detail. In terms of the Danish compromise, yes, as you have said, we're expecting it in the next couple of months or so. I think that everything has been done, all the agreements have been completed, and everything that is needed, and it's been submitted to the ECB, so we're just expecting sooner rather than later. Okay? In terms of other provisions, I mean, what you have seen is exactly what you're saying in terms of one transformation, and it's exactly what the execution in Thank you very much. Thank you very much. It's not an easy job, it's a lot of housekeeping, and it's going to take us a long time. But, nonetheless, you see this evolution coming in every single quarter. And you will continue looking at this for the next 28 years. And I believe this is a dynamic process. It's never going to end up because we always can get better. And this is exactly what we're doing. What I can tell you is that now it's within the culture of the whole organization. Everybody is on track of delivering those. But simplification is of the essence in order to be able to be very competitive in the future. What I see is that, yes, we're going to get to the cost targets. And we may be slight a little bit, I mean, let's see, but because some of these Some of these situations you get high inflation in some of the countries, etc. So I don't want to overpromise. I want to tell you that we will deliver exactly as we have said for 28. That would be my best guess. But I'm slightly positive, I would say.

On capital... Yeah, the Danish compromise, we expected the approval in August, as Hector said, so it should come any time now. The reality is that there is much talk about Thank you very much. So, I think it's premature to assume that all these, like you said, rumors or comments or talk will end up having a significant impact on capital for European banks. So far, we are not seeing it at all.

Thanks very much. Operator, can we take the next question, please?

Carlos Peixoto, CaixaBank

Hi, good morning. Two questions from my side and actually two clarifications as well. The first one would be if you could provide some additional color on the single name provisions that you mentioned related to CID in Europe and in Brazil, so basically how much did that impact the group's cost of risk in the first half or in the second quarter, as you prefer. Then the second question would be actually on NII. In Portugal, we see NII falling year on year, where areas where wounds are actually growing by 8%. I was wondering if you could give us some color on the dynamics behind the NII there. And then just a couple of clarifications, if I may. When you mentioned that NIA in Spain in the second half should have similar trends to the first half, you're basically hinting that second half should be similar to first half in euros or that the 11% base of growth that we're seeing right now should be capped. And then finally on the early retirements, are they in other provisions or another operating cost in their account in which unit, corporate center or in Spain? Thank you very much for this.

Okay, I'm going to answer you quickly, Carlos. In terms of the early returns, we'll be in Spain, and it's basically on line with the budget that we have presented. So it's within the numbers that you have on the guidance for the year, so no changes on that. Let me tell you a little bit, I mean, on the single names and what's going on in the credit quality. First of all, 12 months cost of risk in Q226 close at 1.15. All right? As I said, these are higher provisions in Argentina and the single names in CIG. Excluding Argentina, actually, asset quality improved two basis points to 1.07. All right? So there is no underlying deterioration of the portafolios. Our plan assumes average GDP growth of around 1% to 2% across the footprint of the bank. We see Brazil labor markets, Eurozone rates at 225, UK and US rates at 3.5, and Brazil rates falling 10% by the end of 28. So if that's the case, and high rates in Brazil could basically drive a little bit higher provisions, but we believe they're going to be manageable within the plan that we have. Cost of risk, I expect it to remain around 115. In H2, the better cost risk in Argentina that is already, as I said earlier, Thank you very much. Thank you. Other than that, I see that this is gonna help. So 26, 28 average cost of risk, we see it at one to 1.1, and this is because the niche changes now that we have TSD and Western on the portfolio. And the target range offers flexibility for potential macro deterioration, so nothing out of order in that sense. So, NII in Portugal.

This is basically due to business nick change and pricing of mortgages as we look at profitability and having profitable mortgages through the life cycle. So if you look at net interest margin, the cost of deposits actually is 22 basis points lower this year than last year. Again, as I said for Spain, we are adding new customers and these new customers have mostly transactional relationships with us and this is helping in the managing of cost of deposits. We saw higher yields on consumer loans, 40 basis points, on credit cards, 90 basis points, but lower yields on mortgages, around 60 basis points, again because of the focus on the quality, the overall profitability of the relationship through the cycle. So, I would say this is, you know, it's a slight decrease, it's not that significant, and it's basically the consequence of a business mix decision on the asset side, but again, with a very, very, very good performance on the liability side, based on new numbers of transactional clients. Spain. What I meant is that the components of NII that we saw in the first half should remain in the second half. So, 60 billion of alcohol portfolio at 3.3%. Volumes that are positive. Good management of liabilities. and a slight positive impact from repricing of mortgages as the 12-fund Euribor went up in the second quarter and we have a two-month to three-month lag in repricing of mortgages. So what I mean is that all these conditions that we saw in the first half should remain in the second half.

Thanks very much. Operator, could we get the next question, please?

The next question comes from Benjamin Toms from RBC. Now your line is open.

Good morning. Thank you both for taking my questions. Two on the UK, please. In the last quarter, you mentioned intense competition in UK deposits. Are you still seeing that elevated competition in this geography, and do you expect that to subside into half, too? and secondly, now that the TSB integration is complete, can you talk a little bit more about the cost savings expected by 2028? Now you've had a year to look at the assets. Do you see any potential upsides to your existing UK cost saving guidance? Thank you.

Thank you. In terms of, Benjamin, in terms of the UK, yes, we see that the market has become very, very competitive. Okay, we see a lot of competition A lot of competition mainly in mortgages where we have the largest share of our portfolio. We see the compression of margins and we have seen so. And also a really strong competitive in deposits. So that's what the market is doing. I believe that we have been managing pretty well. I think that our team and the execution of one transformation is helping us quite a lot. because it's helping us out to reduce the amount of cost that we had in the unit. And on the other side, it's helping us out by increasing revenue because we're doing things in a much better way because we are having much more principality with the customers, concentrating on transactional deposits that lower our cost base. and also, as you have seen, I mean, we are pushing for the 1-2-3 account, which is helping us out to get market share. And then we see that PSV is a great addition to what we're doing. PSV gave us 4 million customers more. We have just finished the submission of the Part 7 last week on Thursday. With that, we enter into the full process. We do believe that the cost saving that we promised about $400 million are in line of what we're going to be able to deliver. I think it's too soon to say if we're going to be above that, given that, I mean, we need to see the exercise of the Part 7 and how that basically comes out. But we are confident that we will deliver on the numbers and could be slightly better, but I don't want to, again, to overpromise on that, given the Part 7 and how the evolution of that can be. But all in all, I mean, we already have 250 million in non-recording items included of the restructuring of PSD in the numbers that you have seen today.

Probably to help forecast NII in the UK is worth updating the structural hedge because Post-PSP, this has changed. So, in December, we had 103 billion pounds of structural hedge. In June, the amount was 118 billion. Duration was 2.3 last year. It's currently 2.6. And the yield was 3%, and it's 3.2%. So we have now a structural hedge with a slightly longer duration and higher yields. This obviously is important for forecasting NIR. And also, let me just complement what Hector said. Post-DSV we have 27 million customers in the U.K., 16 million new, sorry, active customers in the U.K., So, this obviously, it's a very, very good sort of client base to work with going forward. So, as Hector said, we remain optimistic about the outlook for the UK and the fact that TSV Plus Santander is a great value proposition going forward.

Great. Thank you very much. Operator, can we have the next question, please?

Next question comes from Borja Ramirez from Citi. Now your line is open.

Hello. Good morning. Thank you very much for taking my questions. I have two questions, please. Firstly, on deposits, I can see that Santander now has a critical mass across its core markets with a market share of at least 10%. and I can see that the stable retail deposits for the group are growing at a faster pace than peers and linked to this, OpenBank has become a relevant funding platform for the group. I would like to ask, given these structural improvements in the funding franchise, do you think the consensus already fully appreciates the benefit from the lower funding costs. And linked to this, in which regions do you see the biggest opportunities to improve the funding costs from here? And then my second question would be briefly on capital. On SRTs, if you could kindly remind me on the capital benefit in Q2, and also what should we expect for the second half of the year?

Please.

Thank you, Borja. Okay. This exactly of the deposit and what happened to the franchise is a result of one transformation. One of the most important premises of one transformation is becoming the number one bank to our customers. That basically results in having, as Jose has been saying all along during his answering of the questions, is that We are increasing transactional deposits, okay? When you become number one bank to your customer, you get a transactional deposit because people do everything with you. They pay their bills, they debit their utilities, they pay their school children, et cetera, everything out from your account. That basically helps us out in having much more transactional and lower cost deposits. And that's exactly what we will continue to do and concentrate on, all right? Open Bank is also helping us out in that. As you know, Open Bank will use those deposits to fund the consumer business, the auto business, and it's helping us out also to use a lot less of wholesale expensive funding and increase the margins and help us in the NIG. And we will continue to do so as we continue to increase the principality of our customers. And that's exactly the idea. What regions do I see a lot of benefits? Look, Mexico, Brazil, every single country will benefit from it. The UK is going to be very important as well. And the both acquisitions that we have done, both Webster's and TSB, bring a lot of deposits to the table, which is key to our franchises in those countries. And it's key to our franchises to make them much more profitable and much more competitive against our peers. So, all in all, that strategy is part of one transformation and it's exactly what we're executing right now.

In terms of capital, Jose, thank you. So let me explain the dynamics of risk-weighted assets in the quarter, because in the quarter you saw an increase in risk-weighted assets of around $16 billion. $13.1 billion comes from TSB. So net of TSB, the increase in risk-weighted assets was relatively muted compared to a very healthy long growth. So we continue to mobilize assets. The total mobilization in the quarter was $13.4 billion, of which a quarter was cash securitizations, a quarter was synthetic securitizations, so securitizations amounted to exactly 50% of the total, 37% was asset sales, mostly non-performing assets, and 13% was guarantees and other actions. in the second half of the year we would expect a similar amount to the first half one thing that we achieved this year compared to other years was to mobilize assets in a more linear way so when you look at first quarter, second quarter very much similar and I would say I would expect similar amounts each quarter in the next couple of quarters probably a bit more in the fourth quarter because of lower activity in the third but in the second half a similar amount to the first half

Thank you very much. Operator, can we have the next question, please?

The next question comes from Miruna Chidea from Jefferies. Now your line is open.

Good morning. Thank you very much for taking my questions. I have two, one on Mexico and then a clarification on Brazil, please. On Mexico, you know, your loans are growing at around 8% year-on-year in June. This is a slight deceleration versus the March level, but still very healthy overall. So I was wondering, how are you thinking about lending growth in Mexico for the full year? Do you think that the second half should see a deceleration from here, or should we expect sort of the same level as now? And then in Brazil, could you remind us what are your rate expectations for the end of year Selic? for 26, 27, 28. And in the light of this, how should we be thinking about your medium-term target of a 20% return on tangible equity in the country? Thank you.

Okay, thank you, Miruna. So, Mexico, yes. What we do is we're very disciplined in the way we deploy capital, okay? So, we see how the market is reacting. Also, we see the cost of risk in the different portfolios and how do we manage them. And when we see that margins tighten or there is a part of a segment that we don't like, we actually don't come in and we don't deploy the capital. So, We are very disciplined in such a way. I do believe Mexico is an opportunity, and you're going to see us investing capital in some of the segments of the market. As I said previously, I see great opportunity in mid-size corporates and SMEs. I think that we will be deploying capital on those segments. Also, if we see that the labor market continues to be strong, we might do a little bit of growth in the credit cards and personal loans. and we will continue to do so, but very cautiously on those because open market is not what we like. We normally do that with our own customers and we're growing the customer base, we see how they react and then we give them credit. So that's why it's in Mexico, but yes, definitely we're going to grow the loan portfolio there.

In terms of rate expectations, it's clear that rates in Brazil are normalizing at a slower pace than anticipated. We still expect some rate cuts this year, not significant, but this should accelerate in the next couple of years. for the simple reason that currently real rates in Brazil are 10% obviously we have the uncertainty around the elections and the increase in public spending ahead of the elections but this scenario should normalize in 2027-2028 so we would expect rates to go down we are very much in line with market expectations for a maybe 13.5-14% rate for the end of this year and then gradually 100-150 basis points cut in the next couple of years and with that we should be able to get to a 20% return on equity in 2028. I mean, there's no question. Remember that we have been decreasing the interest rate sensitivity. So if you look at, I think this is interesting to discuss because if you look at net interest margin evolution in Brazil, net interest income is actually up in a quarter where interest rates actually hurt our deposit cost Quite significantly, cost of deposits in the first half of this year compared to the first half of last year is 87 basis points higher because of interest rates. And despite that pressure, we were able to print a positive NII. And this is the consequence of the business change mix that Hector actually reflected upon before. We have a much better asset side, obviously less sensitive to rates, and lower asset quality sensitivity as well. So we are definitely confident that the current 15% return on tangible equity in the country can improve to 20% in the next couple of years. Some of the tailwind will be rates, but not only. It's all the structural changes that we are undertaking in Brazil that will basically explain this improvement in profitability.

Thanks very much. We have the next question, please, operator.

The next question comes from Brita Smit from Autonomous Research. Now your line is open.

Good morning. Thank you for taking my questions. I've got two and one clarification. On the Spanish net interest income, it seems that about half of that was coming from CIB, if I'm not mistaken. So maybe you can give a bit of color as to what's driving that and how sustainable that is. And also just clarify, is it now likely that you're growing more than low to mid-single digits in terms of NII in Spain in this year? The second one is on CIB. The trading result was weak this quarter, obviously coming from a high level in Q1, but still trending below previous quarters. Can you give us some color as to what's driving that and whether you expect that to run at a higher run rate for the remainder of the year? And then just on TSB, a clarification with regards to the restructuring costs. Could you let us know the timing and the size of the remaining charges you intend to take this year? Thank you.

Thank you, Rita. Let me start by going into the TSB. I'm going to start the other way around. So, in terms of... Transformation charges, okay? You're gonna see that in other results you have 281 million of transformation charges. That's exactly for the whole group, okay? And then, on the line of non-recurring items, you have 250 million from what we have done so far in TSB, okay? What we expect is another 250 million in the following quarters. We will try to do As much as we can, the sooner the better, okay? And that's the idea of what we're trying to achieve there. And then on synergies, as I said, I mean, the number that we have told you is around 400 million. And I already explained exactly the dynamics on how do we see that. We need to do the part seven, et cetera, but I mean, we're on the right track of basically doing that. In terms of the CID, you see the trading income, I mean, you see year-on-year decline mainly explained by the FX hedge, okay, which was a headwind this year, and it was a tailwind last year. And we say the weaker trading activity, quarter-on-quarter in CID, is seasonality. We have lower volatility in global markets and the business mix. And as you know, we are not, I mean, a player in equity, so it's much more related to fixed income, and that's basically the way it is. What we have seen is a lot of our trading and a lot of what we do, Brita, it depends on client flows, okay? So if we see a lot of client activity, it depends on volatility of what's going on in the market. We would see that basically that could help us in the future. But it will depend, if we continue basically growing our relationship with the customers and we're having much more principality, it's going to help us out. So on the long term, that's going to give us some help on the market. How do we see it? In terms of Spain, I see it's sustainable. Yes, it is. I mean, I think we have done a pretty good job in terms of what we're doing. It's also going to depend on what market and the activity that we have there. But nonetheless, we have a pretty good backlog of transactions, and I see that it could help us quite a lot. And this is also the beauty of one transformation and the network benefits we're doing, because it's very important to understand that CID is not just The CIB business and with a big corporate. CIB is a factory for the rest of the bank. What do I mean by that? A lot of CIB product is sold to mid-sized corporates in the commercial business and to SMEs. Trade finance, for example, is quite a lot, and you see the results that we're doing, for example. I explained to you that the portfolio in Brazil in commercial is now almost 30 to 40 percent in dollars related to trade finance, and what we're doing with ECB financing and a lot of export-related transactions. So it is exactly the way that we use CID. and the network benefits that we're getting around it and how this franchise is working together in order to get more business out of that. So you're going to see CIB growing a lot more in the next few years and a few quarters by doing that exactly. And it's going to give us a lot of new things. I mean, with Western, for example, coming in, a lot of commercial business that is going to also be filled up by what we do in CIB. So I really see that... I'm sorry that I went all the way because it is important for you to understand what we're doing in the franchise, which is exactly the result of what we're having in Spain. And remember that Spain is also the hub for CID Europe. Okay, so you have to take that into account. I don't know, Jose, if you have anything else to say.

My only comment would be that to understand or to better understand the year-on-year performance at CIB, I think we need to look at gross revenue, gross income, total revenue. If you look at the different lines and the movements between the different lines, I think that might not give you the right way of looking at that because depending on... Thank you very much. Thank you very much. Could we have the next question please? The next question comes from Sophie Peterson from Goldman Sachs. Now your line is open.

Yeah, hi, here is Sophie from Goldman Sachs. Thanks a lot for taking my question. So on net interest income, I see your net interest income in Chile was up almost or slightly more than 25% quarter and quarter. Could you maybe just discuss what drove that and how sustainable like the net interest income in Chile is and if there are any one-offs that we should be mindful of that Thank you very much. Thank you. In the corporate center going forward. And then just a final question. Your leverage ratio continues to trend down. It was 4.8% this quarter. Does that in any way limit any of the SRT capacity Over the next two, three years, I know you gave very helpful guidance on the second half SRTs, but does that likely meet SRT capacity in the longer term, and how low leverage ratio would you be happy to run with? Would you be comfortable with a 4% leverage ratio? Thank you.

Thank you, Sophie. So, in Chile, yes, I mean, you have to understand that Chile inflation helps us a lot, so inflation moves in the right way. We always make much more NII, so there's no one-offs on the NII in Chile. We foresee that we're going to have a pretty good year all in all, and I think we'll continue to strengthen up for the second half. Chile is having a good run in the sense that also one transformation is being implemented there. I'm not going to go through the whole... Thank you. So remember, Sophie, in Chile there are actually three currencies. You have the U.S. dollar, you have the peso, and you have the U.S., which is the inflation linked

The corporate center, two reasons why NII was weak. First, we paid for TSB, and obviously there is less cash and less return from that cash. And we have to increase issuances ahead of the Webster acquisition to meet with TILA-Kemrel requirements. More or less, we will need to issue or we need to eventually cover around $10 billion of senior non-preferred needs for TILA-Kemrel requirements for Webster. So that's the explanation. Oh, securitizations going forward. Thank you very much. I think we should be able to continue mobilizing assets on a recurring basis. As you can see, our new originations, so assets that are coming in new into our books are increasing, and this is giving us new opportunities to rotate the balance sheet. Also, markets that were closed a couple of years ago are opening up to investors, like in Latin America. So, as long as the market remains what it is, you know, with this strong demand for private credit, I think we can, it's very difficult to put a number, but 35 to 40 billion securitizations, as I explained before, is a very small particular. Synthetic securitizations is a very small part of what we do to mobilize assets. In the second quarter, we actually sold more non-performing loans with impact on capital than we did synthetic securitizations. Cash securitizations are actual sales, so between sales, securitizations of both types, and guarantees, can we keep on doing something like $35-40 billion a year at least? The answer is yes.

Thanks very much. Could we have the last question, please, operator?

The last question comes from Fernando Gil de Santibanes from Intensa, Sao Paulo. Now your line is open.

Hello, thank you for taking my questions. Two questions, please. Division of first one on wealth management and insurance. I think growth suites and premiums grow incisively in the quarter. Can you please drive us through what regions and segments are driving this growth? What can we expect going forward, please? The second question is more a follow-up on capital. The regulatory capital impact expected for the rest of the year, these 15 to 20 basis points you mentioned, Jose, does this reflect the Dennis Compromise benefit? And if not, can you please disclose and clarify or refresh how big is this impact, please? Thank you very much.

Thank you, Fernando. Yes, as you have seen, yes, premiums are going up, and that will be the idea. This is part of what we're doing. That's probably one of the biggest growth opportunities that we have in the group today and probably is going to be the biggest delta in terms of fees for the future given that one transformation again is principality in our accounts and what we can do much more with our customers is exactly penetrating the huge client base that we have and selling them more products and one of the most important ones is insurance. And that's where you will see premiums basically coming up and it has to be quarter by quarter Thank you very much. So we'll continue to do so. If we get to our natural quota, insurance will be a very important product for the group all in all in the next few years. Thank you.

So the Danish compromise will not add any capital to Santander. Obviously future investments will benefit from the Danish compromise treatment for capital but no impact from the Danish compromise at all. So there is no impact on what I said in the expectation for capital in the second half. Thank you Fernando.

Thank you everybody. Thanks Hector. Thanks Jose for your time. The Invested Nations team is available if you've got any follow-up questions. This concludes our first half results call. I wish you all a very good day.