Banco Santander Mexico, S.A.

Good morning everybody and welcome to Banco Santander's conference call to discuss our financial results for the first quarter of 2022. Just as a reminder, both the results report and the presentation we will be following today are available to you on our website. I'm joined here today by our CEO, Mr. José Antonio Álvarez, and our CFO, Mr. José García Cantera. Following their presentations, we will open the floor for any and all questions you may have in the Q&A session. With this, I will hand over to Mr. Alvarez. Jose Antonio, the floor is yours.

Thank you, Begoña. Good morning to everyone. Thank you for joining us this morning. I'm going to start with the first quarter results, starting with the activity levels of the group in the quarter, where we continue to have a good Customer activity, customer and business activity, we keep growing the customer base, 2 million more customers in the quarter, 7 million more since March 2021. This reflects our growing business and increased customer satisfaction. As you know, this is one of our goals, and we rank in the top three in MPS in A markets now. While the transactionality and the digital adoption keep growing at a good pace, 49, almost 50 million digital customers, 5 million more than in March 2021, and transactions in digital channels are growing at 50%, not the digital adoption is getting a good pace. As a result of this, our volumes in the balance sheet, being loans and deposits, keep growing. both quarter on quarter and year on year, and we translate this into a customer revenue growth that you're going to see in our P&L. So going to the... performance results some profitability the Q1 attributable profit was 2.5 billion euros 2.54 billion euros 19% versus first Q21 in underlying profit and 58% year on year when we compare with the attributable profit remember that last year we printed around 500 million which is actually a cost that we don't have this year On the cost side, and this is particularly important in this unexpected high inflationary environment, we were able to, the cost to remain well below inflation and allow us to improve our efficiency ratio in line with our guidance of getting at 45%. We improved our profitability ratios quarter on quarter, year on year. Our return on tangible equity went to 14.2%, and EPS growing at 22% compared with the Q1-21. We continue to create value for shareholders. The tangible net asset value per share stood at 4.29%, 4% up quarter-on-quarter, 13% up year-on-year, including the cash dividends. When we go to the balance sheet and we look at the risk, particularly credit risk, the cost of credit remains relatively stable at 0.77% below our guidance for the whole year. And NPL ratio stays at 326. Remember that in the quarter we have, we include the new definition of default on a like-for-like basis. Without this new definition of default, the NPL ratio fell like this. 10 basis points or something like that. The correct indicator one was above 12%, 12.05. Well, good organic capital generation for the basis points from Q1, 22 earnings and minus 23 basis points from dividend accrual and the second buyback, share buyback that is going on and started mid-March. So going to our P&L, let me say that the chain rates play in the positive way for five percentage points. You have in the third column in the slide, in current euros and constant euros, current euros is for five percentage points more, partially offset by hedging in the corporate center that our CEO will elaborate later on. that we have a negative thing due to the hedging of the expected profits. As I mentioned earlier, we earned a profit of more than 2.5 billion euros, growing strongly year on year. In the quarter, the underlying profit recorded the same amount, and we had no extraordinary charges. I will elaborate in the different lines on the P&L later on. When we look at the regions, we see that Well, we are around 30% in each of the main regions, Europe, North America and South America, and the digital consumer bank around the 10%. Well, in addition to the revenues, profit also receives an uplift from costs, growing below average inflation. We will see later on controlled loan loss provisions and lower minority interest following the acquisition mainly of the centenary consumer U.S. minorities. The quarterly series reflects our sustained profit growth, quarter after quarter, but what I mentioned, customer revenue growth. The quarterly comparison of NII is affected by the count, as you know. So, like for life basis, we are growing 1% to 2% in constant euros, NII. Key on key of income continue to increase, positive performance in the majority of the countries, partially offset by seasonality in South America, mainly in Brazil. Cost decrease quarter on quarter, thanks to our cost discipline and partly due to bonus adjustment at the end of, in the fourth quarter of 2021. In addition, all last provisions remained flat quarter, year on year, and up quarter on quarter, driven by the provision released in the fourth quarter of circa 750 million euros. Trends in euros were better, as I said, than in constant euros, as growth rates were higher, benefiting from the positive FX impact in the quarter. So when we go in deep into the revenue, revenues were north of 12 billion euros, net interest income and fee income accounted 95% of total income. Byline, NII, grew 6% in constant euro due to greater volumes and higher interest rates. By country, at constant exchange rates, significant rises were recorded in UK, plus 15%, Poland, plus 78%, Brazil, 7%, Mexico, 7%. On the other hand, Spain was affected by the change of mix and lower ALCO portfolio. and Portugal by ARCO portfolio disposals that we executed in Q1-21. Net income amounted to €2.8 billion, plus 6% in costs and euros, driven by improved activity, notably in high-value-added products and services. You have the figures in this slide, and great, good levels of activity in cars, insurance premiums, PRS turnover, mutual investment, all the fees all across the board, significant increase in activity levels that are related to higher fees. In cost, as I mentioned at the beginning, we are working in a high inflationary environment. We are focusing here in two main points. One is to make sure that our costs grow less than inflation, and this is the minus 3.3% in real terms that we achieved. That's particularly important. And the second one is to keep improving our efficiency. That improved 1.2% going to the 45%. As you know, this is one of our key targets. When we go by regions, We are delivering, as expected, according to our plans in Europe, in a much more difficult environment. So it's true that we are showing here with the different reporting in Europe, but we are not far away. I think the CFO already guided you that the 1 billion cost savings is going to be more in the region of 800 million affected by inflation, but we are progressing rapidly. very well in both in Spain, Portugal and UK and also in Poland in a high inflationary environment and we continue to deliver according to our plans affected somehow by inflation in non-personal expenses that are much more difficult to control. In North America, growing well below inflation, North America and US and Mexico, minus 2.7% that is a good achievement. You've seen the results of other players in the same markets where cost control has been difficult to achieve. And in South America, well, the figure is pretty high. Argentina is there, but also in Brazil where the inflation is running above 10%. And the agreement with the unions in Brazil that the sector signed in September last year was in the region of 10%, 11% and translated into significant higher costs in 2009. a bit higher than inflation. I do expect in Brazil to enter into two quarters of having dispensers growing less than they grew in the last two quarters on the back of our efficiency plans. And digital consumer banks that are growing above inflation due to some initiatives and change in perimeter last year. The cost of credit. Well, the credit quality indicators remain stable. No significant impact from the war in Ukraine. We have no exposure to Ukraine or Russia. As you already know, our cost of credit, 77 basis points. If you look at the last three months, it's 83 basis points. As you can see later in the country review, provisions normalize after releases in Q4. The MPL ratio, 326%. 19 basis points come from the new definition of default. Otherwise, the MPL ratio, unlike for live basis, will be 307. The loan reserves and the coverage remains relatively stable. In common quarters, the implications of the impact of the current geopolitical situation on our business performance and credit quality are still relatively uncertain, and we don't know the extent of the duration of the conflict. However, I should say that our starting point is very solid. So the growth diversification enables us the resiliency to face the crisis. I mentioned that our exposure to the parts in the conflict is negligible. We have enough tools in our hands to to make us confident that we will meet our expected G-rank cost of risk of below 1%, even in the new scenario. When it comes to capital, Our capital ratio, we had a very good organic capital generation. Gross organic capital generation in the quarter was 40 basis points on the back of the good results I just presented to you. Twenty-three basis points went to the shareholder remuneration, 15 basis points for the share buyback, and eight basis points for the accrual of our 40% payout policy. That's basically, and the other impacts are relatively minor regulatory models and markets and other relatively minor effects. In coming quarters, we will maintain our clear focus of the implementation of discipline capital allocation measures across the group and the achievement of the targets we announced in Q4. In this regard, while risk-weighted taxes are growing below long growth, Our front book is already delivering high-risk adjusted return. We generate a ROA of 2.8% in Q1 2022. The percentage of risk-weighted assets that do not cover the cost of equity keeps falling, and this is a good sign of our future profitability. Well, you know our policy to remunerate the shareholders, the dividends, the 3.4 billion dividends split in 50 in-cast dividend and share-by-backs. The second share-by-back program with a maximum of 865 million euros started on March the 15th and is under execution as we speak. As a result, the total shareholder remuneration is 3.4 billion, 6% yield. In 2022, you know our policy, dividend policy that was stated by the board and we reiterate in our AGM. When we look at the profitability ratios, you can see in the slide both EPS, return tangible equity, tangible net asset value per share, going in the right direction on the back of excellent capacity of the bank to generate results on a recurrent and sustainable basis. Finally, before I hand to Jose, I would like to highlight some very strong commitments to AESG. You have in the slide our commitments and how are we progressing in the different commitments that we have been in green finance, where we already originate 69 billion since 2019. Our commitment is 120 billion by 2025. We continue to seek good demand. There is significant investment going in this field, and we are participating in this. We are developing green products. At the same time, we are starting to develop an information system that allows us to track how our portfolio behaves in relation with CO2 emissions, and this is an important tool that we need to implement in order to track all our progress here. Well, in the asset management industry, we have also targets. You have the figures in the screen. And renewable energy, we are world leaders, and we are signing alliances in order to make progress in this field. The decarbonization targets, you have there our commitments, both in the mainly related with the power sector and while we are progressing in line with our targets. These goals are included in the executives long-term incentive scorecard and that show how committed we are with this ESG target, particularly I was referring here in the screen to the E, but you know that we are also very active in the social target, particularly in the microcredit space in Latin America. So I hand over to Jose that continues the presentation with the results by regions and global businesses.

Thank you, Jose Antonio, and good morning, everyone. As usual, I will start with a brief summary of the regions, and then I will move on to the countries to discuss in a bit more detail. We continue to leverage one of the strengths of our model, which is diversification and scale, improving the operating performance in all three regions and global businesses. In Europe, we are making significant progress in the transformation of our business and in developing a common operating model We achieved double-digit growth in net operating income and profit, reaching a 13.5% return on tangible equity. In North America, we are refocusing our position in the U.S. while maintaining a disciplined capital allocation. We accelerated growth and volumes, generated a return on tangible equity of 24%. South America, we are growing the number of customers and capturing new business opportunities, delivering almost 27% return on equity. And in the digital consumer bank, new lending increased by 17% and profits rose double digits with a return on tangible equity of almost 13%. Obviously, we achieved all of this while enhancing our global business and connectivity with the regions, In this way, SCIB, a corporate and investment bank, earned a return on tangible equity of 25%, and wealth management and insurance return on tangible equity was 55%. We continue to make progress in the development of PagoNext. We'll talk about that in a minute. Maintaining high profitability in our car business with a return on tangible equity around 30%. So moving to Europe, the business transformation to develop a simpler and a common operating model is delivering good results with increased volumes, especially in individuals. Mortgages were up 6%. Consumer lending was up 9%. Mutual funds up 3%. We experienced significant improvements in customer satisfaction surveys at the same time. Profit reached $1 billion in the quarter, increasing 30% year on year. Revenue grew strongly. NII was up 9%, supported by higher volumes and interest rate hikes in Poland and in the UK. Fee income grew 7%, but by greater activity. Our efficiency plans continue to bear fruit as the cost base shrunk 2%, went down 7% in real terms, and the efficiency ratio improved to around 48%, driving net operating income up by 12%. Loan loss provisions dropped 14% as the cost of credit started to normalize across countries, most notably in Spain. Return on tangible equity reached, as I mentioned before, 13.5%, up 30 percentage points year-on-year. All in all, we remain on track to meet our targets for the year. Our performance in Europe stood out not only for its positive set of results, but also for the special initiatives implemented to support our Ukrainian customers and employees. as well as refugees and all those affected by the war. In this regard, we provided financial measures to facilitate transfers and cash withdrawals, made donations, and collaborated with NGOs to help refugees, such as the two planes chartered from Warsaw to Portugal and Spain. Going into details in Spain and in the UK, in Spain, we increased the customer base by 200,000 customers in the first quarter, which obviously helped volumes, especially new mortgage lending, which doubled compared with the first quarter of 21 and exceeded pre-pandemic levels in consumer credit. Profit grew 21% year-on-year, supported by the execution of our efficiency plans and the lower cost of credit. Revenue remained under pressure due to ALCO sales in 2021 and the change in mix. We had a much better performance in fee income. The quarter-on-quarter comparison is benefited from, obviously, the deposit guarantee fund charges of the fourth quarter, but also supported by lower costs and loan loss provisions. In the UK, we maintain very positive business dynamics. Gross mortgage lending rose to £9.5 billion in the first quarter, near a record level. NII rose 15%, supported by increased volumes and higher interest rates, which drove double-digit growth in revenue. The comparison in fee income is negatively affected by the transfer of the Corporate Investment Bank activity from the bank to the London branch. We doubled our efforts to keep costs under control and thus improved efficiency by 7 percentage points, which enabled net operating income to grow 3%. Loan loss provisions were higher following the normalization of the cost of credit. We would expect cost of credit to be around 10 basis points. And quarter-on-quarter comparison was affected by the loan loss provision releases in the fourth quarter. Moving to North America, our strategy there is to accelerate profitable growth in the U.S. while creating a joint value proposition to improve customer experience, simplifying our business to generate efficiencies. The acquisition of Santander Consumer U.S., outstanding shares, along with Amherst Pierpont Securities and Credit Agricole's LATAM wealth management operations will improve our strategic focus and competitive position. We had solid growth in individuals and commercial loans in Mexico and increases in auto and CID in the U.S. On a like-for-like basis, we need to exclude Bluestem portfolio disposal in the first half of 21. Profit was 4% higher, benefiting from a better NII and the acquisition of minorities in Scusa. In the quarter, we virtually doubled the average profit recorded before the COVID-19 pandemic. In the U.S., we continue to make progress towards simplifying our business model across our four core businesses, consumer, commercial, CIB, and wealth management. Loans grew 8% backed by CIB, auto, and wealth management. During the period, auto originations decreased, impacted by the semiconductor shortage, pushing the Menheim Value Index to an all-time high in early 2022. Customer funds continued to exhibit strong performance while the overall cost of funds decreased. Moving to the P&L, on a like-for-like basis, profits dropped 5%, basically due to higher loan loss provisions driven by normalization in the cost of credit. We also had a more normalized leasing activity due to an increase in the share of lease and vehicles repurchased at the dealership. In this quarter, in the first quarter of 22, 94% were purchased relative to 35% in the first quarter of 21. NII was pressured by the runoff in paycheck protection program-related balances. All in all, we recorded a very high level of profit, more than doubling the quarter average profit in 2019. In Mexico, we had an excellent quarter, reflecting our successful customer attraction strategy. We delivered a 32% year-on-year increase in profit and also great returns, great profitability, due to the increase in revenue supported by NII, both due to higher volumes and the rise in interest rates and higher net fee income. We also had lower loan loss provisions due to positive performance in our portfolio. In South America, we continue to focus on attracting new customers and leveraging business opportunities, strengthening connectivity and synergies across the region. We recorded overall growth in loans with good dynamics in individual lending in most countries. Deposits rose 6%, driven by both demand and time deposits. In terms of results, we grew profits 8% year-on-year with double-digit customer revenue growth, costs heavily affected by inflation, especially in Brazil and Argentina, although total costs were virtually flat in real terms. and higher provisions mainly driven by growth in individuals. Also in Brazil, we had lower taxes. Moving to Brazil, we maintained positive trends in customer acquisition. Customer increased 12% year-on-year, and digital customers grew 18% year-on-year, as we launched several initiatives for our multi-channel strategy. In volumes, mortgages rose double digits, car turnover was up 22%, and we maintain our leadership in auto. This great customer activity enabled us to absorb the rising costs and higher provisions due to the growth we had in individuals. Cost of risk stood at 3.94%. In Chile, we continue to expand Santander Live, Superdigital, and GetNet. We were very active in launching new strategic initiatives. And as a result, we had very strong customer attraction with 11% growth year-on-year. We maintain our top position in NPS, and we grew the balance sheet both in loans and deposits. In the P&L, very positive performance year-on-year, up 28%, with revenues up 10%, costs growing below inflation, and a lower cost of credit. Thank you. In the digital consumer bank, also Solid Quarter, which reinforced our position. We are gaining market share very quickly in Europe. We also signed new strategic alliances with Stellantis or Piaggio. We launched new leasing businesses in all our markets in 2021, which experienced a 48% growth in new contracts year on year. We launched the subscriptions. We signed an agreement with Wabi in subscriptions. And we launched Xenia, our buy-now-pay-later solution in Germany, which has generated over 2.5 million new contracts in just 14 months. Moreover, new business activities now above pre-COVID levels have been increased 17% year-on-year, up 13% in new cars and 29% in used cars. We are increasing market share, as I mentioned, in both markets, new and used cars. Open Bank continues to grow strongly, both in balance sheet terms and number of customers. And obviously, this greater activity was reflected in fee income and leasing revenue growth. Costs were up due to investment in global transformation platforms and some inorganic transactions. Excluding these, costs increased 2%, more or less, minus 2% in real terms. We also had very positive trends in trade quality with a further 25 basis points reduction in the cost of credit. So overall, again, very excellent results, very good results in the quarter by the Digital Consumer Bank, which increased 11%. Turning to our global businesses in corporate and investment bank, our goal is to become one of the leading investment banks in Europe, consolidating our leadership in Latin America and continue to accelerate growth in the US. Additionally, as leaders within the sustainable sphere, we completed in April 2022 our plan to acquire 80% of WayCarbon, a leading Brazil-based ESG consultancy firm. In terms of financial performance, Q1 was the best quarter in CIB history with record revenue, attributable profit, and return on risk-weighted assets. Revenue was up 5% year-on-year, a very good quarter relative to already a very good 21%, which led to a 10% increase in profit. It is Worth noting that only 20% of our revenue come from market-related activities. 80% comes from customers. In wealth management, despite market volatility, our businesses grew thanks to our globally diversified value-added proposition and sales through digital channels. We were named as one of the top three global private banks by Euromoney, and activity levels remained strong with new money around 3 billion in the quarter. Investment flows and asset valuations were less impacted than in previous crises due to our global high-value-oriented asset mix. Contribution to the group rose 10%. In insurance, we had sustainable growth based on non-related business in addition to strong growth in digital sales, which were up 50% year-on-year. In summary, higher revenue and total contribution to the group's profit in wealth management and insurance achieved a 7% growth, 14% up on a like-for-like basis. Turning to PagoNext, in the first quarter, we had several achievements. In merchant acquiring, GetNet continued to deliver very high growth, increasing total payments volume by 40%, backed by Brazil, one of our main growth drivers, and Spain, thanks to our customer acquisition strategy and increased merchant activity, and also in Mexico. In international trade, our OneTrade platform currently connects our customers in eight countries, and we continue to expand its capabilities to provide international instant payments between Spain and Brazil. We plan to launch real-time payments in other international corridors in the coming quarters. In summary, revenue doubled year-on-year in the quarter. Obviously, quarter-on-quarter is affected by seasonality. In cards, I would like to highlight our efforts to improve our global card services. We are working to globally manage 95 million cards throughout the group. In the first quarter of 2022, we continued to grow strongly, turnover and the number of transactions increased well above 20%. This performance was also reflected in the first quarter revenue, which reached almost 1 billion, 30% higher year on year. We had positive performance in both credit, debit cards, and across regions. It is worth mentioning that revenue in the fourth quarter is seasonally higher In the fourth quarter, we had Black Friday and Christmas. Still, you see a very good comparison quarter-on-quarter, which shows how strong the first quarter of 2022 was. Looking forward, we expect to continue to grow the number of accounts, turnover, and revenue. Now, let me finish with the corporate center. we reported an attributable loss of $460 million, which is relatively high, affected by the negative FX hedging results, which obviously were more than upset by the positive performance of exchange rates in the country's results. The quarter was also impacted by the higher liquidity buffer, and we also recorded a negative tax impact due to the higher results of those businesses operating in Spain. On the other hand, We recorded no material changes in costs, and we had a significant decrease in non-loss provisions and other provisions. And now let me turn it back to the CEO for his final remarks.

Thank you, Jose. Just to finish this presentation, before we go to the question, let me share with you the outlook for the coming quarters, taking into account the situation in which we are developing our business. As a result of the... geopolitical situation, we are facing an environment in which the consensus is shifting towards an environment of lower growth than otherwise will be the case as a result of this war, and in a, I mentioned before, in a high inflationary environment that is triggering the reaction of the central banks increasing into rates in some countries and some others, the market is expecting those to be increased. So taking into account all of this, I should say a couple of things. Our starting point is extremely solid. You see the results, you see the trends, and our activity in the business, you see our customer gathering. So the starting point is very solid. And we face this environment from a strong position. So our capacity to attract customers and grow a more profitable business in a higher interest rate scenario is going to provide a big significant uplift to our revenues. Naturally in this inflationary environment we need to be as always looking at matching the cost We think that we can continue to deliver a cost growth well below inflation, as we showed you in the first quarter. Third, our capacity to control the cost of risk and to keep it below the average across the cycle. Based on our customer knowledge and our anticipation in some markets, as we are doing in some markets, make me comfortable with the guidance we gave to you in the cost of risk and our capital allocation strategy should continue to drive profitability improvement and maximize shareholder returns. This makes us confident, we share with you in our AGM, that we are in the right track to achieve our 2022 targets that we share with you, both in revenues, efficiency, return on tangible equity, and capital. So now we leave it here, and we remain at your disposal for the questions you may have. Thank you.

Thank you. We can now start the Q&A session, please.

Everyone, your question and answer session will now begin. If you wish to ask a question, please press star and 1 on your telephone. If you then decide to withdraw your question, you can press star 2 anytime. All questions will be answered in the order received and you will be advised when to ask your question. All other lines will remain on listen only. So once again, if you have a question, please press star and 1. And our first question is coming from Ignacio Cerezo from UBS. You are now live.

Yeah, hi, good morning. Thank you for the presentation. Two things for me. The first one is on Brazil. It looks like the situation has kind of deteriorated versus the guidance you gave back in December. Probably most of the lines are probably below expectations then, so if you can update how you're expecting basically 2022 to be shaping up on the main lines in Brazil. And the second one is any information you can provide on the process of Banamex in Mexico, interest, timing, any information, actually incremental information versus the one you shared three months ago. Thank you very much.

Okay. Thank you, Natia, for your questions. Let me elaborate on Brazil. I should say first that our expectations are not materially different than the ones we had. in the last quarter. Let me share with you where we are in Brazil. So as you know, we tightened our credit standards back in September last year. As a result, we are growing our portfolio less. But for the whole year, I feel comfortable growing the portfolio in line with the inflation. So more or less in line with inflation in the country. So around 10%, a bit less, a bit more. So this is our expectation. There is significant customer spread expansion in the business. So the spread, customer spread went up more than 100 basis points. It's true that on the other side, this was more than offset by the ALCO positions that were on the back of inflation rates, almost 10 full percentage points. Naturally, the NII and the NIN coming from our compositions collapse. And this is what you see, the combination of this is what you see in the NII. So revenue-wise, on the net interest income, I feel that we can grow by single digits. No problems to get there. And the same can be said, even more optimistic on the income that we can be for the whole year in double digits. The quarter shows some seasonality here. The costs have been difficult to control costs. As I mentioned, the agreement with the unions back in September increased the salaries 11%. And what we are showing in the banner is exactly this. Probably in the second, third quarter, this is going to trend down because growth. And we'll see the agreement with the unions in September. But I feel that we're going to be able to match to get around inflation for the whole year. Finally, you see, going through the P&L, you see in the quarter an increase in the cost of risk that we were anticipating. And, well, we went from 375 or a figure like that to something above 4%. All right. remain confident that we're going to match to be in the range between four, four and a half for the whole year. So that's my view. This is an environment in which we're going to continue to deliver good results in Brazil and growing probably nicely in the country and having a return on tangible equity north of 20% or around 20%, not particular deterioration in this regard. In this, I should say, more complex environment, although I should say also that the war in Ukraine, well, when I look at Brazil, it should be neutral to positive for Brazil. So I'm not as pessimistic as you seem to be about the trends in Brazil. So second question, Banamex, well, Very little I can add to this. So we set, our chairman set the conditions, our requirements for participating, well, we want to participate in the analysis of the deal, you know, our conditions, but nothing I can add at this time because we don't have additional information other than the one that is public information and the process has not officially started, as far as I know.

Thank you, Nacho. Can we have the next question, please?

Our next question is coming from Sophie Petersens. You are now live. Thank you.

Sophie from JP Morgan. Yeah, hi. Here is Sophie from JP Morgan. So my first question would be if you could just kind of remind us of your auto partner agreements. How should we think about the Chrysler Fiat agreement that comes to an end next year and could you just remind us what your new agreements in the U.S. are? You also have some new agreements in Europe. So could you just remind us what the potential impact from these agreements in Europe are? And related to that, if you could also talk about the U.S. cost of risk, because it remains very low, below 50 basis points. So how should we think about a normalized cost of risk level in the U.S.? And when do you expect the losses in the U.S. to normalize? And then my second question would go back to Brazil. In terms of asset quality, we're starting to see some signs of kind of higher cost of risk, but also higher NPL ratios in Brazil. And NPL was 5.7, and at the same time, coverage fell to 101%. So how should we think about the asset quality outlook in Brazil? How concerned are you about the potential credit bubble, given that rates have gone up so much? Thank you.

Okay. Thank you, Sophie, for your questions. The first one related with Stellantis, our agreement with Stellantis. As you know, first thing, I should say we have an excellent relationship with Stellantis. And we reached an agreement in Europe, very satisfactory agreement, I should say, for us. As a result of this agreement, we're going to focus in the main markets of Stellantis in Europe, France, Italy, and Spain. As a result of the agreement, our portfolio with Stellantis in Europe is going to grow I don't remember exactly the number, a couple of billions, four or five billion. The total portfolio is 30 or 30-something. We're going to add an extra four or five billion as a result of this agreement that we reached within Europe. When it comes to the U.S., As you know, Stellantis, Chrysler bought a small finance company and they plan to develop this company. Well, this company is fairly small. As a result of this, we're going to continue to be the preferred provider for a while. How long it will last depends on how fast the other company evolves. Having said that, we feel that we're going to continue to have significant originations on Chrysler Stellantis. in the U.S. as long as with other originators. We reached an agreement with Mitsubishi. We become the provider of Mitsubishi. We have agreements with certain dealers, with certain originators in the online space. And I do feel... comfortable in that we're going to continue to have the core, traditional core, subprime business we underwrite in our own, in the near prime and prime space, I think that the ordination level is going to remain relatively stable, at least in the U.S., provided the car market evolves, you know, recovers the activity levels. So I'm pleased with the developments in this front and the agreements with Stellantis Chrysler. You mentioned the cost of risk in the US and Europe. It's true that in Europe, on the back of very low unemployment levels, the cost of risk and good price in the used car markets, the cost of risk is at one of the lowest levels. We are not seeing any particular development here. So I will focus more on The main KPI here is, to me, is the unemployment rate. So as long as the unemployment rate remains as low as it is today and the trends in the labor market are solid, I feel comfortable with the current cost of risk and even can stay here or even go lower on the back of this. In the U.S., it's different. In the U.S., we are going back to a more normalized level, you see, in the trends. And this trend will continue to go on. Jose already refers to the special situation of the used car markets in the US that has changed a little bit the dynamics in the sense that when the leases expire, the leasers prefer to keep the car instead of giving us back and selling us to the market. And this has changed a bit the dynamics in our P&L at the... the other income in the P&L gets reduced as a result of not making gains in disposal of the leases just because the lessors prefer to keep their cars and to dispose by themselves. But because of leases, it's going to get more normalized over time. I already, the previous is not just questions. I elaborate on the cost of risk. You mentioned higher MPL ratios, the coverage fall outlook, and the potential. Well, I said that my best guess now, based on the information I get, is to have a cost of risk in the region of 4.5. Yeah, so probably two or three Quarters more, three quarters more before we come back. But this is my best estimation here. Well, this is the result of, as you rightly pointed out, of a significant decrease in the disposable income combined with higher rates. Nothing that we were not expecting and that advised us to reduce our spending in the consumer lending in the fourth quarter last year and in the first quarter we kept the same position. I hope I answered your questions. Thank you.

Thank you. And thank you, Sophie. Can we have the next question, please?

Our next question is coming from Ignacio Lopez from . Hi.

You hear me? Hi. I just have two questions. On one side, on lending growth outlook in Spain, I mean, performance in the quarter has been strong. If you could just update a bit on the outlook for the Spanish NII and the rate sensitivity domestically. And also, I just have another question on the If you just could elaborate a bit on what were the changes in perimeter or the initiatives that you are pushing in the Digital Consumer Bank? What should we expect going forward? If I just may, one, I mean, it's very early probably, but if you could just give a bit of a sense of what should we expect of the impact in Poland from the measures announced yesterday by the Prime Minister, it would be very useful. Thank you.

Okay, Nacho, the third question I got the information yesterday probably is a bit early, so I'm sorry I can't elaborate more on this space. Probably in the coming days or weeks, once we know more, our IR department will be more than happy to share with you our views. But now it's a bit early. Naturally, the trends, it sounds... definitely not positive for the banking system, but difficult to say at this stage and to guide you with any impact. On the other side, you see the results in the franchise that are stellar results. And, well, I do expect that these measures, potential measures that come, will not harm significantly this net income generation but we'll see we'll see we come back to you on this um plenty growth in spain and ii sensitivity um well lending growth uh spain uh mortgage market has been um quite quite strong in the last two quarters or in the last three quarters and this is the This has been one of the main drivers. The other driver is more in the CIB space, where on the back of renewable energy, I was referring also to the energy sector, where we are pretty active. The lending growth that you see there comes from particularly these two spaces, mortgages and the other side, CIB. In the middle market, we haven't seen a strong activity there. NII, Jose will elaborate, but it's north of 1 billion sensitivity. Jose, would you want to elaborate on this?

The sensitivity we have to raise right now in the group is in Europe. Continental Europe is around 1 billion to 100 basis points parallel shift in the interest rate curve. approximately 250 million in the UK and 200 million in the US. In South America, after having raised rates earlier, we are approaching the point of neutrality, already probably in the second half. It should be positive next year.

Okay, finally, your question, Nacho, if I get it right. It was about the consumer bank. You mentioned the perimeter. Well, what we've done last year, we bought a leasing company in Germany along with Hyundai, a joint venture 50-50 we bought from the market. And the other developments we have is we entered into business in Greece with the main importer of cars in Greece and we are developing this business and also other miners was mentioning by Jose in the presentation the agreements with Piaggio and others that well you can say this is business as usual yes somehow at the same time means that we are changing the perimeter is a way to grow the businesses

Thank you, and thank you, Nacho. Can we have the next question, please?

Our next question is coming from Carlos Barrioto from CaixaBank API, UN Ally.

Hi. Good morning. Carlos Barrioto from CaixaBank. How are you?

So the first question would actually be on the outlook for cost of risk in Spain. I believe that the fourth quarter you have guided roughly 50 basis points for the full year, where the first quarter is around 60 basis points. In my math, I was wondering if you keep the guidance for the full year or the changes with the war in Ukraine and rising energy prices. Do you mean some changes on that front? Then on the second question regarding capital, I was wondering if you could give us some on the pending regulatory impact that you see for 2022 and if there are any in 2023. And on the related question, what would be currently the minimum level that you would be willing to see commodity going down to in the context of an acquisition, let's say, to have some reference there. Thank you.

Okay. Thank you, Carlos. Our look for cost of risk in Spain, we got you in the region of 50 basis points. Basically, if I remember well, we said we're going to halve the cost of risk of last year. That was 1997, or close to 100 basis points. I remain comfortable with this guidance, even in the new scenario. I don't think that this scenario is going to affect materially our expectation for the cost of risk in Spain. It's true that we're going to have the expiration of the extensions in e-colons now starting in April, the same month, and I've been talking to you many times about some uncertainty surrounding this, and there's still some uncertainty how those customers are going to behave. Having said that, The risk we have here is only 25% of the outstanding volumes and is not going to change materially without looking at the cost of risk for the whole year. In capital, I believe, Jose, to elaborate on the regulatory impact that will come, let me elaborate on, you are asking for a minimum level. We don't have a minimum level stated. We have a target. to be at 12%, and this is our target, but we don't have such as a minimum level. You're asking for Banamics. I should state again, as we stated the last time, the question that I think was Ignacio made the question about Banamics. I said what we say remains. What we said was that we do not plan to issue shares potentially to buy Banamex, not in the parent company or in the subsidiary in Mexico. And this remains. So the conditions we established to potentially buy Banamex remains in place, including not issuing shares. José, do you want to elaborate on regulatory capital?

In terms of regulatory charges and models this year, same estimation we mentioned in the previous quarter, 20 to 25 basis points this year. More or less. For 23, we wouldn't expect any significant amount. Obviously, that is still very far away. But with what we know today, very little.

For the very first time, we don't expect challenges. OK. That's great.

Thank you. And thank you, Carlos. Can we have the next question, please?

Our next question is coming from Pamela Duagua from Credit Suisse Bank. You are now live.

Hello, good morning. This is Pamela. Thank you very much for taking my questions. I first want to ask a follow-up. If you were to be interested in acquiring Citi Banamex, again, quoting you, without the possibility of issuing capital, you would need to rely on organic capital generation. Could such an interest potentially change the payout targets that you have currently? Or would any shortfall in the required funding come from any potential divestitures? And then, if I may, some questions. One around the cost of risk. The cost of risk for the quarter was still quite below the guidance for the year, even without allocating the COVID overlay, which I understand was the case. Have you had any updates so far to your IFRS models or are you waiting to see how the macro continues developing? So do you anticipate a pickup in provisions later in the year, or could another potential releasing provisions offer upside to the cost of risk guidance for this year? Around Spain, kind of in line with what Carlos was talking about, but more from the loan growth perspective, how do you see the mix evolving? Do you see the extension of the ICO guarantees kind of revitalizing the corporate segment this year? How is the high inflation amid rising energy prices in the country impacting the consumer book? Have you seen any weaknesses there so far? And I'm sorry if I may, one last one. I was looking at the interest rate sensitivity that you were giving for Europe. It's now lower than what was disclosed at the end of 2021. Can you maybe give us some color on this change? Thank you very much.

OK. Thank you, Pamela. Let me go with the questions. Well, your first question was in relation with Banamex. Again, this may affect the buybacks on, well, the dividend policy for this year. What is public is the intention of the board to continue with the payout of 40%, halving shares, halving buying back shares, and halving cash. So there is no intention to change this. And that's the question. Organic capital generation, I'm fairly positive on this. So you see the quarter. And I do think that we're going to keep growing. But taking into account return on tangible equity and risk-weighted assets growth, that in the quarter was in the region of 3%, if I remember well, probably going to keep growing. Risk-weighted assets there, our capital generation, taking into account the payout policy, is going to be significant. Our capital accumulation is going to be significant. That's what I can tell you at this stage. Cost of risk update, well... I mentioned to you the main changes. The main drivers were Brazil. When I do elaborate, the cost of police is going to go up from 3.70% to 4% to 4.5%. Spain, I also elaborate on the back of Carlos' question, and we see certain normalization in the U.S. Other than that, I do not see major changes of the ones you are seeing in the presentation, the trends you are seeing in the presentation. Those are the three main moving parts, and we remain confident that we're going to be below our expected across the cycle. Spain long-growth perspective. Well, you mentioned the corporate sector and not optimistic on seeing plenty of strong demand coming from the corporate sector, not at this stage. The consumer book, I mentioned mortgages. I do expect mortgages to continue to be strong. And the corporate sector, in general, we are seeing significant demand on the energy and energy-related sector and infrastructure and on the back of the M&A activities. Those are the areas in which we are seeing significant activity there. And mortgages continue to be one of the sources of demand at these states, not as much in the SME space. And the final question.

It is slightly lower because of Poland, where we have had already significant increase in rates, and that's coming through the NII. I also gave a bit lower outlook for the UK, because we have had already 50 basis points increase, and we expect to have another 25 at least basis points increase in May. But roughly, we are again highly geared, and that lower sensitivity in these two countries is compensated by now again higher sensitivity in Brazil, in Mexico, that originally was negative, but as time goes by, obviously it's going to turn positive.

Okay, I should say that, well, in relation with the internet rights sensitivities, When you come from negative in Europe, like we are in Europe, and you go into positive territory, very likely, going from minus 5 to plus 0.5, you're going to capture 100%. So on this space, you're going to capture 100%. Elasticity will change. I don't know if it's going to be 0.5 or 1% beyond that. So that makes sense. As the rate goes up at the beginning, sensitivity to rate is extremely high. It's close to 1, depending on the jurisdiction, but it's very high. As you go by and the central banks keep increasing rates or the market keeps increasing rates, electricity changes and reduces the elasticity. This is what Jose explained. This is happening already in Poland, not yet in UK, but may start relatively quickly in UK if the bank of England keep increasing rates and is far away in Europe where we need, well, 100 basis points official rate at least to start to change the sensitivity that at the beginning is extremely high. So this is how you should think on this, at least in our balance sheet that is extremely asset sensitive, as you know, because the mortgages, because all the SME lending that tend to be short run and tend to be URI-based for the CIV, in the CIV space and large corporates. So highly sensitivity to rates with elasticity that keep changing along the increasing rates from the central banks.

Thank you, Pamela. Can we have the next question, please?

Our next question is coming from Alvaro Serrano from Morgan Stanley. You are now live.

Hi. Good morning. I've got two follow-up questions, maybe one on Brazil and one on capital. Jorge Antonio, I think on Brazil, if I understood you correctly, I think you said high single-digit and you still remain confident. Given the minus 6% quarter-on-quarter, that seems to imply that there's going to be significant recovery in the next few quarters. Can you maybe confirm that I've heard correctly? And if that's correct, what would be driving that rebound? And on capital... Again, a follow-up on some of your comments. I mean, Q1, to me at least, should have been the most difficult quarter given what the curves have done, and you've actually pulled off a pretty decent sort of capital print. With the slowing growth, you mentioned you're confident that it's going to continue to still grow. If Banamex doesn't happen and you end up, I don't know, 3, 12.4, whatever, the end of the year you might come up do you think from your discussions in the board or from management thinking what would you do with our capital would you the preference would be to keep the extra buffer to distribute it maybe normalizing sort of payout faster or do you think you can grow into it or M&A just some thoughts there thank you

Okay, thank you, Alvaro. Let me elaborate again in Brazil. So why I do see this trend. I mentioned to you the dynamics in the balance sheet. You have on one side a customer spread that went up from around 10% one year ago to 11%, I don't know, 30% or 11.40% or something like that in the first quarter this year. And on the other side, you have the ALCO portfolio that last year was producing revenues of around $3 billion and now is close to zero. So if you take into account the two dynamics, one is customers, the other is the ALCO, is what allowed me to give you the guidance I gave to you. So you put these dynamics forward and you see how much rates can increase from where we are and how much the revenues coming from customers can increase based on the spreads, you get a dynamic in line with what I mentioned to you before. I hope it helps you to project the numbers with these ideas. Second, capital, well, you say pretty decent, it's more than pretty decent, yeah? So this seems to me a bit downbeat, yeah? It's very good, capital generation. And, well, this is on the back of good results and, well, growth. We keep growing and, well, probably, We've been telling you that our ALCO portfolios were non-existent in some jurisdictions, and what I've seen in many banks is the available for sale portfolio impacting strongly. the capital and in our case our position in Europe is non-existent and in other markets at least I think is smaller than other banks based on the impact I've seen in the capital base. Going forward we're going to keep generating capital in line with the guidance we gave you and Jose already elaborated on the potential regulatory impact that, well, for this year, and expectation next year, not regulatory impacts. The discussion at the board, well, it's also transparent. So the board said we established the intention of paying 40% payout, health insurance, health in cash, and the intention to go to the 50%. So this is up to the board. Naturally, it's not only up to me. But the first discussion I would expect, if you ask me, in the board is when we go from 40 to 50. Well, this is the first step I would expect the board to take. As I said, it's up to the board to discuss probably two quarters from now is when the discussion needs to take place.

Thank you, and thank you, Alberto. Can we have the next question, please?

Our next question is coming from Andrea Filtri from Mediobanca. You are now live.

Good morning. Back again on capital. Sorry, but it's a clarification. You are now targeting 12% CT1. You maintain that. But what would be the plan to maintain this if... Banamex came along, you don't want to issue shares at the parent or at the subsidiary level. Is the 12% target a hard target or could you compromise on it in the case of Banamex? Second question is just a kind of yes or no. Should we expect an IFRS 9 charge in Q2 given the poor macro economic scenario? If you could elaborate, please, on your algo strategy and if you have already included that evolution in your guidance or if you have upside from that. And just finally, a very quick one. Brazil, what's happened to taxes this quarter and is the MPL increase we have in the quarter just due to the new definition of default or is it a genuine change? Thank you.

Okay, on capital, well, I cannot. Our target is 12% and remains at 12%. And this is the target that the board established. Naturally, the moving parts here are the growth we're going to achieve, that in the current scenario, activity levels in line with a less growth in the world probably will be a bit higher. We expect to keep growing, probably less so than otherwise would be the case. And what we plan to do with this is too speculative. You are asking the first question, if something happens, what happens afterwards. Difficult to elaborate on this. But, well, we have the tools. The tools to match our capital. We can securitize. We can dispose assets. We can do many things. OK, so we have the commitments that we have, which is the payout to shareholders, not to issue shares. Those are the commitments we have, and an intention going forward when advisable to go for a higher payout ratio. This is our stance on capital, and I can elaborate more on this. Second question, IFRS 9 charts, we don't expect material charts. Naturally, we need to apply the new macro scenario, but we do not expect the material charts. that change our outlook for the cost of waste. In Brazil, taxes, well, plenty of moving parts there. The main one is what they call GCP, that is when they pay dividends on their own funds or something like that. Euros sobre capitales propios. I don't know how. Interest over own equity or something like that. When this happens, they pay a dividend that is free of If you review the last couple of years, you have this quarter, nothing special this year. Sometimes it happens in one quarter, sometimes it happens in a different quarter, and in this particular quarter you reduce what is called the JCP in Brazil. MPLs, naturally, new definition of default affect MPLs everywhere, including Brazil. I don't have in my mind, probably I can give you how much is the impact of the new definition on default in Brazil in the MPLs. I gave you for the group, that was, if I remember well, 17. 19 basis points are telling me that 19 basis points in the MPLs. I don't know how much this was in Brazil, but we provide you with this number for Brazil.

Thank you, and thank you, Andrea. Can we have the next question, please?

Our next question is coming from Francisco Riquel, for Mantra. You are now live.

Yes, hello. Most of my questions have been answered. Just wanted to ask on the UK business, the mortgage volumes are stronger than we thought, but I understand that the spreads for new lending are also very low. You can update on the front book, back book dynamics, and on NII guidance, and in the UK and overall in the profitability of the new mortgage business? Thank you.

Okay, thank you, Francisco, for your question. In the UK, well, as you see, the NIA has been evolving in a positive way in the last couple of quarters on the back of volumes, mortgage volumes, good spreads. When rates start to go up, and the translation of this increase in the swap rates into the mortgage, the new reination in mortgages, produce some attrition in the name of the new mortgages. Having said that, overall, we do expect the good news to continue on the NII, we expect to continue to grow, NII in the UK. Well, low mid-signal digits, probably we continue to expect to grow in this line. So we are not positive. On top of this, you have changes in rates, naturally. So that while you have the sensitivity to rates, that is starting to show up. So the first increase in rates was, if I remember well, in December. It takes two months, more or less, until this goes into the P&L. So we saw another increase in rates that is going to show up. So we will see. What probably is not yet well known is what is going to happen on the liability side in the UK. in an ecosystem where there are plenty of new players that may affect the traditional elasticity on the liability side. Just to be 100% transparent with you, this is an unknown at this stage. Some market participants fear that we're going to have immediately very aggressive players on the back of high rates. We'll see if this happens. If it doesn't happen, this may change the outlook for this. But in general, I feel constructive. We're going to keep growing there with flat costs. So operationally, we're going to have very good trends in the UK.

Thank you. And thank you, Berger, for your questions. Can we have the next question, please?

Our next question is coming from Carlos Copocatina from Sociedad General. You're now live.

Hi. Thank you very much for the presentation. And yes, most of my questions have the answer, but I have a couple of follow-ups on cost of risk. The cost of risk this quarter, it's around 80 to 85 basis points, I remember. That is still... remains below your 90 basis point guidance for the full year, and also you kind of revised that slightly higher after the conflict in Ukraine. So shall we expect a gradual increase in the cost of risk driven by that higher loan losses expectations in Brazil? Is that the main driver, or are there other moving parts that should converge to the 90, 95 basis point guidance? And that guidance is my own words. You haven't really provided that specific target. And the other one, have you used the provision overlay this quarter? How much is left? Thank you very much.

So the cost of risk, we're going to be approaching the 100 basis points. We're going to remain below. This is what we said. We're going to be below expected across the cycle using expected across the cycle 1%. This is our guidance in the cost of risk. I elaborated the markets in which we expect changes. U.S. trending up. Brazil trending up. I already elaborated on this. And Spain trending down. Those are the main trends. moving parts that can explain this expectation for the cost of risk. You see the provision overlay. We haven't used that much. So they are telling me that less than $100 million here and there. So not material in this quarter. But remember that when we run the IFRS 9, we need to necessarily update where we're going to head into based on expected losses using the new macro. But as I said before, we do not expect a big deal in this exercise unless the macro scenario changes.

Thank you. And thank you, Carlos, for your question. Can we have the next question, please?

Next question is coming from Dada Quinn from KBW. You're now live.

Hi, good morning. Thank you for taking my questions. First question on the valuation adjustments or other comprehensive income, which improved in the quarter, I think by about 1.7 billion, so improving on inequity, but then was just curious as to why that didn't translate into an improvement in capital, where there was a negative impact from market valuations. Maybe you could just provide a little bit more color around the moving parts of FX bond portfolios, et cetera, and how they impacted capital in the quarter. And then second question on Spanish revenues. Firstly, on fees, which delivered very good growth this quarter relative to maybe some of the seasonality we would normally expect in Q1 versus Q4. So And just if you could provide a little bit of color of what you're doing that is growing the fee business and is that a sustainable level of growth for the remainder of the year? Thank you.

The evaluation is due to the effects, yeah? So the changes in the... We'll go back to you and explain where the changes were, but the main drivers here, as I mentioned at the beginning, the effects, play a significant role and this affect naturally the tangible net asset value per share because this affect the equity and this valuation is due to the effects, as you know, the Euro depreciate almost against every currency in which we work. And this has had the impact you mentioned, but you need more elaboration and specific details on it. Happy to do that through our IR department. Fees, you mentioned the decisionality Q4, Q1, And you mentioned also that Q1 was better than you were expecting. Well, the fee income was better than expected due to transactionality levels that grew significantly. And CIB business. You saw CIB business when Jose was presenting results. The corporate investment banking activity, our fee income is growing very nicely. Our business is gathering traction, has been gathering traction for a couple of years, and our fee business, our CAB business did very well. Also, I should mention the wealth management and asset management business, that they are growing double digit, but not as the growth is less so than In CIB, CIB quarter-on-quarter results went up 78%, and partially it was due to the good fee income generation, and also this applies to wealth management and asset management that performed very well in the quarter, and this is on the back of the good fee income generation that we got.

And with regards to the available for sale impact on capital in the quarter, it was seven, eight basis points. So the ALCO portfolio impact on capital was seven, eight basis points.

Thank you, and thank you, Dara, for your questions. Can we have the next question, please?

Our next question is coming from Britta Schmidt from Atomis Research. You are now live. Yeah, hello.

Thanks for taking my question. Just coming back to the rates theme, with 12 months URIBOR already having moved, what sort of impact do you expect in Spain for 2022 and when will we start seeing that? And maybe you can give us a rundown of what rate expectations you have incorporated in your planning for the UK, Brazil, US, the 12 months URIBOR, and maybe Mexico as well. Thank you.

Okay. We do provide information on this. In Spain, the URIBOR Let me speak in my memory. Our mortgage book, that is the one. Your arrival 12 months affects like 80 billion of our portfolio in Spain. So it takes two months, two months, three months before when we apply the arrival of April to the renewals in June. And this affects a portfolio of 80 billion evenly distributed along the year. So one 12th amount is a fair assumption, 6 billion or something like that. So this is the sensitivity of Euribor 12 months. So the companies are more in Euribor 3 months. So you're not going to see this effect until the Euribor 3 months start to go up. And this depends on when the renewal happens. It's another $70-80 billion in companies, more or less related to Euribor. This gives you a sense of the asset sensitivity in the Spanish book. You mentioned also other countries. We provide you with the data. We are near to our high rates in Mexico, clearly. UK, Europe, the Euro area, including Poland, is a bit negative in Brazil. And we are seeing that already. And Chile is much more difficult, because we have a trade between inflation and nominal rates that is much a bit more complex. So it depends on what happens with the inflation is fairly volatile. But in general, One tends to offset the other, but in specific quarters, maybe go in a way, another way, another court. Yeah. So you have something to add, Jose? No? Okay.

Thank you. And thank you, Brisa. Can we have the next question, please?

The next question is coming from Fernando from Barclays. You are now live.

Hi. Thank you for taking my question. I have just one more question on the ALCO portfolio. I see that the size has gone up by 9 billion this quarter. I was wondering if you can update the strategy among the European part of this portfolio. When do you expect this to go up and how far can it go up? And if this is included in your forecasted outlook that you have provided. Thank you.

We don't have a Euro portfolio at this stage. We have, I think, 2 billion in Portugal. Yeah, so it's very minor. Nothing in Spain. And in our forecasting, we are not counting in any ALCO portfolio.

And again, as Antonio already referred to this, we didn't increase the ALCO portfolio size in any country in the quarter. The increase in Euro terms is because of the exchange rate.

Thank you, and thank you, Fernanda, for your question. And can we have the last question, please?

Our last question is coming from Benjy Treeland-Stanford from Jefferies. You are now live.

Yeah, good morning, everyone. Thanks for taking the question. Two quick questions on lending and revenue growth outlook. First of all, in Brazil, it looks like you are continuing to grow below the system. I was just wondering whether you expect to remain more restrictive versus the market through the rest of this year and whether you're aiming to change the mix of the book in Brazil going forward. And the second was on the European consumer business. You've obviously talked about the inorganic opportunities. You've also talked about unemployment being a very important lead indicator for risk in the consumer business, but perhaps from a a revenue and a loan growth outlook, leaving aside the inorganic opportunities, given the inflationary pressures, et cetera, what are you seeing in terms of customer demand levels at this point in time? How do you expect that to trend through the rest of this year? Thank you.

Okay. Lending in Brazil, you elaborated in relation with our lending standards. We're going to remain where we are as long as, until the point we see a stabilization in the risk premium. So, if we are right, we expect the next two quarters to have a stabilization in the risk premium. If that were the case, we may become more confident to start to grow strongly against maybe the last part of the year. But this is I'm sharing with you my expectation. We need to look at the data. We need to look at the vintages, how the vintage is coming and how do they behave till we change our stance towards our lending, consumer lending in Brazil. The other question is that are there consumer finance in Europe aside from inorganic opportunities? Well, this is a business that I mentioned before that were inorganic. I don't know how do you deem opportunities when we add a new OEM to our portfolio. You may deem as inorganic or organic. What I can tell you is very likely this continues to happen. So we are gaining significant share and we are a partner of choice for many OEMs that are willing to expand into Europe and very likely we're going to capture opportunities there. Aside from that, that you may think is organic or inorganic, that's smaller, how do we see the customer demand? Well, as you know, there is a scarcity in new cars. The supply is weak. We are seeing this in the stock finance. Our stock finance normally in Europe stays at $5 billion with the car dealers. Now it stays one-third of this or less. This tells you about the situation of the supply demands dynamics in the industry. This is for new cars. So that is what restricts the volume there. The rejuvenation is more supply than demand. When we go to used cars, the opposite is happening. So prices went up due to the strong demand there, and our rejuvenation has been pretty strong. If you look at the quarter, our nation in auto lending in Europe grew more than 10% when the market for new cars decreased a bit. This tells you we are gaining share, that's for sure, and at the same time, our position in the used car market is pretty strong in the main markets, particularly in Germany, not only in Germany, but particularly in Germany. Those are the dynamics that we are seeing. And I do see the opportunity overall, the business is going to grow, the volumes. The speed at which we grow depends on how many agreements we reach with OEMs, car dealers associations, importers, Chinese OEMs that are coming to Europe. This is plenty of moving parts there, but I remain on the back of our recognition of the leader in the market and the best operator in the market that is widely recognized, I do expect us to keep going and to gain market share in this through a combination of traditional origination, new agreements, and all these things. So that's my expectation. I hope I answered your question, yeah? Okay, now, so the last question, Begoña?

Yes, that was the last question. Thank you.

Thank you all of you. Thank you for being there. Bye.