Unicaja Banco Sa Ord

Good morning and welcome to Unicaja Banco annual final year 2020 results. As always, let me start confirming that we have published the quarterly financial report and this presentation in the CNMV website this morning. Pablo González, our Chief Financial Officer, will explain the quarterly results and afterwards, as always, we will answer your questions. This quarter, we have split the presentation in four different sections. The first one includes an update and a quick overview of the merger with LiberBank. As you all know, it was announced in December. The second section includes the main highlights of the quarter. followed by a third session with the results in detail, and finally, an update of our solvency, liquidity, and the asset quality trends of the quarter. So, Pablo, whenever you want.

Thank you, Jaime. Good morning to everyone. Before reviewing the quarterly results, as Jaime said, let me review and update the merger process with LiberBank. In slide 4, you have the main transaction terms and the calendar. I won't go through all of them, but let me only highlight that the process is progressing as expected, and as you can see in the calendar in the bottom, in January, the independent expert was appointed by the registry. So we keep on advancing. In slide 5, you have the details of the adjustments that we have announced. As a reminder, the restructuring charges will enable us to crystallize 159 million cost synergies that together with the Unicaja Banco Estanalo and Pending Savings represents almost 200 million of total future savings, representing a bit more than half of LibreBank's total cost base and around 20% of the combined entity. Also, following the provisions booked in the quarter, the NPL coverage after the mentioned adjustments will reach 74%, which is two percentage points above the previous guidance. Total NPA coverage will also grow to 69%, also slightly above the level guided in the merger presentation. All in all, these charges will enable the bank to deploy partially the current excess of capital to improve recurrent profitability. Moving to slide 6. As it happened with the coverage levels, the quarterly increase of the solvency of both banks has also improved the solvency levels above the reference published in the merger presentation. The combined seed, one fully loaded, has reached 14.7% in December. However, the larger equity of the combined entity also increases the thresholds applied for the deductions, adding to the solvency other 40 basis points from the buffer's adjustments. In other words, There are capital synergies explained by the larger capital of the combined entity, which increases the thresholds applied to deductions and levels to seed one of the combined entity at 15.1% at the end of the year, well above the 14.7% of September that was considered in the merger presentation. So really good news with higher than initially considered solvency. Now, moving to slide 7, we remind the synergies calendar. We expect a fast crystallization of synergies explained by some specific circumstances, as we explained at the top right. Almost half of the savings are already identified, mainly from Unicaja Bank standalone measures, LiberBank EPCs, and the lower amortization of intangibles that will follow the impairments. On top of these measures, the experience in previous integration, together with application of the best practices of each bank, will help to meet the targets on time. And finally, in slide 8, we show the mentioned adjustments will significantly increase the returns that consensus is expecting for banks. both banks in 2023, from levels of around 3% to around 6%. It is worth noting that such improvement is coming mainly from cost-cutting measures with low execution risk. It is also important to realize that we are not considering any potential revenue synergies despite the opportunities arising from the merger and the limited commercial overlap. In addition, the relative high coverage of MPAs and the conservative loan mix should also help to improve the future cost of risk. Finally, these profitability levels are considering seeing one level well above the one of our peers and it is not adjusted for that. All in all, the deal will enable to allocate the excess of solvency to increase consensus earnings per share by around 50% to a profitability that is close to 6%. All these while are currently trading the banks at around 0.2x tangible book value and 4x 2023 consensus earnings. If we move now to the quarterly results, I will start the second section in page 10 with the main highlights of the quarter. Regarding the business, customer funds grew 6.5% year-on-year and 2.6% quarter-on-quarter. With off-balance sheets, funds also growing 2.6% in the quarter. Total performing loans grew 0.8% in the quarter, leaving almost flat for the year. New loan production improved significantly in the fourth quarter, with new loans to individuals up 24% in the quarter. From the P&L point of view, as we will see later, trends are quite positive for second quarter in a row. On one hand, NII grew 1.1% quarter on quarter, owing, among others, to the lower cost of deposits. Fee income also showed a significant improvement, growing 10.7% quarter on quarter. Such a positive trend left the core income almost 4% above the previous quarter. Regarding expenses, total costs fell an impressive 5.7% compared with 2019, with savings amounting to 35 million in the year. In terms of impairments, we have anticipated other 34 million of COVID provisions in the quarter, totaling 200 million in the full year. All in all, net income fell 55% in 2020 compared with 2019. However, excluding the mentioned COVID provisions, net income was 218, almost 27% above the previous year. On asset quality, liquidity, and solvency, I would highlight that both NPLs and foreclosed assets fell in the quarter. NPAs fell by 8% year-on-year and almost 6% quarter-on-quarter. with MPLs decreasing 13% and foreclosed assets almost 3%. It is also worth noting that the MPA's coverage levels continue to grow one more quarter above 65%, which is more than 7 percentage points above the previous year's. the previous year. From a liquidity point of view, very little to add. LTD was 65% and our LCR 310 by year end. Finally, our solvency continued to improve. We see one fully loaded growing other 33 basis points to 15%, mainly owing to the lower risk weighted assets. Regulatory total capital also improved to 18.2%, implying a 1.3 billion buffer over our SREP. So, as you can see, in 2020 trends are quite positive. Lending was stable. Core income finished the year with significant improvement compared with the first half of 2020. Total cost fell an impressive 6%. Impairments include 200 million for COVID provision. That explains the best-in-class coverage level. On top of this, NPS balances continue to decrease. through the year and in the quarter, and finally our solvency position has been reinforced, enabling us to merge with Libermans in a deal that will crystallize significant synergies that will boost our profitability. I will move now to slide 12, where you have the P&L details. Starting with the quarterly trends, as I already mentioned, both NII and fees improved in the quarter, with fees reaching an all-time record of $63 million, that is almost 11% above the previous quarter. Regarding the rest of revenues, I will highlight the relatively strong trading generated to partially compensate the additional COVID impairments. Finally, other operating income and expenses include the DGF charge that explains the seasonality in each fourth quarter. All this led to a gross margin of 195 million in the quarter. Total costs were 143 million, well below the 152 of the fourth quarter of 2019, leaving pre-provision profit at 52 million, of which 34 were used to book additional provisions for COVID-19. As a result, the net income was close to break-even. From an annual point of view, I would highlight that despite the COVID-19 core income was pretty stable, even growing a little bit. Gross margin fell 5%, mainly owing to the lower other operating income as a result of the lower contribution from our real estate servicer that fell from 55 million in 2019 to 50 million in 2020, but still positive. Bear in mind that it was extremely high in 2019 following some portfolio disposals. Total costs showed a very positive trend and finished 2020 falling 5.7%, slightly above our mid-single-digit guidance. Finally, as you can see, in 2020, we decided to book 200 million of COVID-related provision that left pre-tax profit at 99 million and net income at 78 million. However, excluding these extraordinary impairments, the net income grew from 172 million in 2019 to 218 million in 2020. If we move now to slide 13, you can see that total customer funds grew 6.5% year on year. This trend is explained by a strong growth in deposits that grew almost 9% year on year, but also And for third consecutive quarter, we have seen an improvement in assets under management and of balance sheet funds that recovered throughout the year and finally finished at the same level as in 2019. In slide 14, you have the credit and loans trends, with gross loans fell 0.8% year-on-year, with NPL's balances decreasing almost 13%. By segments, loans to individuals fell close to 5%, while corporate loans grew 4.4%. As usually, on the right-hand side, we include performing loans evolution that, as you can see, remain stable in the year following an almost 1% quarter-on-quarter increase in the fourth quarter of 2020. By segments, corporate performing loans grew 5% year-on-year, while consumer loans and mortgages decreased both around 4%. In slide 15, we show the new loan production by segments. Overall new production improved a lot in the quarter. In individuals' new loans, the improvement was around 24% in the quarter. However, total new loan production still finished the year below 2019, with total private sector new loans falling 21% in 2020 compared with the previous year. Now, in slide 16, we start with the P&L review with net interest income. As you can see in the top left, net interest income improved significantly in the second half of the year. In fourth quarter 2020, the improvement was mainly explained by lower cost of deposits because, as you probably know, we still have some redemptions of costly customer deposits. In the bottom of the slide, you can see that back book customer spread grew by 4 basis points to 156 basis points, following the mentioned lower cost of deposits. In slide 17, you have the regular details of our debt portfolio, where you can see that overall balances reached 22.3 billion, as a consequence of the liquidity position of the bank. However, as you can see in the right-hand side of the slide, most of the exposure remains sovereign debt classified in the amortized cost portfolio. If we move to slide 18, you have the fee income trends that under my view are one of the most positive news of the quarter. Total fees grew almost 11% in the quarter owing to the improvements in our transactional business. Year on year, such fees reflected the impacts mainly in the first half of the year from the pandemic. However, this was compensated among others by higher non-banking fees that grew almost 5% in the year. Net-net total fees grew 1% year-on-year, something that under my view is quite positive. If we consider all that has happened this year, and more important, it shows that the underlying trend going forward in fees will continue to improve. If we move now to slide 19, you have the total expenses evolution that under my view is one of the other positive news of the quarter and the overall year. Total costs fell almost 6% in 2020 and 7.6% since 2018. Savings were possible following the provisioning efforts made in the past when we announced our standalone cost cutting plan. We also did a review of the plan, including measures taken to accelerate the savings. Part of the savings are explained by the evolution of branches and employees that, as you can see on the right-hand side of the slide, have been decreasing during the last years at a run rate above 7% for branches and close to 5% for employees. In slide 20, You can see the details of the impairments that we have booked during last year. As I explained before, we booked in Q4 2020 another 34 million of provisions for COVID-19 potential future impacts, totalling 200 million in the full year. In the right of the slide, you can see that excluding these impairments, the recurrent cost of risk represented only 14 basis points, increasing to 85 basis points when including all COVID provisions, which is under our upper cost of risk range guidance. for this year. However, following the provisioning effort made in 2020, we expect to book much lower provisions in 2021 and onwards. We can now move to slide 22, where we start the regular asset quality review. In this same slide, we have the details on the evolution of our NPLs. As you can see, NPL balances continue to fall one more quarter, NPL ratio fell to 4.2%, and balances continue its downward trend, decreasing more than 8% quarter on quarter. As we show in the table in the bottom of the slide, quarterly gross entries remain low, something that together with strong recoveries and stable write-offs explain the 109 million or 8% quarterly decrease. In slide 23, we have updated the eco loans and moratoria balances. In the left of the slide, you can see that we have granted almost 900 million loans and credit lines guaranteed by the state. However, such amount is the limit, with the balance drawn at the moment representing only 578 million at the end of December, which represents 7.5% of corporate loans and only 2% of total performing loans. In the right-hand side of the slide, we show the moratoria details. As you can see, 99% of the outstanding moratorias are mortgages, representing 567 million after falling by one-third and representing only 2% of the total performing loans. In slide 24, we have updated our regular credit risk exposures and NPL coverage details. Overall NPL coverage continues to grow one more quarter, At the end of 2020, NPL coverage reached 67.4%, which is 13.5 percentage points above the previous year, an extremely high coverage when considering our loan mix and that 85% of the non-performing loans balances are secured by secured non-performing loans. In slide 25, you have the regular details on the foreclosed assets. Coverage remained one of the highest of the sector at 63%, while gross balances fell 2% quarter-on-quarter, or 26 million, leaving total gross balances at 1.1 billion, although in net terms they only represent 400 million, or 0.6% of total assets. Finally, let me highlight, as you can see in the right-hand side of the slide, that we continue to sell assets at very good prices, at around 33% above book value on average last year. In slide 26, you can see how overall MPAs have decreased to a gross balance of 2.3 billion and the net balance of 790 million, representing only 1.2% of total assets with a coverage of above 65%, which is one of the highest of the sectors. In slide 27, we have the details of our liquidity position that, as you can imagine, continued to be extremely comfortable one more quarter. Following the increase that we have in deposits, our LTD ratio fell further to 65%, with the LCR around 310 and the NSFR at 142%, which are among the highest of the sector. Finally, we update our solvency in slide 28. Our regulatory seed one reached 16.6% in December, 36 basis points above the previous quarter, and our total capital ratio was 18.2%, representing 1.3 billion buffer over our spread requirement. In fully loaded terms, the ratio improved 33 basis points in the quarter, reaching 15% with the big bulk of the improvement coming from lower risk-weighted assets, among others, explained by the continued decrease in NPAs. Finally, as I usually do, let me also remind you that our solvency ratios are calculated in full under the standard approach, something that we expect to change in the short term, but by the moment is still calculated with quite conservative credit risk densities. So that was all from my side. But before we start with the Q&A, let me finish reiterating that in 2020, despite the pandemic and its negative economic impacts, we have kept pretty stable our core income. We have reduced by almost 6% the total expenses, something that has helped us to further and significantly reinforce our coverage and our solvency. And at the end of the year, we have announced a very positive agreement with LiberBank, an agreement that was possible owing to the strong financial position of both banks, and an agreement that will improve significantly the future profitability of the bank and its shareholders' returns, all these with limited execution risk.

Thank you, Pablo. We move now to the questions that we have received. Let's start with the P&L. Pablo, we've got lots of questions regarding NII trends and net interest income guidance. If we can provide some color, please.

Yes, as you saw, we have met our guidance of leaving NII flat in 2020 compared to 2019, something that was discussed and not considered by all analysts and investors possibility at the beginning of the year. And such a positive trend was possible owing to the significant improvement in the second half of the year. where NII improved more than 8% compared with the first half. We started the year at a quarterly run rate of 140 million per quarter, while the last two quarters it has improved to 150 million. We have some positives going forward and negatives ahead. On the positive side, we still have high-yield customer deposits maturing ahead. And following the maturity of 200 million in this fourth quarter, we still have around 400 million of high-yield retail deposits at an average cost of around 4% maturing in 2021. So the NII will benefit from these maturities mainly in the first half of the year. On the negative side, we have lower Euribor and lower contribution from our debt portfolio going forward. All in all, we believe that Unicaja Banco in standalone can keep NII pretty stable in the coming quarters.

Thank you, Pablo. The next one on volumes, if we can update our loan growth expectations.

Yes. As you saw in the fourth quarter, total performing loans grew 200 million in the quarter, leaving almost flat for the year. And so the new production has improved and we hope to maintain this trend, mainly in this improvement has happened in the second half of the year. So for 2021 in standalone basis, at this moment, we believe that total performing loans will remain quite stable.

Thank you, Pablo. The next one is on the debt portfolio, regarding the alcohol portfolio. If we can update the expected contribution from this portfolio going forward and the strategy and activities that we got ahead.

Yes, regarding the contribution. So going forward, we think the contribution of our debt portfolio will be slightly below current levels, but also will depend on market conditions. And the lower contributions in the coming quarters or the headwind is explained mainly by the maturity of around $3 billion of our debt portfolio in 2021. The contribution of the debt portfolio has been higher in the last two quarters as in 2020, we have bought in advance some of the bonds that we were expecting to be purchased in 2021. So we expect its contribution to come back to more normalized level throughout the year. Regarding the strategy, there are no significant changes with previous quarters and the main objective continues to be to invest in the structural liquidity of the bank to obtain a stable income. With this objective in mind, the strategy will be analyzed liquidity in the different periods of time and how liquidity evolves and invest as we have done in the past mainly in government bonds and In most cases, we will probably hedge the median interest rate risk, so we avoid any impact in pricing of this portfolio going forward if rates finally pick up. As I mentioned, well, let me remind that most or probably all our structural bond portfolio is accounted and will be accounted in amortized cost. which have no impact in P&L neither equity and as I mentioned before in 2021 we have 3 billion maturities that will significantly increase our liquidity and although it's not something that we have defined yet as the bank is analyzing different ways to optimize liquidity part of this redemption will probably be reinvested depending on market conditions. And finally, regarding how is the devaluation of the portfolio, let me remind you that at the end of 2020, the unrealized gains of the amortized cost debt portfolio was around $800 million. And we follow closely the valuation of the portfolio and market conditions to try to secure part of the current unrealized gains and lock some capital gains for two, three years.

Also related to NII, if we can update our TLTRO strategy and the impacts coming from the TLTRO 3 and the TLTRO 3.2.

The new measures announced by the ECB last month allows us to ask for an additional 500 million of the TLTRO facility and on top of the already drawn $5 billion that we requested in June this year, well, in 2020. The formal decision to ask for this additional 10% of the TLTRO funding hasn't been taken yet, so we cannot advance any impact, but the most likely the conditions, as you can imagine, are quite favorable. We will probably draw that 10%.

Okay, Pablo. Moving through the P&L, if we can update our guidance, what do we expect in terms of fees going forward?

As you can see, fees have been affected at the beginning of the year of 2020 by the lower activity and the lockdowns and the measures that we took to offset the situation of our customers. This impact was mainly shown in the second quarter figures. But since then, the trend has recovered and improved significantly, supported by higher transactional business and the evolution of the non-banking products like asset under management and insurance. And that finished 2020, the asset under management finished 2020 almost $1 billion above the balance that we have at the end of the first quarter. So last quarter, we guided for... flat fees in 2020 and we finally have finished the year growing slightly more than 1% with the highest quarterly income ever for fees in this fourth quarter and the new strategy regarding fees that was applied at the end of 2020 together with softer lockdowns makes us feel comfortable with the future fee trends and But obviously, it will depend on the evolution of the pandemic. But under our actual scenario, if we don't go back to hard lockdowns, as the ones that we had in March through May of 2020, we believe that fees for Unicaja Banco in standalone can grow at high single-digit again in 2021.

Thank you, Pablo. Can we also please clarify why was other operating income and other operating expenses so weak this quarter?

Yes. The other operating income and expenses fell in the quarter, in the fourth quarter of 2020, compared to the fourth quarter of 2019, owing to the higher contribution to the deposit guarantee fund and the lower income from our real estate business. The contribution to the deposit guarantee fund obviously was higher among others to the customer deposit increase that was almost 9% year-on-year. On top of this, our real estate contribution to this P&L line mainly through our real estate servicer was lower due to, as I mentioned, the large portfolio sales that we had last year.

Moving to cost, to expenses, probably we can update on cost-cutting trends in standalone and the timing on the standalone pending savings plans.

As you all know, cost cutting has become something key for Unicaja Banco under the lower for longer interest rate environment and the threats from COVID-19 pandemic. In 2020, under my view, we did quite a good job with total costs decreasing by almost 6% year on year, which was slightly better than our initial guidance. This drop was possible, among others, due to the acceleration of part of the savings announced one year ago. Going forward, as we explained in the merger presentation, there are still around 30 million of additional savings pending to crystallize at Unicaja Banco level. However, in a standalone basis, we don't expect the same savings in 2021 as in 2022 due to the last year drop significantly. was very high and we expect to have some additional investment this year. In net terms, the final savings will depend on the amount of these new investments. We will be updating the trends in the coming quarters, but in comparable terms, we expect to further reduce our total cost in 2021 although at a slightly lower rate than in 2020. On top of these savings, we have additional cost cutting from the merger, as you probably know by now, and putting all expected savings together, we believe that the combined bank will be able to crystallize around 30 million of savings in 2021 and close to 150 million in 2022. and 190 million in 2023. And this represents around 3, 16 and 20% respectively of the combined cost of the two entities in 2020, which are quite significant reduction in the cost and improvement of profitability. Thank you, Pablo.

We have a few questions related to the cost-cutting measures, but more related to the merger with LiberBank. We can provide more details on the measures and the cost-cutting measures for the merger, how many branches will close, how many employees will be affected, and so on. We can elaborate a bit, please.

I have just given what we expect on the overall savings from the merger but we haven't published obviously the details obviously we have a plan and we expect to execute it quite quickly but we need to go step by step part of these adjustments will require reaching agreements that obviously we haven't got yet and we will update you on the details once we reach those agreements with the parties. However, let me stress that we have measures that are already either in place or identified and will help us to speed up the crystallization of these synergies. As we have explained in the presentation, we have the UNICAGE standalone savings, we have the liver bank EPCs, and the straightforward benefit from the intangible impairments that will accelerate the process significantly and allows us to reach the targets. Bear in mind that all these three measures together, these identified measures represents almost half of the expected savings and can be implemented quite quickly.

All right. Moving through the P&L to cost of risk, we can update our guidance for loan loan impairments. Pablo.

Yes, our loan mix and our conservative loan mix, let me stress the prudent loan mix with a higher than peers mortgages and public sector exposure and the relative or not even relative, the very high coverage that we have on the standalone but also with LiberBank. leave us in a very good position going forward. Bear in mind that the coverage has improved further in the quarter above the initial level announced in the merger presentation. Our asset quality trends continue to improve, although the economic situation one more quarter and foreclosed assets and NPL balances decreasing almost 6% in the quarter. On top of this, we have decided to book another 34 million for COVID-19 related provisions in the fourth quarter of 2020, reaching a total of 200 million in 2020. And this leaves the final cost of risk at 85 basis points, close to the high end of our guidance. but this is due to our conservative approach and will leave us in a good position going forward. The reported cost of risk has been abnormally high in 2020 due to the COVID permissions, but as we anticipated, it has already started to decrease. a positive trend that will continue during next quarters. I think in 2021, if we exclude the impairments related to the merger, we expect to book significantly lower provisions. With the current information on our base scenario and considering the uncertainties still for the economy and the measures taken by governments and the ECB, we see as the most likely cost of risk reduction in 2021 to level between 50 to 60 basis points of cost of risk.

Thank you, Pablo. Also, regarding asset quality trends, if we can explain the trends that we saw in a risk by type of stage.

Okay, stage one loans were stable. Stage three loans decreased one more quarter. These are the non-performing loans, as you saw in the presentation. And the trend in MPLs remained positive quarter after quarter. So no change in the trend here. However, as is happening throughout the sector, following a very prudent and conservative and thorough review, our Stage 2 loans have grown in the quarter by around 400 million, and they have provision representing 11% of their balances, which is very conservative. and leave us in quite a comfortable situation going forward.

All right. Another one, Pablo, on asset quality. We consider the cost of risk 2020 provisions and the merger impairments. Could we expect at some point to see releases in the future? Will the impairments for non-performing assets of the merger reduce the future cost of risk? If you can elaborate a little bit. Yes.

Yes, I think at this moment, I think it's too early and the uncertainties are significant. So we don't expect to release provision. I think that's going too far and we have to wait to see that. But what we are quite confident is that we will have an improvement in the cost of risk, as I said, to the tenor of the 50 to 60 basis point. So, in other words, it is too soon to talk about reversal of any provisions, and there are still lots of uncertainties in the economy, and so we maintain our prudent approach. So, in asset quality trends, we remain positive with NPAs decrease every quarter, But at some point, obviously, we expect to see some deterioration in our books. And that's why we have booked the 200 million of COVID-related provisions in 2020. However, such amount of provision reflected in our high coverage and also owing to our conservative mix of loans, as I explained, the one at Unicaja, but also the one at LiberBank, so it makes that both individually but also as a combined entity will report lower recurrent cost of risk going forward something that as I said before together with the cost cutting plans that will enable to improve the recurrent profitability and the shareholder return significantly from 2020 onwards. Regarding, as I said, the future cost of risk, what I can say is what I said before. We have the highest coverage ratio among our peers, and we also have a very conservative and low risk profile in our lending mix. So, there are still uncertainties, as I said, but considering this level of coverage and the prudent loan mix, I'm quite confident that we can have a relative lower cost of risk going forward.

Thank you, Pablo. We are moving now to solvency. Let's start with the IRB models. If we can update the process, what is the situation of the approval of the IRB, the advanced models?

As we announced, we expect to have the ECB approval in the coming months, probably before formalizing the merger, but we need to wait for the regular and formal steps of this type of process, and we cannot confirm a specific date. However, this is only a matter of time. Here, what is more important is that sooner rather than later, our solvency will start being more comparable with one of our listed peers, although initially only for one part of the credit exposure, but the remaining will come in the future, leaving additional solvency tailwinds for the combined entity.

Thank you, Pablo. Maybe a follow-up related to this one. We can explain if there are additional regulatory tailwinds ahead in terms of solvency, Pablo.

As you know we don't have trim because we don't have the IRB models and the new ones will be considering the trim of the low risk part of the portfolio so we don't expect in the coming quarters any additional regulatory changes other than the obviously the one that I mentioned before the IRB for the mortgage and the consumer loans of Unicaja Banco So the benefit from the change in intangibles in our case represented a 10 basis point, and it was already included in our solvency numbers. So no impact from additional regulatory changes.

Thank you Pablo. Can we update on 2020 expected dividend and the accrual of dividends that we did this year?

We haven't formally decided on the final dividend that we will ask to our shareholders meeting. However, in the fourth quarter of 2020, we have adjusted our solvency for a dividend that is considering a 15% payout adjusted by the buyback formalized last year. And this all following the ECB recommendation.

Thanks, Paolo. Another one related to the previous one on the potential payout. What will be the adequate payout following the merger with LibreVac?

As we explained in the merger presentation, our aim is to reach a cash payout ratio of around 50% as soon as possible. Following the merger with LiberBank, the solvency position, even better now with the quarter evolution, will remain among the highest of the sector and it will be further improved by the future approvals of IRB. models and higher recurrent results. So we believe that a payout of around 50% will be adequate.

Okay, yes. One final question before we finish, Pablo. If we can elaborate or provide a bit more color on the expected revenue synergies coming or arising from the merger with LiberBank.

Yes, and We didn't consider in the presentation that we had any income synergies for prudency, but we know that following the best practices of each bank, and the larger scale will bring us new opportunities. Also, it is worth noting that the relatively low overlap of our branch networks compared with other similar deals will reduce significantly the risk of losing part of the business after closing some branches. So considering this, we do expect to generate some revenue synergies, but we want to be prudent and conservative and we are not quantifying the potential impact. I think only with the cost synergies, the potential benefits are so significant that we don't even need to consider the revenue synergies to make this deal a great opportunity for our shareholders.

Thank you, Pablo. That's all for the webcast. Please, if you have further questions, do not hesitate to contact the IR department. We'll be delighted to answer you and follow up with you offline. Thank you very much and see you next quarter. Keep safe.

Thank you very much. Stay safe.