Edward O’Loghlen: Good morning, and welcome to CaixaBank’s financial results presentation for the Third Quarter of 2021. I hope you and your families are well. For today’s presentation, we are joined by the usual management team consisting of our CEO, Gonzalo Gortazar and the CFO, Javier Pano. Moving on, just a reminder that we plan to spend roughly around 30 minutes presenting with 45 to 60 minutes after that for a live Q&A session, for which you should have received instructions via e-mail. Let me just say that my team and I are available after the call to discuss any events that remain unanswered.

And without further ado, let me hand it over to our CEO.

Gonzalo Gortazar: Thank you, Eddie. Good morning, everybody. Thanks for taking the time. And let’s go directly into the presentation.

So the highlights, I think the highlights are that we have made substantial progress in our merger project, it’s now almost a reality from an operational point of view, we have now planted the seeds to get to those 940 million, which we announced, we reviewed upwards last quarter and for a substantial part of that 80% to be delivered in 2022, which is the first year after transaction, the closing in March. And I think this is very important. The one message I would like you to go out of this presentation today is that we’re very confident about how things are going. And at this stage, we have plenty of research to be confident. So if at any point people have seen execution risk associated to these cost savings or merger, I think it’s time to be completely confident that we’re going to get there.

And that in the context of all the work that we’re doing our performance in our commercial activity, I think it’s quite noteworthy, particularly and obviously, you see here we’re doing in the area of long term savings, 8.9% growth year-to-date, we’re gaining market share in long-term savings. Despite all the merger reasons, it means a lot about what franchise we have. New MyBox premia, up 140%. Those engines are really firing and firing 100% even in the context of these complex integration. Our core revenues are stable, obviously, we have very strong headwind in NII.

One might think, given what you see in the market those NII headwinds may be close to the end, we’ll have to see, but certainly, we’re starting to see different expectations for rates and I’m talking about just what you can see the markets. In any case, we continue with that very strong growth in insurance and fee-related areas, which is going to continue whatever it happens on in the area of the evolution of rates. Cost of risk is doing very well, you have that 30 basis points in the last 12 months combined basis. Obviously, on a quarterly basis, it is even lower. We keep having good news and we’ve decided to improve our guidance for this year to less than 30 basis points, not to 30, but to less than 30 basis points for the totality of 2021.

We’ve kept asset quality very stable in the quarter. And I think capital is another strong point. We reached 12.7% on a fully loaded, excellent transition on basis, 12.7, well above our rate targets and that is obviously after deducting our 50% payout that we have now, so very strong capital generation. If you look at what we’ve done year-to-date, 88 basis points. It actually means a lot to us and I think it also means a lot because we see it as something that is -- whatever is the right number, but is going to continue on a sustained basis on the future so that will allow us to appropriately reward our shareholders and real is at very high levels, so already compliant with what is required for us for the year 2024.

And I spent a couple of slides talking about the integration because I think the achievements so far are great but also we still have a couple of quarters of great challenges ahead of us. That’s clear. What is most important is that all what we during the six months has been to put in place all what is needed to have a very successful and a very quick, fast integration. This bank is going to be in an extraordinary position, starting probably six months from now, once the vast majority of execution work has been done, to capture revenue scenarios and to benefit from a tremendous platform, tremendous workforce, and a great opportunity in Spain, which we have been doing for quite some time as CaixaBank and we are going to be doing even further as CaixaBank plus Bankia together. People integration has gone extremely well.

The teams have been put in place since the beginning. We’ve done over 6000 interviews, over 2000 management appraisals with external people so that we actually had a very clear assessing process on which meritocracy is and has been the name of the game. And that’s done and it’s been done in a fair way so that people are part of one integrated bank at this stage, even if it’s only six months after the merger. We agreed the restructuring with unions. Finally, with all voluntary redundancies, people are starting to leave, actually in the first of November this year and will be leaving very fast as you’ll see in the next -- on the next page.

The model -- the business model has been integrated very quickly from all points of view. Some of the businesses have been integrated already, like CIB or business banking and private banking. There you might have seen some impact of that very fast integration at the beginning of the second quarter, but it means people are done with integration and on a great position to benefit from what we see ahead of us. The retail network has been operating as one, even though with two separate platforms, that’s going to end mid November when we finalize the IT integration. We have already integrated the payment business into CaixaBank.

The asset management companies have been merged. The insurance are well advanced and we expect to have it finalized during the fourth quarter with the sort of breakup of the joint venture with Mapfre and sort of a steady state on that front. Have rebranded branches. Clients have been advised of what’s coming. Everything is prepared.

We’re also prepared on the IT integration. We’ve been working for 12 months on that, since the transaction was announced, as opposed to since the moment that transaction was closed, we’re well prepared to go ahead and have a successful integration. So there’s a lot, that’s my point that we have achieved in these last six months, so there’s approximately 15,000 activities that we have completed. Fortunately, I’m not going to go through them or put the number of slides explaining each of them. But this is working like a clock.

Ahead of us, in this quarter, we have the integration, which I discussed. The fact that people start leaving in first of November; we have 1200 people leaving and then the bust of the exits are going to concentrate in the first quarter so that by the end of the first quarter, 70% of people will have left, that’s what obviously helps to make sure that we deliver these very high number of cost savings already from next year. The branch network, we have around 1500 branches to be closed or integrated. We’re going to do 80% of that, by the end of the first quarter. Half of that will be actually be done in December right after the IT integration.

So very speedy, we are prepared to do that and to get the organization again ready for the next phase of the joint ventures I discussed already. We’re making good progress. All this is relevant because obviously we are going to be able to focus on delivering the revenue synergies as soon as all this heavy lifting of integration is done. The numbers for the year-to-date or long term savings mentioned in the beginning, they are pretty good. Look at these 15.7 billion of what is the assets under management and long term savings, very significant increase both market and new inflows.

There’s also an increase in liquidity and I will say a very good trend. Having gone through all what we are going through this year, the fact that we’re growing faster than the market is something that speaks by itself. New inflows, you have some data on that, you have data clearly on the revenue growth from EM and savings insurance. Our market share, you can see there; the 22 basis points of increase from 29 to 29.2. Success we’re having on the management of portfolios on a discretionary basis.

MyBox, you heard a lot about MyBox, this quarter have been fantastic, again, for MyBox, consolidating itself as a very, very successful commercial offering with a lot of future for us. It’s a very ample concept in which we can not only do what we’re doing, extend it to bank customers, which is obviously a great opportunity, but also develop new ideas, new products within the MyBox. It has captured the attention of our people, it has captured the attention of clients and it’s a great commercial tool. Now, you can see how bank is already accounting for 20% of sales, it should in theory account for one-third, given the relative sizes, but obviously, that is in due course where we will get and probably honestly two levels above that because the opportunity is even higher. I talked about revenue synergies, obviously IT integration is a precondition for that and now we’ll get into the moment in which that will be a reality.

You see the difference in long term savings, those numbers you’ve seen in the past, but still, 6 percentage points of penetration of long term savings is a huge difference. There’s a lot of money to be made there. In the case of life risk, the numbers speak by themselves on non-life, things like health insurance, where we do seven times more at CaixaBank. It gives you an indication this is going to happen. It’s a matter of obviously closing the negotiations with Mapfre and then having a unified platform.

And these will give us great tailwinds for the coming years. Remember, when we closed the joint venture with Mapfre, we acquired 100%, we had announced approximately 75 million of pre-tax income that would immediately accrue to ourselves for that reason into next year already, as we expect to close these during this fourth quarter. The loan book is obviously the other side. We have significant reductions in the loan book. This quarter is also aided by the seasonality.

You will have this 3 billion of pension advances for a few days at the end of the second quarter every year, so that really doesn’t compare but then we’ll still have 1% decrease of the loan book in the quarter. The same seasonality as well there in September, which is usually a weaker month than the June but there is obviously some impact. Mortgages, we continue to see similar trends with our focus on pricing and value of mortgages rather than volumes. We’ve seen better trends in consumer lending in terms of new production, but still the loan book is slightly down. I am quite convinced that that is going to change soon.

And then on the corporate side, obviously you’ve seen relatively weak year. I have to say this is after strong exceptional performance the previous years and particularly post-pandemic. Now we look at our market sharing business loans on an organic basis and we gain much more market share in 2020 than the market share we are losing in 2021 and part of this means that our clients had enough liquidity or more than enough liquidity than we have provided them during 2020, so that they are actually having a lower demand of credit during 2021 in which obviously you see our numbers are reasonably weak. I said I was optimistic on consumer lending. Here you have on the graph what we’ve seen in terms of consumption patterns during the last quarters.

As you know, because of our market share and our credit and debit card spending, it is very good thermometer of what’s going on. We’re seeing now in this third quarter that consumption has been around 14% above the equivalent period pre-pandemic. So there’s a complete change of tone here. And we’ve seen it already in our numbers, maybe we don’t see it in, in balances. But you can see some of the things on car leases, which we’ve been very successful, we are at 17,000 this year, it’s up 19% from last year, obviously last year was weaker.

But we are on a run right, that should put us on a record year. You see, what we do through UI, up 38%, or we’re selling TVs and selling on funding TVs, mobile phones, other sort of wide level, other white goods, etc. We have increased the number of MyCard. MyCard is a card that acts as a debit or credit card, depending on how the client wants to use, it can also convert into revolving, and where we’ve made a lot of progress in increasing the number of cards that our clients have. This is not showing today in the numbers because you’re just changing the card, but it’s giving you a much more powerful tool that will eventually engage in sort of deferral of payments, and hence a great source of profits for us.

We have increased now the numbers of customers with pre-approved loans, which we tighten after the pandemic. So I think other than the numbers that are positive on our new production, I think we have put the seeds for better performance into the future and consumer, which is not so relevant for volumes, but it’s quite relevant for NII, as you know. The comparison for the nine months, obviously, you see how we are offsetting the fall in NII through fees and in certain revenue so that we have stability on core revenues. And then the big gap is the difference in provisions, which is no surprise to you and very well explained. We continue to have a mix of core revenues that is shifting gradually and more and more towards higher quality fees and insurance revenues.

It’s at 42% but obviously we’d like to see NII growing as well in the future. NPL’s coverage, liquidity and capital are here, we’ll get into the detail but those are excellent numbers. Again, I want to emphasize how much capital we are creating quarter after quarter, which is obviously something very important for us and I’m sure for our shareholders. One final note on ESG, just remind you all what we do on this front we are excellently positioned to benefit from ESG trends and to benefit from a market that is increasingly more and more sensitive to what we are -- what banks and other corporates do. You have one specific point of information, we have been the largest European bank in terms of ESG insurance this year by a very large margin with both green and social bonds because we have obviously the activity, the collateral.

We can do more but we can and we will put in value all what we already do, which is a lot. And with that, Javier, it is your turn. Oh, you have that. Thank you.

Javier Pano: Okay, thank you and good morning from my side also.

I will try to be brief on my comments on the P&L and the balance sheet. Well, first, on the income statement, the income statement for the quarter. Core revenues, as commented, slightly down by 0.9%, although flat year-to-date as commented it’s NII that is putting some pressure on that front affected by lower asset deals and average volumes. On fees, although we have some quarterly seasonality, we have better landscape with growth mainly driven by assets under management. On insurance revenues, we keep improving this quarter and, as Gonzalo commented, we are quite optimistic for this into the future.

Nothing specific to remark on noncore revenues this quarter. On cost, broadly stable quarter-on-quarter and evolving in line to meet our guidance for the year. And our loan loss charges, clearly a lower figure EUR 165 million this third quarter, clearly below our initial expectations for cost of risk for the last 12 months at 30 basis points. It’s a quarter where we have also some M&A impacts, already expected and in line with our initial plans for net impact of minus EUR 124 million mainly related to the incoming restructuring of our network, taken into account those EUR 124 million, on an adjusted basis, net income has been this third quarter EUR 744 million, up by 33% compared to the situation last year. Some words on BPI where we really have solid operating trends, as you may see, core revenues there up significantly, year-on-year, year-to-date, quarter-on-quarter, very good evolution of the loan book, importable up by close to 6% across all segments and as a consequence, we keep gaining operating leverage with a core operating income that improved by 28%.

Net attributable profit of 42 million and also on the credit front, we are doing well. Loan moratoria has already expired almost totally in October, so we are only have left 100 million and credit metrics really sound with an NPL ratio of 2.2% [indiscernible]. Let’s go into the detail, NII. NII down by 4% year-to-date, as we showed before. Quarter-over-quarter, minus 2.9%, mostly impacted by lower loan yields and loan volumes mainly on the SME sector I would say, we can comment later.

Also on the ALCO front, we are having the negative impact from excess cash, as we have been waiting for the reinvestment of the portfolio, as we commented last quarter. The back-book yield has been negatively impacted by rival repricing and comes down by 4 basis points this quarter to 163 basis points. And the front-book yield quarter-on-quarter also comes down by 13 basis points to 198 but in this case, due to higher weights of the new production of corporate lending this quarter, approximately 40% of the new production. On the ALCO book, as commented we have been in a wait and see mode for the third quarter, although you could see that the market is moving towards what we were expecting. So we are clearly having backup in yields in recent weeks, and that’s offering some opportunities for the reinvestment of this portfolio further down the road.

So far, as of the end of September, the metrics remain stable. Also the sovereign exposure and our wholesale funding cost, nothing to remark for the third quarter. I would like to highlight a couple of measures we have taken in recent times to mitigate NII headwinds. First, we are charging for some corporate deposits 38 billion by the end of September. And as you may see, this is increasing steadily by the quarter and we think that we still have some room on this front.

And also importantly also, this shift from fixed to variable annuities on this front, in the past, we have been almost distributing a product with a fixed income component but nowadays, we have been moving towards also a valuable component thus resulting into a higher contribution from fees while at the same time, as you may see, the size of this savings insurance portfolio has been increasing steadily. Some comments on non-NII core revenues that grew strongly on the back of asset management. On this front, year-to-date, on fees, we are up by 5.2%. You may see the breakdown, recurrent banking fees gradually recovering. On this, I would say that is still on payments below the levels -- COVID levels, so still, we need to learn to gain some traction on that front.

But obviously on asset management, we are much more than compensating these with growth at over 16%, also insurance distribution, clearly improving year-to-date by 6.7%. And despite seasonality that always affects here in the third quarter. On wholesale banking, we are having a weaker year compared to last year. In this case, I would say that last year was exceptional in terms of taking advantage of some opportunities we had in the turmoil of the COVID situation and look including or excluding, better said, the CIV related fees, our fee pool is growing by 6.8% year-to-date. A look on the right hand side chart on other insurance revenues.

On this front, this is the combination of the equity accounted from several cash arrays last premia from our life risk business and you may see that this is growing by close to 9% year-to-date and we think that clearly on this front, we are going to do better in the future. On costs, not much to comment. I would say that we are fully on track to meet our guidance for the year. Gonzalo has already commented on the timetable for staff departures that will result into cost synergies that already kicking significantly in 2022 by approximately 80% of the run rate. Remember, our upgraded run rate for cost synergy is at EUR 940 million.

Loan-loss charges, finally, well, much lower than initially expected, at least a few quarters above, only EUR 165 million in this third quarter. I would also like to remark that we keep unused EUR 1.4 billion of COVID reserves that have remained at this table. This quarter we have made some minor adjustments to our forecasts for growth in GDP, growth in next years, but still, as you may see in 2022 and 2023, we are quite a bit on future evolution. No major changes this quarter on the different stages of our loan book and as commented, with this much positive backdrop and positive evolution and performance of our exposures, we are upgrading our cost of risk guidance to less than 30 basis points from less than 40 basis points for this year. Let’s move now to the balance sheet commenting first on our non performing exposures.

You may see that non-performing balances remained broadly stable, actually in Euros slightly down. The NPL ratio stable at 3.6%. The breakdown by segments pretty stable, only some minor denominator effects. The coverage ratio also stable at 64%. And as I was commenting, no, there are some parts of the portfolio that are evolving better than I initially expected.

One clear case is moratoria, it has already expired almost completely, only 1.4 billion left, once considering those that have already expired in Portugal during the month of October and while and the credit metrics on this portfolio continue to be really sound and at the same levels we had in the previous quarter. [indiscernible], some comments, 35 of them are already repeated in principle, 97 outperforming and only 1% asked or applied for some kind of, I would say, applied for the good practice some kind of changes on this front. So I will say that this is really a low amount up to now. Finally, a liquidity and solvency. On liquidity, well first, up on the upper part of the slide, you have the MREL ratio at 25.6%.

This is a 350 basis points over our current requirements, so really a comfortable position. We keep issuing as you know well, this quarter successfully 750 million [ph] at record low coupon levels for certain [ph] European bank. And you to know that in the future, we will be recovering issuer as we are already facing the rollover of plenty of the instruments already issued in the past and below. Below, our credit metrics -- sorry, our liquidity metrics, the liquidity coverage ratio over 300% and the net stable funding ratio at 151%. And finally, now, yes, solvency, it has been a quarter of very strong organic capital generation, 45 basis points in one quarter.

Remember that we keep accruing a 50% cash payout in our sovereign ratios, those – the structuring impacts already expected have resulted into a negative impact of eight basis points this quarter. Remember that we were recommended that we were expecting that on a net basis, we were already done last quarter. This means that for the fourth quarter, probably, we will have some positives on this front. And finally, markets and another, almost no impacts this quarter, so we end the quarter with a CET1 ratio at 12.68%. When adding additional 35 basis points from IFRS9 transitional, this is a CET1 ratio already over 13% and an MDA buffer already approaching 500 basis points.

And finally, on the right hand side chart, you may see the evolution of our tangible book value per share up by 6% year-to-date. It’s now at EUR 3.72. And I think that with this, this is for my part, so we might be ready for questions. Thank you very much. Edward O’Loghlen : Indeed.

Thank you Javier and thank you, Gonzalo. It’s time to move now to Q&A. I just like to remind everyone to keep your questions brief for the benefit of everyone on the call. We have a queue of around 12 people. So with that, operator, please proceed with the first question including the name of the company of the caller, please.

Operator: Thank you. And the first question comes from the line of Mario Ropero, Bestinver Securities. Please ask your question. Your line is now open.

Mario Ropero: Hi, good afternoon, everybody.

And my first question, a couple of questions around NII, do you think that yield pressure should be over now. I know that there may be some still marginal pending effects from your labor, but you’re also producing loans at yield above the back book. And then also related to NII, if you could update us on the contribution from [indiscernible] and what is your base case expectations regarding what the ECB may do about this into next year? And then the second question is regarding cost of risk. It seems very low now, you improved your guidance, you think that you still have room to improve impairments, credit impairments, in 2022 versus 2021? And also somehow related to this is you can update us on the amount of provisions you have for COVID and whether you could consider some release in 2022 ones eco grace periods expire. Thank you.

Gonzalo Gortazar: Thank you, Mario. Good morning. Let me take the second question and probably Javier can take the first and add anything he wants. On cost of risk, we feel fairly upbeat. What we’re seeing is positive from all angles.

We are a fairly conservative institution. As you know, we are very well provided with that 64% coverage ratio and we have the COVID provisions and we have the PPA. And the reality is surprising us on the positive every single quarter. So that means that looking into 2022. And I think the big milestone in 2022 is going to be the second quarter with the maturity of many of these or a commercial many of these eco loans into sort of principle payment loans.

I think at that point is one way, with information we have now when we will have all the evidence in terms of what is the potential or likely access or provisions that we have accumulated. And up until that moment, we will be conservative but the good news is the actual running of the business has been very, very positive in both second and third quarter. I don’t see that changing unless there’s any significant move on that on that front. So I think we should look at not just 2021 but also 2022 on a very good metrics. We’re not going to be as specific on what happens in 2022 in terms of our current cost of risk, less so in terms of potential write backs.

We’ll have to wait until the appropriate time comes but the tone is quite positive, quite upbeat about it. Javier, maybe you can take NII. Javier Pano : Yes, Mario. Hello, morning. Well on NII some general comments that I’m sure will touch on what you commented on.

In terms of Euribor repricing, still we have some for next quarter and probably into the first quarter. For next quarter, I mean, fourth quarter and first quarter of 2022, there is still some lying impacts from a Euribor repricing. Although in our view this to some extent maybe compensated with better performance in terms of volumes in general, in the loan book and also on the ALCO portfolio. I commented in the presentation that, clearly the market has moved a lot since before the summer, thus offering us some opportunities to start rolling over maturities and also broadly increasing the size of the portfolio compared to the fears we saw by the end of the September. So this is one thing.

On the ECB and TLTRO, what [indiscernible] of ECB said, is that they wanted to avoid the cliff effect. So this is what we saw before, but I was happy to hear [indiscernible] from ECB that they think the same. So our base case assumption is that there will be some kind of rollover of the, let’s say, the funding benefit of the TLTRO, otherwise, more banks could decide to redeem in advance the TLTRO that’s resulting into liquidity impact in the system. So I think that clearly, the message from the ECB is one and we need to wait until December to know the details. But I think that this will be the case.

So, well, with all this in our mind, because at the end of the day, the question behind all this is when is the trough for NII, in my view it is going to be at some point between the fourth quarter and I don’t know when in the first half of next year. And this will be a little bit market dependent depending on the steepening of the yield curve, to what extent we decide to increase much more or less the size of the ALCO portfolio, to what extent the repricing on Euribor ends before or later, because as you know, nowadays, the forward yield curve is already considering that the 12 month is going to be at 0% by the end of 2022, which is quite a change of what we have seen previously. So you need to take all this into account before assessing when is going to the trough happen. And also, back to my first point of volumes, Gonzalo already commented, we are quite optimistic on future revolution on consumer lending. Clearly, this is a key part for us because you know that yields could be higher than the average and are having a clear positive impact on NII as it was in the past and we are expecting to be in, let’s say, pre-COVID mode as soon as possible in order to regain traction in terms of new production of new lending.

I would like here, if I may, I’m sorry, because I probably I think in some time to update you on our interest rate sensitivity. So our positioning is clearly towards higher rates. According to the latest figures, we have analyzed we have interest rates sensitivity of approximately 20% for repricing of the Euribor yield curve of 100 basis points and this plus 20% on NII would happen once you have all the repricing in the portfolio. So after one year, so the impact in year two will be approximately 20%. And as I say, as of today, the market is telling us that Euribor is going to be at zero by the end of 22.

We know that markets change and they have done in the past, but clearly there is a different tone on this front, so we have clear potential, if this happens. I think that this provides Mario some information to your general question.

Gonzalo Gortazar: Mario, on the figure you were asking the 1395 COVID provision remains unchanged from last quarter. Sorry, I didn’t mention that in my answer. So let’s go.

Edward O’Loghlen: Okay. Thanks, Mario. Let’s move on to the next question, please.

Operator: Thank you. And the next question comes from the line of Ignacio Ulargui from Exane BNP Paribas.

Please ask your question. Your line is now open.

Ignacio Ulargui: Thanks very much for the presentation and for taking my questions. I just have two questions. One is on NII, just coming a bit back on the excess liquidity.

I mean, I think it’s a huge issue for Caixa because of their strong reach into the retail portfolios, I mean, you’re getting -- you’re gathering a lot of deposits. I mean, is there any way you can accelerate beyond charging more to cooperate? I mean, understand that, that will be a big driver of the drug [ph] in NII in this quarter. And the second question is on the capital return outlook. And then what are the milestones that we need to sort of like to be completed for the bank, just to update a bit on the whole the revelation and would you consider that [indiscernible] buybacks as an option? Thank you.

Gonzalo Gortazar: Thank you On these two, obviously, there’s many things we can do.

But we can do it and we have to do them in a sensible manner, and making sure that our customers benefit from that. One very obvious thing is to continue to move money that is on balance sheet to off-balance sheet products, and that is something where you could expect continuous movement. And obviously, depending on market conditions, depending on our ability to develop new products, particularly if the long end of the curve starts to rise, we’re going to be able to deliver more solutions to clients that are more attractive and saving on a current account at zero, even saving at zero is a loss for us. Certainly, if they move into other products, it’d be a clear profit. So yes, there are things that we can do and obviously, we’re also looking at, again, reinforcing our position in CIB, where we have the opportunity to deploy part of this liquidity.

And where we have a team that has been reinforced after the integration of great professionals from Bankia to the superb team we have in CaixaBank. So we’re going to keep doing reasonable things beyond charging for access deposits. And then there’s all the financial management that ALCO can do and like Javier has mentioned, and I’m sure he will elaborate during the call. In terms of capital return, let me be very clear, we have well above limit -- our targets of capital. We had a target and we are now well above and we’re generating more and more capital over and over that target every quarter.

We’re about to complete the IT integration, the sort of the heavy lifting of the branch restructuring over the next few months. And then we’re planning our capital markets a three year plan for the second quarter. We will update after sort of detailed debate in our board on what are we going to do with that capital but certainly it is not our intention to do any other thing than return it to shareholders one way or the other. We can discuss the quantum and the timing but this is excellent news and we certainly see that we can be more and more ambitious on that front, the way the businesses is running. We have had excellent news on Basel IV, even though this is a 2025 to 2030 with the ILM now said at one, we’re not expecting any material impact from Basel IV.

So, actually, there’s no clouds on the horizon here. It’s all good news. It’s a matter of us coming to how much, when and how and for that I can only explain that we’re going to need some time because we’re in this three year planning process after completion of the merger and completion of the operations these quarters and on the first quarter, so I think you should be optimistic. I’m certainly am that that part of the basis of our good history is going to be really making a difference going forward and during 2022. Edward O’Loghlen: Ignacio, thanks a lot for your question.

Operator, maybe move on to the next one.

Operator: Thank you. And the next question comes from the line of Alvaro Serrano from Morgan Stanley. Please ask your question. Your line is now open.

Alvaro Serrano: Hi, good morning. Got a question on NII first. It’s a bit of a broader question to start off, what is proving so difficult to forecast NII. Because in the last quarter, you said you are expecting a trough in Q3. Now, Javier is talking about later this year or even the first half and it has proven quite tricky to gain confidence on that.

Maybe high levels thoughts and in the more concrete sort of question is, if I look at your corporate books to down 4%, year-to-date, non mortgage lending 5% year-to-date, how are you going to meet the TLTRO benchmark? On my sort of very crude numbers, it looks like you need to grow loans 7 billion, 8 billion in Q4, which sounds very, very difficult. I know it’s not done on consolidated basis, but maybe some reassurance there. And the very short kind of second question is IFRS 17, some of the UK banks used embedded value accounting and they sort of got it pretty meaningful impact on P&L. Just wanted to confirm that your expectations there and that you don’t use embedded value accounting? Thank you.

Gonzalo Gortazar: Thank you, Alvaro.

I can confirm that we are not using embedded value accounting, so hence, we’re not going to have a problem. We’re not going to have a material impact from IFRS 17. We’re still calculating all the details that are fairly complex but no, we are not going to have a material impact, certainly on profitability. And obviously the first one is a big, big question for you, Javier.

Javier Pano: Okay, Alvaro, well at the trough, well, I remember I told you by saying that this would be by the fourth or very early into the next year.

So this is what I remember from my notes. But anyhow, it’s about volumes. I think it’s clear, we did a lot in terms of SME lending, with the ecos and we think that this was the right thing to do back then to provide liquidity to our clients. It was good for them. It was good for us.

It was we needed to do at the moment. And now we are feeling a little bit the pain of having done so, because those same clients have plenty of liquidity. They are to some extent waiting for news about the next generation funds, etc and we are a little bit in a standstill. And if you look at our new production figures, it’s actually the same one, the one that is having the most impact. But to your question about TLTRO, no worries about TLTRO.

We have sufficient buffer. There are plenty of adjustments to the final figure, so when you compare the headline to the final figure, there are adjustments for borrowers that do not -- have not residents in the Eurozone adjustments due to asset-backed securities adjustments for portfolio sold. There are plenty of things. So I understand that from the outside, it’s difficult for you to follow but situation is comfortable. So it’s in our plans and that is not an issue on that front.

So and to my first point, so the situation in the market is changing. Other times has already had this, if I may call it, falls down but now it looks -- it seems that is going to be for real. And clearly, just by stopping the narrative repricing on our Euribor is going to be clear improvement if we will be on this and we start having positive repricings, which looks increasingly likely and as we leave this, let’s say, period of the integration behind us and we are back to business fully, I think that we will interact as we have done in the past to keep growing on SMEs, on corporate, on consumer lending and well on mortgage you know that we have had a different approach always focusing on pricing etc. But time will tell because if the yield curve changes, our strategy on this front also may change. So we are quite a bit that the future is positive for us on this front and although in the very short term it is true that we are still feeling some pain.

Thank you, Alvaro.

Gonzalo Gortazar: Alvaro and If I may add, we are seeing fairly good month of October and trends from now to the year end, I have to say across business lines. So it’s positive from that point of view and certainly well, you know, here, if there was any ways that we will not be meeting the TLTRO he would have warned you long ago, so we’re very confident on that. Edward O’Loghlen: Okay. Thank you, Alvaro.

Let’s move on to the next question, please.

Operator: Thank you. And the next question comes from the line of Sofie Peterzens from JPMorgan. Please ask your question. Your line is not open.

Sofie Peterzens: Yeah. Hi. Here is Sofie from JPMorgan. So I would like to ask on is Erste bank, what’s the rationale for considering selling down your stake? Is it the bank, given the limited capital benefits, but [indiscernible] EDS downgrade that [indiscernible] going to see here? So if you could just talk a little bit about that? And then my second question would be on capital, if you could just get a free mind of what capital headwinds you potentially have on the regulatory side? And also, what’s your view on potentially doing share buybacks going forward, given that that seems to be the trend in Europe? So kind of how we should think about, yeah, moving parts on your capital and how that might be distributed to shareholders. Thank you.

Gonzalo Gortazar: Thank you, Sofia. I would say [indiscernible] the rationale, you, not you personally, but you, as a community and investors have always been asking us what is the rationale of holding it. And we never have seem to be able to convince you at least fully. I think markets look at us and look at us wanting to own the banking business and operate the banking business, or not be in that banking business. History for us, in the last few years, we’ve divested out of Bank of East Asia, Inbursa Mexico, Boursorama, we turn our minority stake of Portugal into a controller and then eventually 100% ownership.

This was the last step in this trip. And we’re just saying we want to have control of the banking businesses, which we operate, and those are in Portugal and in Spain. Erste is a great bank, actually has good prospects, I have no doubt. And we have had a great relationship and I’m sure it’s going to continue to do well. But I don’t think our shareholders expect from us to be minority shareholders in other banks.

And we are now preparing -- starting to prepare this three year plan. I’m sure if we present the plan, we’ll have a lot of questions on that, so we’ve decided to say, listen, we are going to create 1.2 billion of pre-tax additional earnings from synergies of these merger including revenues. Let’s part now with this great partnership, but seen more as an sort of additional financial results of lower quality because we do not operate it even if the bank is certainly higher quality. So that’s the rationale, nothing to do with our state, a lot to do with our own strategy and thinking this is the right time to finalize that trade, which was started some years ago. This is what it is.

And in terms of capital, I just want to, because I might not have been clear enough, Javier will, I’m sure, elaborate on the evolution in the future, but we are already having substantial excess capital. We want it to be given to our shareholders. And yes, I personally think the share buyback makes a lot of sense. But we’re going to have to make these decisions at the appropriate time by the board which may or may not have the same use than I do and then announced I mean in the second quarter. So I would say this is definitely the direction we want to go and I think it’s highly likely that in this direction, some of the capital return tools that we will use will include the share buyback, but that has to be decided in due course, so I’m just asking for a little bit of patience but also confirming the capital keeps accumulating and that’s good news, there’s more to deal with at the right time, which is going to be 2022.

And it is over to Javier because --

Javier Pano: No, no probably some more details on incoming impacts now from M&A and as you mentioned the regulatory front, remember that we commented that we were expecting that, from the M&A part of the equation, we were expecting that on a net basis, we were already done, we have had those minus 8 basis points this third quarter. And now what is pending on this front is, and I’m sure that you remember, it is the transfer to Comerica of the merchant acquiring business of Bankia and this results into a positive impact of 11 basis points. Then there is pending an agreement with [indiscernible] in order to us enlarge the perimeter of clients available to serve [indiscernible] and this is one of the positive force. And we will have still some minor pending, let’s say, restructuring impacts, the costs related to the integration. And then there is also an impact pending from the breakup of the JV with Mapfre.

So those are the pendings. But our view is that the net of all those may, in this next four quarter may be slightly positive, okay. So this only reinforces the message on [indiscernible] giving on capital. To add on this front is that in terms of regulatory, so I mean, on risk-weighted assets, pending internal model, inspections, etc. So the net of what is pending in our view is going to be pretty neutral.

The only caveat here is that the timing is quite uncertain and we may have some quarters during -- even not only next quarter, but also into 2022, some quarters where we may have some positive impacts and others where we have some negative impacts. The positives have to do mainly with the release of some limitations we had on some internal models and the negatives may come from the adjustment of the amortization of the models of Bankia with CaixaBank, and they always have some adjustments here on that. But the net impact, in our view, is going to be pretty neutral. And to add on this front, remember that in the past, we have been commenting about the potential risks with asset inflation because of [indiscernible]. And well, this risk, in our view, although probably we will suffer some, very slightly, is that it’s going to be really low.

So I think that as the economy is doing better and better, what we feel that the risk of high impact on RWAs, on risk weighted assets, because of [indiscernible] is fairly limited right now. So, with this only to reinforce the message that we have really a strong, solid risk position and no much worries. And already one fellow mentioned about Basel IV. He said that the impact was suspected to be no material, but no material is really very low material. So I think that we can give a figure here that is in our expectation is going to be around 10 basis points, if any.

Thank you. A - Edward O’Loghlen: Okay, Sofie, I hope that answers your question. Let’s move on operator to the next one, please.

Operator: Thank you. And the next question comes from the line of Stefan Nedialkov – Citi.

Please ask your question. Your line is now open.

Stefan Nedialkov: Yeah, hi, guys. Good morning. It’s Stefan from Citi.

Just a couple of quick ones. On fees, on the custom disease, you’re now at 38 billion. I am not sure if you mentioned of the scope to do more here. Number two on the IFRS 17 impact from -- if I heard correctly, you said in material impact on profitability. Is it immaterial on the book value as well? And the last question on the Erste stake sale, just taking a very simple calculation of the earnings that you book in the P&L compared to the capital consumption, it’s obviously a pretty interesting investment to have on your balance sheet.

On the other hand, you did have the strategic considerations of not wanting to have stakes anymore, significant stakes. How do we reconcile the two? Could you be investing the 15 BPs that you’re releasing in, say, consumer lending where your profit is quite a bit higher or is there an overall strategy to replace the lost earnings overall from the Erste stake? Thank you.

Gonzalo Gortazar: Thank you, Stefan. Good questions obviously on Erste. I was trying to say we are going to generate 1.2 billion of pre tax additional earnings for our shareholders, so when we look at the 150 million of net income, that we equity accounts for Erste, which only part is paid as dividend, in terms of what I would replace it with that, obviously, money is fungible but certainly, the fact that in our core business, we are increasing efficiency and generating savings, for this amount, means that I think we can take out of our balance is something that is a bit of a paradox, and that it’s gone well, but I have to say, at the end of last year, we had to book a 300 million plus provision because of the pandemic.

Fortunately, it wasn’t needed but we had a very significant drop book value. And anyhow, this was turbo charging our earnings, which is nice when you look at the amount of earnings. I have spoken to so many people over the years that would said to me, listen, this is poor quality earnings, not because it’s Erste, Erste is a great bank, but any financial investment that you have minority investment in other bank, it is poor quality earnings; looks like it’s cash earnings, it’s not because you’re equity accounting and then it’s subject to variability and this actually increases our cost of capital. That is what I have heard for quite a few years. And obviously, when you do the projections, the numbers, you’re going to take out 150 million.

If you had already accounted for all our cost savings, etc, you’re rightly asking, so what do I do with this 150 million? Let me be -- I shouldn’t be doing it but maybe you should reconsider what’s our cost of capital, because certainly our profits are of higher quality when we actually own operate, control them. Other than that, we are actually at an inflection point where closing a very rapid, very successful merger, and this will extend towards the fourth quarter, first quarter of next year. And then we have a tremendous platform to grow to benefit from revenue synergies from our great market position, maybe from a change in the direction of rates. Let’s do that. That’s what we do.

Let’s not do all the things that after 12 years, have not led us to more than a good or a reasonable financial investment because obviously, for the last 12 years, financials in general have not done very well in Europe. So I wouldn’t look at what else we’re going to do, I think depending on when we exit, but one of the reasons that we wanted to explain these was that in advance of May, even May next year, we continue to be a shareholder of Erste, which is a possibility, will clearly will not include the earnings so that three years from now in 2024, we will be there and will give you a return on tangible equity targets, including those revenues. So that’s, I think, a strategic decision, one that I feel very comfortable with. It’s with sadness that we depart from Erste, we have great personal and professional relationship with them but is the right decision I think for shareholders and I’m sure that the timing is not bad from the point of view of the many opportunities that we have ahead of us to replace those earnings. With that, Javier, maybe you can take the other two.

Javier Pano: Yes on custody fees, well we are charging with different thresholds and different amounts because you know that this is not coffee for everyone. So it is a tailored approach to every customer because every customer has different needs and circumstances. But we have [indiscernible] 30 billion and as you could see growing every quarter. I don’t think that there is any reason to think that this is going to stop so I think that we have some room there and last quarter we made like 25 million on that part. Remember that those are fees.

So I think that we still have some room. On IFRS 17, you’re right, according to our preliminary data, our expectation is that we are not facing a material impact on the profitability of the insurance business, nor on the ability of our insurance company to pay dividends to the parent company, okay. Moreover, we also expect that the initial application impact on capital ratios and book value is going to be manageable. So we are finalizing all the process and all the modeling. We are undergoing the pre-assurance review with our external auditors, then also with supervisors, but this is the information we can provide you as of today and I’m sure that when we have more details, we will be able to share with you but in our view.

Despite there will be some changes in the classification or in the P&L account, you know that some revenues are moving from one part to another, but the net value of the business keeps being the same. Thank you. Edward O’Loghlen: Thank you, Stefan. Operator, can we move on to the next one, please?

Operator: Thank you. And the next question comes from the line of Marta Sánchez Romero from Bank of America Merrill Lynch.

Please ask your question. Your line is now open. Marta

Sánchez Romero: Good morning. Thank you very much for taking my questions. I’ve got a couple on net interest income.

The first one is on [indiscernible], it contributed 214 million to your NII so far this year and that is down 6% year-on-year. How do you see that income line progressing in 2020, 2023 and so on? And the second one is on the ALCO portfolio. Thank you very much you’ve given us a lot of detail about how you’re thinking about it. But can you be more specific, so Spanish and Italian [indiscernible] nicely so far this quarter. Have you already started rebuilding your portfolio and where would you like to take the 56.4 billion that you have today forward? So what is the structural size of your bond portfolio? Thank you.

Javier Pano: Hello, Marta. Well, on NII, [indiscernible] precisely, this quarter, we included and it is like that probably answers a little bit your question, because it’s true that the NII on annuities is, I would say, pretty much stable or well, you say 6% but told in Euro now, in Euro terms is not that much. But this is much more than compensated with the fee revenue we are obtaining as we are moving this portfolio from fixed to variable annuities. And this is the combination with a fixed part plus a unit link that is diversified in international equities. So what is true that on NII terms that is this is more negative in Euro terms but overall, I think that we have been able to build, let’s say, a commercial solution for our clients, by the way it has been very profitable for them and that also results into profitable for the bank.

And then on the ALCO, well after 30 years in markets I have learned that it is good to never pre-commit about market levels because when the market reaches a certain level, it’s because something has happened and then you reassess the situation again. So well, to your question, if we have already started to do something, the answer is yes, we have already started to do something. There is plenty of to do, so I would say that in this situation, the market is never black or white, you need to move in the area of grays. But we really think that this time, that is quite a clear chance that we may see higher yields, thus, the opportunity to build a portfolio And you asked me about the size, so I think that we have a portfolio excluding the SAREB bonds because the SAREB bonds are not actually managed. This is a legacy situation.

That is approximately 10% of our total assets. I think that when you compare these to other banks, not only in Spain, but also across Europe, I think that we can have a larger size probably between 10% and 15%. I don’t know when this will happen and when we will decide this, but we think that we have room if market conditions are there to increase the size of our portfolio. And you know that we have had some exposures historically in Italy and what, obviously, we have a natural tendency to have a large exposure in Spain and Portugal because it’s our region, is what we know well, in and also is what our investors, our shareholders understand that is a risk they can share with us. Thank you, Martha.

I hope this helps. Edward O’Loghlen: Okay. Thank you, Martha. Let’s move on to the next one, operator, please.

Operator: Thank you.

And the next question comes from the line of Britta Schmidt, Autonomous Research. Please go ahead. Your line is now open.

Britta Schmidt: Yeah, hi, there. I’ve got two quick questions.

One is, I think last quarter, you expected 112 million synergies to come in 2021. Do you still expect that to take place? And then secondly, with regard to your comments of having control over businesses, where does it leave SegurCaixa Adeslas, which I guess is then the one remaining large equity holding that you own?

Gonzalo Gortazar: Britta, on SegurCaixa Adeslas, the question is, as you know, we own 49.9% and is something we consider its core business. I didn’t understand the question on SegurCaixa Adeslas.

Britta Schmidt: The question was more about would you ever consider buying out the business again?

Gonzalo Gortazar: All right. Well, I will certainly not comment on that.

The relationship that we have is working very well. And this is a core activity for us and it’s also a core activity for Mutua. I don’t think it makes sense to touch or change any aspect. It’s been working so well over the last 10 years that when something is working don’t fix it, that’s the old sort of saying. Certainly, that’s how we feel about it.

So I would not think of question it. I know that we don’t know 100% but we own 49.9%. We have very strong shareholder agreement. Third quarters of the production comes through our branch network. Obviously, we keep 100% of the margin of distribution, because it’s distributed through us.

And overall, I think the structure is one that is good for us. On the synergies for 2021, we’re on track, Javier?

Javier Pano: I think that this figure is in line with our expectations, yes. Edward O’Loghlen: Okay, well, that was brief present. Thank you very much. Let’s move on to the next one, operator.

Operator: Thanks a lot. And the next question comes from the line of Andrea Filtri from Mediobanca. Please ask your question. Your line is now open.

Andrea Filtri: Hi, good morning.

Just two follow ups really. The first is I completely agree with your elaboration around the business model of CaixaBank in relation to the Erste bank stake decision. Could you give us the risk-weighted assets attached to it? And could we then not make the same extended rationale for the Telefonica stake? The second thing is very quick. The line was very bad, broke down when Javier was given the details, future impacts known on capitol we’re expanding. I think he started talking about the transfer of commercial merchant acquiring and then the line faded.

If you could, please repeat it. Thank you.

Gonzalo Gortazar: Well, let me on Telefonica, we are not making the same rationale, or extending that rationale to Telefonica. There are a few differences. One is what we’re doing with Telefonica has been done in our core market in Spain where we have a very successful joint venture with Telefonica on consumer finance, some models in fact are having strong cooperation with them.

And then from a financial point of view, the stake is smaller, 4.6%, has a lower weight on our capital and we just reflect dividends. So we do not feel that this is actually increasing in a significant manner our profitability, and hence, we feel comfortable with what we have. Javier, I think you may want to –

Javier Pano: Yes. Andrea, you had a question on risk-weighted assets. This asset is risk-weighted approximately at 100% right now And then on what I commented on pending, let’s say, restructuring or M&A related impacts, it’s positive of approximately 11 basis points from the transfer to commercial the merchant acquiring business of Bankia, then there is another pending and not quantified yet about the fact that SegurCaixa Adeslas will have to pay for in order to be able to operate with a larger pool of clients, okay.

This is going to be positive, then there are some minor restructuring impacts in terms of some costs pending, mainly related to IT and other expenses. And then we have another impact pending, which is the breakup of the JV with Mapfre. What I said is that the net of all this for the fourth quarter will probably be positive. Edward O’Loghlen: Okay, Andrea. Hope that answers your question.

Operator, let’s move on to the next one, please.

Operator: Thank you. And the next question comes from the line of Ignacio Cerezo from UBS. Please ask your question. Your line is now open.

Ignacio Cerezo: Hello, good afternoon for you. A couple of questions basically from me. The first one is on the recurring banking fees excluding the CIB part of it, they’ve been kind of stuck around 500 million since last year. What is missing there? Can you actually break it down a little bit between the different items and, I mean, that number seems to be a slightly underperforming actually most of the other domestic peers. So, how far are we basically from being able to normalize that number on a higher level? Second question, basically follow up clarification on the TLTRO discussion, under the numbers you have obviously, which are significantly more detailed than the one we have, do you actually need volumes to grow in Q4 to meet the target or you can actually have deleverage and still meet it.

And the third one is a little bit of color basically on a corporate lending book, if you can break it down between large corporates in small size and basically give us a little information on how each of those books has performed year-to-date. Thank you.

Javier Pano: Okay. Ignacio, good morning. Well on recurring banking fees, we have still some headwinds in terms of the payments business.

Although volumes have clearly recovered, still, there are some parts of the business that are not doing as well as in 2019, everything related to with foreigners, for example, ATM use in general. So, on that part, we are still approximately 5%, 6% below the levels of 2019, so I think that this is a little bit the situation. On top of this, we have in terms of risk-related fees or in the origination of loans, that is many cases mainly on SME lending our fee attached, as the new production on that front is below clearly the levels of last year. On that front also we are having some negative impact. On other parts, I would say that we are doing well.

And as volumes recover in general, so loan volume recovers, also there is some part of this part of the business that lands into fees and expect that will recover also and the same with payments. On TLTRO, you mentioned if we need volumes, well, I would say that we need business more or less as usual. We don’t need to rush into, let’s say, extra lending in fourth quarter in order to meet TLTRO. And you had some questions about volumes or the evolution of different segments. And I think I mentioned in a previous question, but this is mainly the SME world, what is having a more negative feedback.

If we look at new production rates, we see for example that year-to-date, I am going to give you figures year-to-date, on corporate lending we are approximately down by 10% compared to 2020 and this has to do also with some following of lending for as a liquidity buffer for some corporates back in 2020. But on the on SMEs, this reduction in terms of new lending is more clear -- clearly, because we had the impact of the Eco loans last year and in this case, the reduction is in the range between 40% and 50% and it has to do with eco lending I mentioned before. On the other hand, on consumer lending, we are slightly up in terms of new volumes and on mortgages also, we are slightly up. Although as I think that Gonzalo already mentioned, I would like to add that during the fourth quarter, we are seeing a much more positive trend in terms of new lending during this fourth quarter across different segments.

Gonzalo Gortazar: Yes, indeed.

The reality with respect to TLTRO on the fourth quarter is within our ordinary activities, it is going to lead us there. The fourth quarter seasonally is higher, working capital use is much higher and hence it’s -- you cannot compare all quarters equally and then even if we don’t necessarily need it to meet it, we are seeing severe reemphasizes, good growth and in fact, we expect to grow our loan book on the business front in the first quarter -- sorry, not in the first, in the fourth quarter, so that yes, we expect growth in that part of the book. That’s why I think we have to be all very confident on that front. Edward O’Loghlen: Okay, Ignacio. Thank you very much.

Let’s move on to the next one, operator, please.

Operator: Thank you. And the next question comes from the line of Carlos Cobo from Societe Generale. Please ask your question. Your line is now open.

Carlos Cobo: Thank you very much for taking the questions. I’ll be brief. One is on your guidance for NII and in particular, if you could explain a bit dark negative impact still in queue for maybe Q1 from Euribor, because when I look at the curve, it’s been so that -- the spot rate has been flattish for almost one year now. Bankia, from memory used to reprice the mortgage book each six months or at least part of their portfolio. So I mean, I’m just trying to understand that how material it is because I understand it could be a few basis points here and there but how material is that negative impact on Euribor coming through in following quarters? And secondly, if you could just update us on the litigation charges, and what is the run rate we should expect going forward? Have you seen some emerging trends in new lawsuits or what do you expect there? Thank you.

Javier Pano: Okay. Well, on the Euribor repricing you need to take into account that there is a lack of approximately two months, so this is why what you observe in one quarter actually is not having an impact until the following quarter. But it’s only very few basis points of negative repricing during the first quarter of next year. And in terms of litigation, I would say that we are more or less in the same place, those 50 million to 60 million per quarter. Obviously now we have a larger balance sheet, more clients, more things can happen.

Obviously we took care of what we could know ahead of the merger with adjustments on the PPA. But then obviously things happened and there are obviously new circumstances. So probably you can think that we might have like a recurrent impact on other provisions between 50 million and 70 million. This is my best guidance on that front, although obviously always subject to some volatility but the usual suspects are the same, so it’s about setup costs for mortgages, it’s about some floor closes, IRP he is not an issue. And what you always have things here and there on this front.

Gonzalo Gortazar: And Carlos is to add even if we have a few basis points at the beginning of 2022, for the whole of 2022, based on the latest Euribor forwards we will not have a negative impact. So at this stage what is negatively repriced, at the beginning of the year is positively repriced later on and so in the whole year we’re neutral. Obviously, these changes because forward futures change and then when we get there, we’ll see what the actual rates are but certainly, the recent movements have been all very, very positive. Edward O’Loghlen: Okay, thank you, Carlos. I think we have one last caller.

Operator, could we please have that one?

Operator: Thank you. And the last question comes from Fernando Gil from Barclays Bank. Please ask your question. Your line is now open.

Fernando Gil: Hi, thank you very much for taking my question.

My question is on mortgages, if I heard correctly, Javier, you were thinking about changing the strategy and investing in mortgages. Am I right on here? And if so, the question is, what is your current market share there? What target market share will you be looking? And will this strategy be an alternative to the ALCO volatility that you’re seeing in rates? I see the yield in your portfolio is 0.6. Obviously, new production in mortgages is higher and would be accretive to margins. But I just want to understand how you are thinking on that. Thank you very much.

Javier Pano: Well, thank you Fernando. What I mentioned is that if the shape of the yield curve changes, or has a clear change, then we can rethink our strategy on mortgages. No but it is not something that we are thinking right now. Time will tell. Obviously, if rates -- long term rates will go up and we still have plenty of them are not fixed rate, then we can rethink but we are still not there.

To what extent this is a substitute of the ALCO, what is true, that it is actually -- there is a clear connection, it’s a fixed rate exposure. And when managing the sensitivity of the whole balance sheet, obviously we’re taking into account which is the new production of mortgages, the size of the portfolio, the average maturity and all metrics that obviously affect our interest rate risk. And on share, now we have the stock and for the stock we have a market share of approximately 26%, which is quite significant. It’s over 40% of our loan book, so this is why we have been moving from mortgages to diversifying into other segments in the past and on the new production we are making approximately 16%, 17% depending on the month. Edward O’Loghlen:
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