Luisa Gomez Bravo: Yes. Well, this year NTI has been increasing, but primarily on the back of global market activity across the board in the different geographies. We have been gaining both on the franchise side as on the leverage side on global markets. I would like to also indicate that with regards to a couple of countries, maybe on Mexico, on the quarter, you may see an impact, a negative impact in NPI that is coming primarily from an exchange that we did in July of short-term sovereign bonds where we received bonds at 9.45% yield, and we replaced 5.5% yield bonds and that impacted our NTI in around €80 million. That’s why in the quarter, you see a negative impact in NTI in Mexico. Actually, considering that the bottom line in the quarter will show quite a good increase.
In Turkey, Turkey has been posting outstanding NTI results from – driven primarily from global markets and specifically on FX. So, with the situation in Turkey, with the regulation, the access to dollars, volatility, guarantee, BBVA has an outstanding team in global markets that monetizes this volatility and generates quite sound recurring FX NTI quarter-on-quarter, and that is what you see in this quarter as well.
Patricia Bueno: Thank you, Carlos. Next question please.
Operator: The next question comes from Marta Sanchez Romero from Citi. Please go ahead. Your line is now open.
Marta Sanchez Romero: Good morning. Thank you very much. So, first question on Mexico. The Mexican Government has approved tax credits for CapEx for certain exporters. So, how much of an impact could this have on your corporate loan book growth for the following quarters? And a follow-up on your risk appetite on Mexico again, how can investors get comfortable that your risk appetite will not result in a car accident. Can you please elaborate a bit more on what’s driven the increase in defaults or cost of risk that we have seen in consumer? Is it that you have been testing new segments, or yes, any color there would be very helpful. And just a third quick one, an update on the equity hedges in Turkey and Mexico, how much of your carrying value have you covered? Thank you.
Onur Genc: Okay. Maybe you can take the equity hedges, Luisa. On the Mexican tax credit to certain exporters, we have not really calculated Marta, to be fair. The specific impact of this on the lending and this and that on the direct impact on our business, the only thing we can say is that it’s another positive trend in the sense of promoting exporting industries and creating incentives for people to near-shore. It’s going to be positive. On Mexican cost of risk, how can we, say Gural [ph], ensure that the cost of risk is going to be – and there will be not a car accident, as you just said. Once again, I would repeat it once again on two dimensions. The first – or maybe I will start top line once again on the topic of we are maintaining our guidance that we have had for Mexico at the beginning of the year, which was less than 300.
And in that sense, we are still, again, keeping that, although you see some slight deterioration in the cost of risk in this quarter. But why is that happening, I partially mentioned it in the first answer, but the mix effect. Marta, the cost of risk for the retail book in general is around 600 basis points. The cost of risk around – for the corporate book in general, even in the previous years, it was around 50%. So, the mix effect is huge in Mexico. I would repeat once again and what Luisa also said though, although the retail book comes with that 600 basis points that I mentioned to you, it comes with a higher return on capital. It’s a better book. Even if you look into through the cycle, so you can look into the current losses, but if you double those losses, if you increase those losses toward stress levels, the return on capital for that book is better than the – some other books that you can have in terms of growth.
To cut long story short, we do see a mix-related impact in the cost of risk for Mexico. Given the cost of risk of different portfolios, we are very comfortable. We are very comfortable, I underline, the fact that this will continue to create value, the growth that we are doing in terms of the NPV, in terms of the value for the shareholders. The second thing I would say is some of the things that I repeated – I would be repeating. But number one, the labor market is very strong, which is going to be affecting more the retail segment. The remittances is very strong and 40 months in a row, the remittances that comes from the U.S. to Mexico has been growing. The expected growth for this year again is around 10%. It’s going to be $63 billion of remittances.
Why is that important, because 1 to 15 or 1 to 20 households in Mexico receive a remittance income from the U.S., which then has an implication on the retail cost of risk. I can clearly tell you that as long as Mexico continues to perform as it has been performing and our expectation is it will be doing so in the coming quarters, the car accident that you referred to is completely out of the picture. We don’t foresee anything like that at all. The final thing on the cost of risk for Mexico that Luisa also mentioned, in the case of Mexico, especially for high-risk portfolios like credit cards, we do have these models, we call the behavioral models, which is IFRS 9 provisioning, which is provisioning for possible future losses and €90 million, around €90 million of the provisions that we had in the quarter was related to these models, which basically foresees that because of the fact that the line of the utilization of the credit cards has gone up, because there is inflation and the line utilization has gone up or as Luisa mentioned, our customers, they have multiple cards and they might have difficulties in the cards or other entities, not with us yet.
For multiple reasons, we have taken this additional €90 million in terms of the behavioral models that foresee the future losses. And that is also something that we are anticipating basically for the future. To cut the long story short, we are comfortable with the cost of risk figures that we are seeing in Mexico. Regarding the equity hedges, Luisa?
Luisa Gomez Bravo: Yes. Well, as you know, we typically hedge between 60% and 70% of the aggregated amount of excess capital. Specifically in Mexico, we are currently hedging around 60% of the excess capital. And in Turkey, we are currently hedging around 50% the excess capital specifically. In Turkey, we shifted a little bit the dynamics of the equity hedges after the elections and at devaluation. And we have increased slightly the sensitivity to depreciation because we see the currency being stable in these months and stable towards the end of the year. So, right now, sensitivities in our CET1 ratio stand at around 5 basis points for Turkey against the 10% depreciation and around 9 basis points from Mexico against 10% depreciation.
With regard to cost of hedges, which you know we include as part of our CET1 costs as well, we have around 1 basis points per month of cost of hedging in Mexico, and the cost of hedges in Turkey have gone up slightly because of the interest rate evolution and they right now stand at around 1.3 basis points, 1.4 basis points per month.
Patricia Bueno: Thank you, Marta. Next question please.
