Jose Garcia-Cantera: So back when — in the first quarter, we had a drop of around €21 billion in CIB deposits in Europe. But that was seasonal. If you look at the fourth quarter, we had quite a strong increase, but again, this happens every quarter. This quarter was a bit more — a bit higher than in previous quarters because we also grew a lot in deposits with our customers in Europe in the fourth quarter. So associated basically with year-end balance sheet performance. So this is not recurring and this is seasonal and — but again, it doesn’t really affect the structure of our deposits. We always try to take advantage of the opportunities. We had an opportunity in the fourth quarter, took advantage of that, is normalizing a bit in the first quarter of the year, but I would expect the seasonal behavior to happen every year.
Betas. Where are we? So let me tell you where we are. In Spain, we have a — in retail banking, beta today is 6%. Yield, average yield is 22 basis points. In CIB, in Spain, European branches and global CIB, betas are between 80% to 100%. So in Spain, if you look at the whole of Spanish balance sheet, the cost is 80 basis points with EBITDA of 25%. And this is — we guided for the year to between 25% to 30%, still this will hold because, again, most of the CIB business has already repriced and we expect a slow increase in the repricing of retail banking, so still within the 25% to 30% for the year. U.S. beta is 35% at a cost of 1.67. Betas were a bit higher in the first quarter, not significantly higher and very much in line with the average of the system.
In the U.K., beta is 25%. And in the first quarter, betas were 30% to 35%, we guided to around 50% for the year. So if we look at our interest rate sensitivity relative to the figures we gave at Investor Day, very much in line with Europe, and the U.S. and probably a better outlook in the U.K. Finally, ALCO. Yes, we expected more or less 16% — sorry, €16 billion average in Spain. We are already there. We might be above — a little bit above that, but it basically depends on the opportunities we see to gradually increase the size of the portfolio. Remember that we are very, very far from a neutral ALCO portfolio. We have a negative balance sheet, which is what we want to have. We gradually want to close that negative sensitivity. So actually buying an ALCO portfolio or rebuilding an ALCO portfolio in Spain is not just a matter of 2023, it’s probably also a matter of ’24 and even 2025.
So again, we will react to what we see are the market opportunities.
Begona Morenes: Thank you, Hector and Jose, thank you, Paco for your questions. Can we have the next question, please?
Operator: Next question from Carlos Peixoto from CaixaBank. Please go ahead.
Carlos Peixoto: Hi, good morning. Thank you very much for taking my call – the question, sorry. So first question was actually — I’m sorry, for a bit of a recap on previous ones, but I was just wondering if you could give us again the outlook for NII in both Brazil and in the U.S. and also so wondering if you could confirm, just make sure I understood correctly, you have that there is a €210 million one-off positive effect in Brazil and NII in the quarter? And the second question would be actually on fees and basically, the discussion that we have seen at the European level regarding fees namely potential raised. And I was wondering if you have — if you can give us some visibility around the potential amount of fees that could be impacted if there were to be an investment bank being introduced at the European level. Thank you very much.
Begona Morenes: Hi, Carlos, Begona here. Sorry to do this to you, but you need to repeat all of your questions. The line was terrible. We couldn’t understand a word here. So can you start again maybe slightly slower and see if it goes better?
Carlos Peixoto: So trying again, hopefully, you’ll hear me better. So as I was saying, on NII, the question was really on the outlook for the U.S. and Brazil, if you could recap it. And also, I was asking to confirm whether there was €210 million positive one-off in the Brazilian NII, just to make sure that I got that number right. And then the second question was on potential inducement bans in Europe. What type of impact would such ban would have in fee income for Santander.
Hector Grisi: Okay. I mean, to give you exactly how do we see the NII okay, is exactly the guidance that we give is €211 million, okay? So Brazil is mid-single-digit growth, okay? We’re talking 8.9 and then the U.S. is 6.1, is down mid-single digits, okay? That’s exactly the number.
Begona Morenes: Thank you, Carlos, for your questions. Can we have the next question, please?
Operator: Next question from Sofie Peterzens for JPMorgan. Please go ahead.
Sofie Peterzens: Hi, here is Sofie from JPMorgan. Thanks for taking my questions. I know there has been a lot of questions already on net interest income. But could you kind of give a little bit more details around when you expect net interest income to peak in your core European markets? NII was slightly down in the U.K. Do you think we have seen peak NII and net interest income will kind of — on a quarterly basis don’t improve further? And when do you expect net interest income on a quarterly basis to peak in Spain? And when do you expect it to be in Portugal? And my second question would be around the cost of deposits in Mexico, they increased almost 1% quarter-on-quarter. Could you just detail what drove this increase in cost of deposits in Mexico?
And then my final question would be on core equity Tier 1. You saw 11 basis points of regulatory capital tailwinds in the first quarter. How should we think about any further tailwinds or headwinds on the capital side to come? And could you kind of give details on the magnitude of any potential headwinds or tailwinds to come? Thank you.
Hector Grisi: Thank you, Sofie. Okay, really quick. I mean, as Jose was explaining to you, in terms of NII, what we see in Europe, we’re still not where I believe we’re going to be. I mean, mostly, the majority of the portfolio will reprice in probably April and May, okay? So the portfolio is still repricing and we’re going to see those impacts mainly in Spain exactly at that time probably to the mid through the cycle of the year and towards the end. It also is going to depend on what’s happening with the deposit impact and how the market is basically going to react towards that. So in that sense, we’ll see that. In the U.K., we’re basically seeing things stable, okay? We basically see that we’re still basically building up the way the portfolio has been going and also Portugal, we expect also to continue better towards the end of the year, okay?
Also, the terms of what you were talking about growth in deposits in Mexico, you’re right, is still lagging behind, okay? The growth in customers in Mexico is starting to peak. What is important to do in Mexico was actually to change the onboarding that we had with clients, okay? And that was part of the things that we needed in order to compete head-to-head against our competitors. So in that regard, you’re going to see an increase on the deposit base in Mexico in the following quarters, given also the new payrolls that we have contracted that are coming into the portfolio. Also, you’re going to see a very good increase in time deposits as basically the market has turned very competitive, and we will also be focused on profitability. What we’ve been doing in Mexico is mainly maintain our deposit base of individuals, while the costly deposits from corporates were basically leaving them aside also to have much better margins, okay?
In terms of capital, Jose, would you like to comment?
JoseGarcia-Cantera: Yes. Yes. Sofie, as you said, we had — the QNA from the EBA was a positive 13 basis points. We had 2 basis points negative from other updates, model updates and regulatory updates. Basically in corporate investment banking, we would expect — I don’t know, just a few basis points per quarter of negative headwinds from regulatory and models for the rest of the year, very, very small charges per quarter. In terms of organic capital generation, if you do a simple math in the first quarter, the share buyback corresponds to two quarters, and we had the full impact of the Spanish tax, which was 4 basis points. So the first quarter only corresponded 1. So if you do a, let’s say, clean organic capital generation, we generated 10 basis points — 10 to 12 basis points in the quarter, which is what we have always said. We organically generate 10 to 15 basis points per quarter. And that’s what we expect for the rest of the year.
Begona Morenes: Thank you. And thank you, Sofie, for your questions. Can we have the next question, please?
Operator: Next question from Ignacio Cerezo from UBS. Please go ahead.
Ignacio Cerezo: Hi, good morning. Thank you for taking my question. I’ve got one in the U.S. and one in Spain. The one in the U.S. is if you can elaborate a little bit on the cost of risk drivers in the future, breaking it down between probability of default, loss given default, what kind of measures are you taking to alleviate basically the increased installments on the auto business, in particular, for clients that gives you comfort basically that again, provisions are not going to go above pre-COVID levels. And the one in Spain, if you can give us a little bit of color in terms of the breakdown of your deposit base between retail, corporate and large corporate. What kind of behavior are you basically seeing in each of those segments from a customer point of view, how pushy, especially the retail side actually are being these days in terms of chasing additional remuneration. Thank you.
Hector Grisi: Thank you, Ignacio. Let me explain you exactly what’s going on in the U.S., okay? In terms of cost of risk, we expect the cost of risk actually to be better than we expected at the beginning. What we saw a little bit some of the vintages on ’22 started to being a little bit more complicated than we expected. But it’s quite interesting to see that normally, when you see customers in those vintages started to get delinquent for more than 90 days, usually will repossess between 90% and 95% of the autos, okay? What’s been happening and it has been quite surprising is that whenever we see the clients going delinquent beyond 90 days, we see that they basically are calling us restructuring and start paying us back. So we have seen a decrease of repos from around 90% to 95% to around 59% to 60%, okay?
That’s basically 30 points. That’s why you see the cost of risk is getting much better in the U.S., okay? To your question basically of going back to pre-COVID levels, what’s going on there is that we have changed the mix of the portfolio. Pre-COVID, we have a lot more in subprime and deep subprime. Today, we have a much larger part in the portfolio of prime and near prime in the business. So that’s why the portfolio is never going to go back to the levels it had. Also in ’19, we have Bluestone, okay? If you remember, we actually eliminated that JV back in 2021. And that was basically very complicated in terms of cost of risk. So that’s another part of the portfolio is actually much better because of that, okay? So in that sense, we believe that the cost of risk in the U.S. even though is normalizing because it’s going back to pre-COVID levels, it’s not going to be as that as it used to be, but it’s much better than we expected at the beginning, okay, to conclude.
And in terms of the break down in deposits, I don’t know, Jose, if you would like to…
Jose Garcia-Cantera: In Spain, the Spanish business, we have €246 billion in deposits, individuals and SMEs is €229 billion, corporate clients, €18 billion. When we look at the public perimeter that it includes the branches and CIB in the branches, we have €15 billion in global corporate investment banking, €38 billion for the total is what you see in the accounts of €301 billion. Thank you.
Begona Morenes: And thank you, Ignacio, for your questions. Can we have the next question, please?
Operator: Next question from Carlos Cobo Catena from Societe Generale. Please go ahead.
