Begona Morenes : Thank you, Marta. Can we have the next question, please?
Operator: Next question from Andrea Filtri from Mediobanca. Please go ahead.
Andrea Filtri : Yes. I wanted to get more clarity in basically in page so to speak of [Indiscernible] going to the different geographies and particularly you’ve given a lot of detail on NII in a lot of countries. Can you do the same for Brazil please? And the second question is on Spain. And if you could split the drivers of NII there between the effect of increasing interest rates of deposit beta and the ALCO portfolio contribution? Thank you.
Hector Grisi: Okay. Thank you, Andrea. Let me explain a little bit, the NII in Brazil, and then Jose will give you the details of the drivers of NII and the betas in Spain, okay? Yeah, in Spain. So to start, I mean, Brazil NII, okay, performance in the recent quarter has explained first of all on loans in 2021 I have been very specific on that. We have become very much conservative and we have changed the mix, okay? And we have grown volume selectively, okay, changing the loan mix the low mix – the loan mix to lower risk on deposits, okay. The fast increasing rates, means a rapid rise in the cost of deposits, okay. We expect NII in the second half of ‘23 to be higher than in the first half of the year leading to a flat NII in the year with a substantial improvement in ’24, okay?
If we see that the rates basically start to come down because it’s very important to understand that Brazil has negative sensitivity to the, we should gain traction. And we maintain, we’re going to maintain our cautious stance, but we believe that we can go back to the market, okay? And we believe that the functional rates could fall in the second half, bringing the cost down in retail funding, okay? And then in the drivers of NII in Spain and Jose will give you more details. Spain is one of the countries that has benefited most from the higher rates, okay? We will continue to see strong growth in clients. Just in the first half of the year we have 300,000 more active clients, okay? NII in Spain is up around 57% in the first half of the year and 60% just alone this second quarter is mostly supported by the pricing of the loan portfolio.
The height yields and remain contained on the cost of deposits. So, we have been managing very well in that sense. We expect double-digit growth for NII in 2023 and regarding the peak of NII in Spain, there are several things to consider that Jose will explain you as this will continue to reprice at least during the first half of ’24, clients which we expect will continue to grow and betas, which will be key. We’re still seeing a rational competition with low betas for individuals in a system which remains highly liquid, okay? So as of today, we don’t speak much higher remuneration on the foreseeable future.
Jose Garcia-Cantera : So, hi Andrea. The ALCO in Spain we have €27 billion ALCO, €21 billion is a structural long-term held to collect with an average maturity of – duration of 7.7 years on a yield of 3.3%, 3.4%. And then we have €6 billion which is more associated with short-term liquidity management average duration of 1.2 years and yields slightly below at 3%. We expect to continue increasing the amount of the ALCO portfolio in Spain to gradually reposition the balance sheet towards a lower positive sensitivity because as interest rates start reaching a peak, we don’t want to run a balance sheet with such huge positive sensitivity to rates. So one way of doing that is not the only we are also taking other measures, but one way is obviously increasing the ALCO portfolio.
