Sofie Peterzens : Yes. Here is Sofie from J.P. Morgan. Just to follow up on the previous question. So could you just remind us what the current deposit beta in Spain is? And kind of how it moved in the quarter and also how you see the deposit beta moving in the other geographies, mainly U.K., U.S., and I guess, also Portugal? So that would be my first question. And then the second question would be around the U.S. tax rate. It was very low this quarter. How should we think about the U.S. tax rate going forward? And what’s the kind of normalized run rate? And then if I may, just if you could comment on any capital headwinds going forward?
Hector Grisi : Thank you, Sofie. Could you explain us a little bit the second question because we couldn’t hear you well? First of all, on deposit betas, I mean, betas today in most geographies remain below the initial expectations that we had. And in general terms, they’re behaving rather rationally, and we expect pressure to mount in the coming months and the betas to increase. I mean it’s normal because of the dynamics of what’s going on. And the geographies we are present are showing a different behavior. Our CFO, now give you a little bit further details on that.
Jose Garcia-Cantera : Yes. Sofie, in Spain, total beta is slightly over 20%, 22%, but we exclude Corporate Investment Banking. Corporate Investment Banking is already almost fully priced. Ex-Corporate Investment Banking is 13%. Remember that we have €153 billion of current accounts in Spain with very low volumes. So — and the beta there is almost 0. We don’t expect any significant change in the behavior in the market in the coming quarters. So we would expect the beta in Spain to gradually drift upwards, but very gradually, similar performance to what we have seen this year. In the U.K., beta is 35%. If we look at the beta in the quarter is higher than that. It’s around 50%. So here, we would expect higher — gradually higher betas, but we are pricing assets also higher.
The new mortgage pricing in the U.K. today is around 5.7%. So this is going to help withstand the slightly higher betas that we expect next year. For the rest of the countries, Portugal at 9%, Poland, 30%, and in the U.S., it’s 32%. Ex-Corporate Investment Banking is 31%, very much in line with expectation, not much to comment on that. So bottom line is we would expect cost of deposits to gradually increase against repricing on the assets in some countries, particularly in Spain, also in the U.K., et cetera.
Hector Grisi : Sofie, in terms of the tax rate in the U.S. going forward, what I could tell you and we could basically contact you to give you more detail, I believe that we may improve it given that we are doing some leasing on electric vehicles, and that basically would help us out in the tax rate that we have outstanding today. But to give you details, later we could call you and give you exactly what’s going on there.
Jose Garcia-Cantera : Your final question, capital headwinds. The only one is — the only significant capital headwind we have is the final implementation of Basel III. Still some detailed rulings or regulations need to be written. But bottom line is the total fully loaded impact would be around 50 or 55 basis points. The phasing impact, so the charge on January 1, ’25 is going to be between 15 to 20 basis points. So again, very much in line with previous expectations, maybe a touch better than what we expected.
Operator: Next question from Ignacio Ulargui from BNP Paribas.
Ignacio Ulargui : I have just 2 questions. The first one on Brazil. After the performance that we have seen this quarter, where there has been growth, you were guiding before for a bit of an acceleration, and you have been commenting into the quarter results that we should expect better momentum in the second half. Did you see a moment to change your risk appetite? So we see an acceleration of growth also due to mix changes as we are seeing in Mexico? And what should we expect for 2024 from Brazil? And also, if you could share a bit of color on what has been the driver of cost growth in Spain in the quarter? And whether we should expect some synergies coming from One Santander in coming quarters in Spain or it’s more restricted to Mexico and the U.S.?
Hector Grisi : Thank you. In terms of what’s going on in Brazil, Ignacio, a couple of points. First of all, what you have been seeing is, as you remember, we changed a little bit the mix. So we’re changing a little bit that the cost of risk is helping us out first of all, because our — some of them — the positions that we took, actually the credit loans that we gave are basically performing much better than we expected. And the mix also is helping us out because remember that the mix that we changed, went a little bit into payrolls and to secure loans, and the mix has also changed and it’s getting better. We’re also seeing that the market is performing much better in terms of LLPs. So in that sense, we’re opening it a little bit.
I mean we’re open to a little bit more or giving out loans in terms of going back a little bit to the credit card markets. We are performing very well, but our credit appetite is cautious, nevertheless, and we expect Brazil basically to perform really well in that sense. So you’re going to see really growth in momentum also given that the rate is coming down, and we expect the rates basically to continue coming down over the next few months. So this is a double combination in terms of how we’re managing the portfolio and second, because of the way the rates are moving in Brazil. So in that sense, I believe it’s going to be much better. In terms of the growth in cost in Spain, as you know, we have been implementing One Transformation. So with the implementation of One Transformation, we’re spending a little bit to transform a little bit on processes, some things that we’re doing and the way we’re managing the bank in that sense.
But — and you’re going to see a much better outcome in the next few months due to that fact because we are — as you know, we are simplification — we’re doing simplification, dropping the number of products that we have, we are doing also automation of many different things, and we are pushing our branches basically to move more towards businesses than look at the incidents or problems. So all that transformation that we’re making in — all that transformation that we’re making is the one that is pushing us a little bit to spend a little bit more, but it’s going to be in control, and we expect that to continue to drop in the next few months. So in that sense, I feel confident that we’re going to be able to do that. So in terms of in Brazil, going back to the — to just to that — just to tell you the second half is going to be much better than the first half of ’24.
As we continue to go on and we build up the portfolio, it’s going to be performing much better. I don’t know, Jose, if you would like to complement.
Jose Garcia-Cantera : As I said, I think the sensitivity to rates gains momentum. So we have already started to see a slight change. Rates have dropped just 100 basis points to — from 13.75% to 12.75%. We expect another 100 basis point drop in the third quarter — sorry, in the fourth quarter, but we would expect probably 200 basis point to 250 basis point drop next year. So these accumulates. So when we look at year-on-year third quarter, fourth quarter, we will see rates probably 400 basis points down. So clearly, the second half next year will look much, much better in terms of NII than the second half of this year.
Operator: Next question from Alvaro Serrano from Morgan Stanley.
Begona Morenes : Next question and we’ll recapture Alvaro later on. Thank you.
Operator: The next question comes from Sánchez Romero from Citi.
Sánchez Romero : My first question is on restructuring charges. So I understand your profitability target is underlying. Should we expect any material restructuring charges associated with your new reporting structure? The second question is your outlook on operating expenses in the U.S. You’ve gone on a hiring spree of investment bankers recently. So what is the outlook for cost? And how much revenue do you expect to generate as a result? And just quickly on your effective tax rate in Brazil for 2024 and what is your expectation regarding any potential changes on interest on capital?
