Hector Grisi : Thank you, Andrea. Let me do the following thing. Let me answer your question on the digital euro, and then Jose will basically talk about the structural tax rates and the capital. First of all, it’s quite important to understand that the European Commission has published a proposal of regulation last June, which basically sets a framework and it’s a necessary condition for the digital euro to be launched. They have publicly stated the discussion should not be rushed ahead of European elections in June ’24. And they’re saying that instead, they were examined in a quiet and slow way by the new commission and the new parliament. So we expect a long negotiation process to achieve a common agreement in that sense.
In parallel, what we have seen is the ECB has just finalized investigation phase of the digital euro, as I said. The government counsel published last week the results and they decided to initiate a 2-year preparation phase, as we have heard, basically focused on the actual implementation of it. It will evolve finalizing in the rule book and the selection — selecting providers that could develop the infrastructure. This is quite important. And this phase will pave way to a potential future decision on issuing the digital euro or not. But we see that it’s going to happen. And as the decision on the digital euro, I don’t believe will not be taken before the regulatory proposal is approved. So I don’t expect to its release before 2026. On this context, I mean, also as Banco Santander, we are aligned with the European authorities to design the European — the digital euro, also develop the pan-European integrated payments market.
It’s basically very important that we believe we generate value for consumers, companies and the financial institutions. And it’s also important to say that we will continue to monitor the potential impact the digital euro may have on our banks in Europe. And also it’s important for us to have greater clarity as the ECB and the European Commission finalize the regulatory proposal and implementation phase. So that’s the way we see it at this point. With this, I will basically pass it to Jose to tell you.
Jose Garcia-Cantera : Hello, Andrea. Brazil interest rate sensitivity is €150 million to a drop of 100 basis points, all things being equal. Tax rate — the — in terms of structural tax rate for the group going forward, I think using 30% is the right number. This year is going to be a bit lower because of the tax benefits on EV in the U.S. And then organic capital, well, the higher the profitability, obviously, the higher the organic capital generation. We don’t expect any significant regulatory charges other than the ones we mentioned, and obviously, always subject to available-for-sale impacts, et cetera. But we don’t see any significant inorganic or extraordinary charges to our capital buildup. So you’re right. I mean the higher the profitability, the better.
We also have a very strong focus on asset rotation. We have started a team that is going to be looking at ways of optimizing risk-weighted assets across the group. In the first 9 months of this year, we have already rotated the equivalent to around €15 billion to €18 billion in risk-weighted assets. We think we can do more or less €30 billion — close to €30 billion — €25 billion to €30 billion this year, and that will be the focus going forward. The focus will be to rotate the balance sheet because we might not be the best tenors of some of the assets that we have in our balance sheet, so — on our balance sheet. So the focus going forward is going to be optimizing risk-weighted asset consumption and maximizing profitability. So you’re right that we would expect the capital buildup to accelerate in the coming quarters.
Operator: Next question from Pablo de la Torre Cuevas from RBC.
Pablo de la Torre Cuevas : I had a question on credit cards in Brazil. Could you please provide us an update on the ongoing negotiations there between the banking sector and the central bank regarding the new limits on installment and revolving credit card lending in the country? And if possible, could you please give us any indication of the contribution to Brazilian NII of these types of lending? And any estimates that you can give us on the potential P&L impact of the new measures announced? I guess besides the negative impact to NII, are the measures also likely to impact fee income from lower transactionality? And are there any offsets there like lower cost of risk or lower cost of funding that we should also think about?
Hector Grisi : Thank you, Pablo. Jose will tell you basically about the situation in Brazil.
Jose Garcia-Cantera : Again, these are ongoing negotiations. I just already referred to interest on capital. Here again, the focus is more on corporates than financials. Obviously, there might be an effect on banks, but that’s not the main focus. But in our case, it would have a relatively minor impact if it was approved as it has been proposed. But again, we think that will change credit cards. The 90-day period for self-regulation is already [comping] and is finalizing by year-end. We do not expect an agreement here. So probably, [BASN], the Bankers Association in Brazil — sorry, the central bank in Brazil will have to regulate. There is a not minor possibility that we will go to a model in which total interest paid by the customer is capped to total principal, which is called the U.K. model.
Again, Santander and FEBRABAN, the Bankers Association, are already working with the Central Bank of Brazil to try to find a best solution. It’s very early to comment on the impact because this type of regulation could have an impact on NII, but there might be ways of offsetting this through commission income, et cetera, because there is a lot — a significant rotation of the balances in Brazil. So again, working on all of these very early to put numbers to these changes.
Operator: Next question from Carlos Peixoto from CaixaBank BPI.
Carlos Peixoto : Carlos Peixoto from CaixaBank. A couple of questions from my side as well, and a few follow-ups. So on NII, a minor detail, but — or a minor geography. But in Portugal, you have a 40% quarter-on-quarter increase in NII this quarter. I see the improvement in customer spread is actually lower than in the previous quarter. And you do have an increase in the ALCO portfolio. But in any case, I was trying to see if you could have some color on the rationale on what caused this evolution? And also, what should we expect in coming quarters? And then on the U.K. and NII as well. I’m sorry if I missed it, but I was wondering, do you expect — previously you were talking about a high single-digit increase in NII in the U.K. for this year. You expect that to be the case still? And how do you see it evolving into next year?
Hector Grisi : Okay. Thank you, Carlos. NII, I mean, as you said, grew very strongly in Portugal. It’s been helping us out basically because of the repricing of the portfolio, the rates we’re going. And I believe that it will continue a good trend towards the end of the year if rates go up a little bit more in Europe. So that will help out. And then we’ll stabilize. And that’s my view because we see that the rates will stabilize at some time, and we don’t see more growth in that sense. So NII should stabilize in Portugal. In terms of the U.K., I explained to you quite well exactly what’s going on.
Jose Garcia-Cantera : If I may, before you go, just to give some more color on Portugal. When we look at yield on loans, in the fourth quarter of last year, yield on loans in Portugal was 2.4%, 3.3% in the first quarter, 4% in the second, 4.6% in the third. So the yield on loans basically increasing almost at the same rate every quarter this year. Yield on deposits, 4 basis points, 14 basis points, 26 basis points, 38 basis points, also more or less growing at the same pace. So one quarter, there’s obviously seasonality, balances, number of days, all of this may explain the differences. But again, when you look at the trends, the trends in Portugal are very consistent. We would expect, as Hector said, obviously, there is a limit to the repricing of assets.
And mortgages in Portugal, contrary to Spain, are linked to the 6-month Euribor, the 12-month Euribor in Spain. So the flattening out on the asset side in Portugal is going to happen a bit faster than in Spain. But again, the cost of deposits in Portugal is really, really low, and we don’t see any competition there. So we remain constructive in the next few quarters in Portugal.
Hector Grisi : Thank you, Jose. Very quickly on the U.K., Carlos. I mean, as I said, basically, I mean, we continue to put profitability ahead of market share. And we have lower risk appetite given the dynamics in that market, and we combine that — and we’d like to combine that with a good performance that basically could lead to a NIM expansion. But answering your question, I expect 2023 with a high-single-digit growth and on higher rates, management of deposit cost, while we assume the lower volumes that we have. And that’s basically the outlook that we have for the U.K. at this point. I don’t know, Jose, if you would like to complement. But I think with that, I answered your question.
