Jose Garcia-Cantera : So let me start with Poland. The proposal comes from the current government. We need — we are going to have a new government, and this will have to go to parliament. So very early stages of this proposal, and I am almost 100% sure that some other form of proposal, if any, will be conducted because again, this is a proposal of the existing government, not the upcoming government. The ALCO — sorry, also Britta about this and I forgot. We have more or less €27 billion, almost €30 billion of ALCO in Spain at an average yield of around 3.4%. We expect to end the year at around €30 billion. We might increase the ALCO a little bit more next year, obviously, taking advantage of the higher yields. So depending on how you measure the profitability of this, if you measure this against average cost of deposits sort of against the marginal funding cost, you have different profitability.
But obviously, this is going to add significant push to the profitability of the group next year. DCB, I don’t know if you want to comment on DCB and the outlook for the business.
Hector Grisi : Yes. I mean on DCB, there has been a particular change in the business in this year. In DCB in particular, there is one very important. We had really good growth in terms of loans, but the majority of those loans — a vast majority is basically stock financing. Given the dynamics that the auto market has had over the past few months, first of all, there was not enough production, then the production started and now basically, we are financing a huge amount of the car dealerships. We expect basically to start — the dealerships start moving that inventory out and that basically will produce more — the normal auto loans and then will give us the normal NII that we are accustomed to at this point. So that’s basically the way we believe that this is going to evolve.
It is important to acknowledge that also we have been able to finance a lot of this portfolio with our own deposits instead of going that much to wholesale. And also, you’re going to see a dynamic of what Jose was telling you about of selling a lot of these portfolios out into the market once we basically start out giving out loans, direct to individuals. So we believe that the outlook would be good. It’s important to see also how the economy evolves mainly in Europe, and that would also depend on how fast the inventory is moved.
Jose Garcia-Cantera : Yes. Well, final comment here. Although we have a neutral position into rates in DCB, obviously, the higher the rates, the more difficult the business is, particularly when rates start going up. So once rates stabilize, the business also stabilizes and increases the profitability. The difficulty in managing DCB is when rates actually go up because although we do not have sensitivity to that movement, obviously the customers do not react well to that. So that is one point I wanted to make. The other point is on cost of risk. We would expect the cost of risk in DCB to gradually trend towards the normalized level of around 50 basis points a year, taking into account that this will depend on asset sales, securitizations, et cetera. So our aim is to try to minimize that, like Hector was saying, by managing the assets that we have on our books.
Operator: Last question from Ignacio Cerezo from UBS.
Ignacio Cerezo : I’ve got 3 follow-ups. First one is on NII in Brazil. I mean are you sticking to the guidance you gave in Q2 that Q4 would be better than Q3? And if you can give a little bit of color in terms of pattern of NII expansion next year, should we be expecting like a linear increase through the year? Or you’re going to have some degree of seasonality at some point? Second one is on the U.S. I’m sorry if you have mentioned that already, but what has driven the 13 percentage point decline of the coverage in the quarter in the units? And the third one is on capital return. Given your comments around accelerated capital generation as profitability goes up and mindful of Basel IV, do you see any chances of topping up your capital or increasing your shareholder return in ’24?
Hector Grisi : Thank you. Look, Ignacio, in terms of NII in Brazil, I think it’s important. I mean, we reiterate, first of all, as I have seen the worst of the NII is behind us. We continue expecting an improvement both in NIM and NII in the coming quarters. Rates, as Jose explained to you, have started to curve down, I mean, 100 basis points in the Q3 ’23. Our numbers basically tell us that maybe they will come down towards the end of the year to 11.75%. So that basically tells you, reflecting the Q2 decline in rates plus credit activity increasing plus market-related NII no longer a drag, NII improvements. So that basically tells you that we — yes, we believe that the second — sorry, that the fourth quarter is going to be better than the third.
In terms of what do we see in the future is exactly as Jose explained to you, is that we see a trend going upwards towards — more towards the second half of the year, next year. And that’s the way we see it. It’s going to help out if rates continue to come down and volumes continue to go up, but that’s exactly the beauty of the diversification model that we have at this point. In terms of the U.S. coverage, it’s basically, I mean, the normal seasonality that we have discussed. And we have an update in loan-to-values including the current value of the cars. And in addition on the quarters, we have CRE charges due to downgrade rating of several companies in the sector and fintech charges due to originations in that sense. But I see that this will normalize towards the beginning of next year, as I said.
So in that sense, I don’t see a problem in that is — also, there was an increase in provisions mainly, as I said, I mean, the LTV and the Stage 3 balance with the GST remediation. But other than that, I think it’s quite what — it was quite normal. Cost of risk, as I said, is 1.77%, and is below the 200 basis points that we indicated as guidance for the year. And total coverage ratio is double. The total loan portfolio is flat year-on-year, 2.7%. I don’t know if that answers your questions. And in terms of the capital return, please, Jose?
Jose Garcia-Cantera : No, I think that’s for the Board to decide. So for this year, the policy has been decided, and that’s for the Board to decide, obviously.
Begona Morenes: Thank you. I believe we have no further questions. So thank you very much, everybody, for your time. As always, the Investor Relations team remains at your disposal for any and all questions that you may have. Thank you. Bye, bye.
