Sofie Peterzens: This is Sofie from JPMorgan. So my first question would be on U.S. asset quality. If I look at the NPL ratio in the U.S, it increased from 4.2% to 4.6%. Coverage fell from 73% to 68%. Cost of risk in the fourth quarter was 250 basis points. If I look at the secondhand core value, they’ve dropped over 30% in peak value. And in addition, you’re doing more EV financing, as far as I can see, given the tax rate, given that you had heard dumping 20,000 EV vehicles in the U.S., I think up to 80% discounts. And the secondhand core price is coming down so much and asset quality already showing signs of deterioration. How should we think about the cost of risk in the U.S. going forward? And if you could just remind us what a normalized cost of risk level is?
And then my second question would be on the Corporate Center. As far as I can see, the first time you make a profit in the corporate center since the global financial crisis. You also made a positive net interest income in the Corporate Center. So how should we think about the contribution from the Corporate Center going forward?
Ana Botin: Let me take a couple of this high level and then I’ll pass to Jose and Hector. But in terms of asset quality, I want to say we’ve seen no signs of asset quality deterioration at all. We are guiding and we are confident our cost of risk will stay around 1.2%. That is probably a through the cycle number, roughly. So, it could be lower, it could be a bit higher, but should be a 1.2%. We’re not seeing really, we have said previously 1% through the cycle. We have a bit bigger balance sheets in some emerging markets, but we haven’t given this, but I’d say and maybe Jose wants to address that, but I’d say around 1.2%. What’s important is that and this is not just zero but it’s mostly Europe. Our balance sheet is very low risk and highly secured.
In the case of Europe, a lot of that is mortgages. So, 33% actually of our total balance sheet is prime mortgages with very low average LTVs. We’re not anticipating a big change in those numbers, maybe a few basis points, yes. That’s why we, as you know, the 1.13 is the underlying. So, we do have some space to grow there, but this really is about basis points. And the big driver and that’s the reason we’re not seeing any deterioration in our big portfolios is that we had record low unemployment and this is the biggest driver of cost of risk in most of our balance sheet. So again, we are confident the economy will remain resilient. If you look at the latest actually to date, the IMF just upgraded growth, especially for Spain and some of our key economies.
And then our consumer portfolios, and maybe Hector wants to comment a bit more on the U.S. But yes, there will be some normalization. But to be honest, everything we expected this year has happened in our consumer portfolios. Brazil is trending down. The U.S. is normalizing as we expected. There will be some normalization in consumer next year, but very much within the expectations of what we’ve been seeing in the last year. I’ll let Hector answer on that, but let me just address the corporate, the corporate center. Maybe that’s for Jose. But just to say that that it’s very important that different banks have different policies for the corporate center. So, in the corporate center, for example, we place our excess liquidity with the ECB. Then we have transfer pricing.
And so again, you should see some of that and I’ll let the detail for Jose in the context of our commercial business, for example, in the euro balance sheet in Spain and Portugal. Again, part of that is, let’s say, more financial and part of that is depending on how you choose. And our policy in high-level terms is to take out some of the volatility and really try to have a more market based transfer pricing. So you can see the actual commercial business. And so, some of those financial benefits of higher rates, sometimes in our case, as you’ve seen this year, go to the corporate center. So maybe you want to take the U.S., maybe autos, and then, Jose, you want to also expand on the corporate center?
Hector Grisi: Sure. So, Sofie, I mean, really quickly on the U.S. Our U.S. auto business that we have has shown a very robust growth in ’23. Sales volume are 26 billion is basically helped by the new, relationship we have with some new OEMs that we have included in the portfolio. And we have, as you know, a continued dominance in the so prime used car segment, which, we are the leaders in the market. This volume basically rebounded as you have seen on the back of the new OEMs agreements that I explained, okay, and also compensated for some declines on volumes that we had in other OEMs. Okay? And then, you basically see that we have seen a reversion to normal in credit performance with delinquencies and losses increasing, seasonally as we have every single year through the last quarter, but it’s still below the pre-pandemic levels.
Okay? So we expect the performance to continue through ’24 and we see lower roll rates of charge-offs and lower delinquencies driving that of the shift that we have to prime and near prime loans and a generally U.S. recovery in the U.S. economy. So, I wouldn’t say recovery but robust U.S. economy. New vehicle prices basically continue to be higher by pre-pandemic period, and use prices are falling, but they continue to be higher than four years ago and also are being supported by a robust recovery rate that we have. Remember that I explained last quarter about after 90 days delinquencies, We’re still below pre-pandemic levels at about, I mean, 67% compared to above 90%. So our outlook for 2024 is a positive on the U.S. auto, sales growth in both loans and leases and the sustained net income delivery as losses basically stay below the historical term.
