Banco Santander, S.A. (NYSE:SAN) Q1 2023 Earnings Call Transcript

Banco Santander, S.A. (NYSE:SAN) Q1 2023 Earnings Call Transcript April 25, 2023

Operator:

Begona Morenes: Good morning, everybody, and welcome to Banco Santander’s conference call to discuss our Financial Results for the First Quarter of 2023. Just as a reminder, both the results report and presentation we will be following today are available to you on our website. I am joined here today by our CEO, Mr. Hector Grisi; and our CFO, Mr. Jose Garcia-Cantera. Following their presentations, we will open the floor for any and all questions you may have in the Q&A session. With this, I will hand over to Mr. Grisi. Hector, the floor is yours.

Hector Grisi: Thank you, Begona. Good morning to everyone, and thank you for joining us. Let me just share with you what we will focus on today. First, I will talk about our Q1 results within the context of the strategy we outlined at our Investor Day. Jose will review our financial performance in greater detail. And finally, I will conclude with final remarks. Before we start, let me briefly remark that during the first quarter the financial system has experienced situations, we’ve confirmed that our strategy and unique business model are key factors that allow us to deliver solid and resilient results, even in times of market volatility as we have demonstrated today through our first quarter performance. As we announced at the Investor Day, we have entered a new phase of shareholder value creation.

We are focused on maximizing value creation, aiming for the first time ever to deliver double-digit growth in tangible net asset value per share plus dividend per share with solid capital generation and efficient capital allocation that will allow us to improve our profitability and provide more returns to our shareholders. And we will achieve it, thanks to, first, our unique combination of local leadership and our global scale network that very few others can replicate. Our business model based on customer focus, scale and diversification, which provide us growth, cost and profitability, competitive advantages, which is underpinned by an ambitious transformation plan that is already making Santander a digital bank with branches. Today, we delivered a solid Q1 with great progress in all our strategic objectives.

TNAVps plus DPS improved 5% in the quarter. A strong capital generation increased our fully loaded CET1 ratio to 12.2%, and disciplined capital allocation improved the percentage of RWAs that create value and return on tangible equity reached an extraordinary 14.4%. In a difficult environment, we are growing customers and volumes. The deposits increased 6% year-on-year, which drove a double-digit revenue increase with good cost control. At the same time, we have maintained very solid liquidity ratios as a result of our conservative financial management strategy and a credit quality that remains stable with cost of risk well below our target in line with the medium low risk profile of our business. These trends resulted in a profit of €2.6 billion, the highest in the last five quarters, while profitability improved and we also delivered strong capital generation.

All in all, we are on track to reach our 2022 targets. I will provide more details later. Moving on to the income statement. Firstly, as we usually do, we present growth rates both in euros and constant euros. There was no material difference this quarter. Secondly, in January, we recorded a €224 million charge related to extraordinary banking tax on revenue in Spain, €202 million accounted in Spain and €22 million in DCB. Excluding this impact, profit rose 10% compared to the same quarter last year, 8% in constant euros. Additionally, we have positive and negative one-off impacts in Brazil, which do not affect profit. To better explain the business trends, they have been netted in the underlying P&L. Jose will go in more detail on this, please.

And thirdly, the most notable movements in the quarter were, strong top line performance supported by NII and higher fees, supported by global and network businesses; cost, have started the year in line with expectations, growing one point below inflation. We demonstrated the sustainability of our results with double-digit growth in net operating income, which was to €8 billion. From a credit quality perspective, loan loss provisions continue to normalize. Jose will go into more detail on all these points later. This is a great start of the year. Good business dynamics that are translating into double-digit revenue growth with income increasing year-on-year across our regions and global businesses. We are implementing our One Transformation project, which is helping us improve the efficiency ratio to within the range of 44% to 45% that we established for 2023 and which makes us one of the most efficient global banks in the world.

Our cost of risk remains contained in line with our target of keeping it below 1.2% at the end of the year. Our RoTE grew quarter-on-quarter to 14.4%, 15.3% if we do not analyze extraordinary banking tax in line to reach our year-end target. And we generated capital equivalent to 17 basis points after having completed the second share buyback program to reach a fully loaded CET1 ratio of 12.2%. In summary, very positive trends, which we expect to consolidate in the coming quarters as we progress towards the 2022 financial targets that we provided during our 2022 annual results presentation. As we announced at our Investor Day in February, we are building a digital bank with branches that makes our customers’ lives easier with processes and products that are simpler and more attractive to them.

This, together with our global network, are helping us to improve the levels of our activity, revenues and costs. This approach, combined with a disciplined capital allocation are the cornerstone of our value creation model. Now I will dedicate some time to explain how we’re progressing. Our customer focus is driving volume and revenue growth across the group. We are progressing well in the initiatives. That will help us to improve the way we serve our customers, and let me explain some of the most relevant ones. We’re also taking advantage of our network effect to better serve our multinational corporates and SMEs through our regional coverage model that is growing at very high rates. Multi-Latinas and multi-Europeans are increasing revenue 53% and 72% year-on-year, respectively.

We’re also moving fast in the construction of our branch of the future to offer a best-in-class omnichannel experience across all the group. A good example of this is significant advances made in the digital onboarding processes in Mexico. We have a program that aims to better serve our customers through the use of data, which targets 80% of our customer base. It would help us to personalize our product offering, improve interaction with our customers and provide them with the best user experience. We have developed a common mobile app across Europe as a tactical solution while we implement the common front across all the group, which is already live in Spain, Portugal and Poland and will be also released in the U.K. in the end of 2023. Customer reception has been strong as demonstrated in Portugal, where we have improved for number five to number two by customer satisfaction that is NPS through the mobile channel since the app was released.

Our efforts to become a fully customer-centric bank are allowing us to grow the number of customers, loans, deposits and transactions per active customer at a very significant pace as shown on the right side of the slide. But customer focus is not enough. Simplification and automation are also needed, and we are making a good progress in simplifying our product offering and fully automating our front and back-end operations. This is reflected in our leading position in efficiency and significant growth of 10% in net operating income per customer year-on-year. As we have discussed, one transformation is improving our local bank operations. We are bringing our 160 million customers onto a common operating and business model while converging into a common technology.

We are simplifying our product offering to improve our customer experience and reduce the cost. We also have already simplified our product catalog by 42% since we started the project two years ago. We are reducing also administrative and operational task in branches. We aim to optimize around 80% to 90% of the overall customer-related processes, and we are progressing well. Spain, for example, has already optimized 40% of the processes in scope for 2023 and is expected to provide significant improvements. We are leveraging our global technology capabilities to accelerate digital transformation in Europe to make our processes fully digital end-to-end. Finally, we are migrating our core banking system to the cloud, a project, which we call Gravity, making it more efficient, modern and scalable.

This should result in the annual efficiencies of around €150 million up on full implementation with a 67% return on investment and a payback of three years. Overall progress at the group is at 30%. Once we have completed Gravity in Santander U.K. for a corporate platform migrations in CIB and Chile are expected to be concluded before the end of ’23. These are just a few examples of our ambitious transformation program that will bring Santander’s operations to the next level. Moving to our Global and Network businesses. The revenue is growing above the group average and already represents 39% of the group’s total revenue. Several actions and initiatives to drive revenue growth are already in full swing. CIB is still growing strongly after record highs in 2022.

We are strengthening the centers of expertise with value-added products and services, developing global and regional platforms, focusing on our areas of strength, such as energy, transition, infrastructure or projects trade finance, among others. In the U.S., we are reinforcing CIB coverage teams, strengthening product capabilities and fully leveraging the integration of APS to expand our ability to distribute risk assets. Wealth Management and Insurance revenue grew 43% year-on-year. We are working to maintain the positive trends by scaling up alternative and institutional products and promoting collaboration between Wealth Management and CIB, offering private banking and asset management products and services for CIB clients and vice versa.

In PagoNxt, which is also growing strongly, we have progressed with the migration of Santander Payments in Spain to our Payments Hub platform and already manages a significant part of the payments in Europe. Merchant acquiring expanded its innovative value-added services, which is reflected in 27% year-on-year growth in total payment volumes. Auto revenue fell affected by new lending and the performance of our leasing business in, SCUSA as well as the negative sensitivity to interest rates. We have recently announced an agreement with Stellantis in Europe to become its key financing partner. We expect to increase the outstanding portfolio by 30% to €40 billion by 2026. At the same time, we continue to leverage relationships with OEMs, importers and mobility providers to grow our businesses in North and South America.

We further strengthened our balance sheet and capital position. Our overall risk profile remains medium low and is proving to be predictable based on our diversification. Cost of risk stood at 1.05%. Provisions continue to normalize year-on-year as expected. LLPs performed well in the quarter as provision dropped 3%, mainly driven by South America and North America. At the same time, we delivered strong capital generation. Our CET1 ratio reached 12.2% after having absorbed the full impacts from the second share buyback program and the extraordinary banking tax in Spain. Jose will provide more details in a moment. We will continue to leverage our transformation plan to deliver increased profitability and shareholder value creation on profitability.

As I mentioned earlier, our RoTE closed at 14.4%, up 100 basis points in the quarter. If we do not analyze extraordinary banking tax in Spain, RoTE would have been around 15.3%. Earnings per share grew to €0.15, 11% higher than the 2022 quarterly average, supported by strong profit growth and lower number of shares following the buyback programs. Additionally, in the quarter, we delivered 5% growth in shareholder value creation as a result of our disciplined capital allocation and share buybacks. At current share prices, buybacks continue to be one of the most effective ways to generate value for our shareholders. We completed last Friday, the second 2022 share buyback program having repurchased around 7% of our outstanding shares in the last two years, which provides a return on investment of approximately 21% to our shareholders.

These results demonstrate that Santander has a strong model and risk management capabilities that work very well even in the toughest environment. Jose will go now into more detail on the group’s performance in 2023. Please, Jose?

Jose Garcia-Cantera: Thank you, Hector, and good morning, everyone. Following our CEO’s presentation, I will go into more detail on the group’s P&L, risk profile and capital performance. Starting with the income statement, I will explain the account line by line in the following slides, but let me make a few initial comments. As it has been mentioned, we had some one-off results in the quarter related to the reversal of tax liabilities in Brazil for €261 million to €111 million in NII and €50 million in tax recovery and two provisions made to strengthen the balance sheet totaling €474 million, which net of taxes is €261 million. So these movements had no impact on profit, and we have decided to net them in the lines of the underlying P&L and ratios to facilitate comparisons with previous quarters and to better understand the underlying business dynamics to frame them against the year-end guidelines we gave at the Investor Day.

Additionally, the P&L includes the extraordinary banking tax in Spain, which did have an impact on attributable profit. On the right-hand side, you can see the upward trend in profit quarter-on-quarter, 23% if we exclude the banking tax, which was driven by top line growth. Going into detail on the main lines and starting with the quarterly trends in cost in euros, we maintain our strong revenue improvement. In the first quarter, revenue was 3% higher than in the fourth quarter of ’22, €1.5 billion higher than in the first quarter of ’22, boosted particularly by NII, which increased €1.2 billion, but also by fees almost €300 million more. We have a balance sheet with very positive sensitivity to interest rates, mainly in Europe, which coupled with healthy volume growth and active margin management, led to a strong NII improvement in the last few quarters.

Therefore, in the first quarter ’23 was a solid quarter despite lower day count and seasonal factors in the Americas. We had good fee income growth supported by value-added products and the network effect. Trading gains, a small portion of our total revenue rose driven by customer base CIB transactions. And here is important to take into account that 97% of our CIB revenue is customer-driven. And finally, other income increase as the fourth quarter was affected by the deposit guarantee fund contribution. Group NII rose 14% year-on-year, supported by volumes, interest rate increases and margin management as I just said. In terms of volumes, loans were up year-on-year with double-digit growth in DCB and South America. North America rose 6%, and Europe was stable with falls in Spain and Portugal, mainly driven by prepayments of mortgages to individuals.

Overall, loans grew 3% backed by consumer and mortgages. Likewise, deposits increased 6% with Europe growing 4%, and South America, North America and DCB growing around 10%. I will go into more detail on our loan and deposit structure later. Interest rate hikes mainly benefited Europe, Mexico and the Corporate Center. The latter driven by higher liquidity buffer remuneration. On the other hand, Brazil was impacted by a change in mix towards lower risk products and Chile and DCB were affected by their negative sensitivity to interest rates. Group net interest margin improved from 2.45% to 2.63% as we continued to actively manage our margins. We are very disciplined managing the cost of deposits and the repricing of loans. After the market movements at the beginning of the year, our deposit betas are on track with the numbers provided at Investor Day.

So we expect this positive NII performance to continue in 2023. Turning to net fee income. It rose 7% year-on-year, reaching more than €3 billion, which is explained by more customers and more transactionality with them in retail banking. CIB, which stood out with a 16% growth in all regions, but especially in Europe, very positive trends in PagoNxt and cards. And in Wealth Management and Insurance, we had a good performance in private banking and insurance and volumes in Asset Management recovered in the first quarter with a net new money of €1.7 billion. Finally, in auto, volumes growth across the board continue. However, fee income in Europe was affected by the new insurance regulation in Germany. The evolution of fees reflects the improvements we make to our model to be more capital light.

Moving on to costs. The first thing to highlight is that despite inflationary pressures, cost continued to increase below the rate of inflation. This was the case mainly in Europe, where costs in Spain, the U.K. and Portugal, well around 3% to 4% in real terms as salaries in Poland and Latin America tend to be more directly linked to changes in inflation. Our efficiency ratio is one of the best in the sector at 44.1%, having improved both year-on-year and quarter-on-quarter. Outstanding performance in Europe, improving its efficiency ratio by 6 percentage points year-on-year. We will continue to deliver on our cost and efficiency targets and as we expect to further reduce our cost per customer, and as a result, continue to improve the net operating income per customer as Hector just explained.

Credit quality remains robust and the cost of risk is well under control. Loan loss provisions grew year-on-year driving the cost of risk to converge towards — through-the-cycle average as expected. The main changes by countries were the following, improvement in the cost of risk in Spain and Mexico, credit normalization in the U.S. from the very low levels we saw in 2021 and in 2022, but the behavior in the first quarter was much better than we thought. Poland increased its loan loss provisions impacted by higher Swiss franc mortgage provisions. And finally, in Brazil, we had higher loan loss provisions year-on-year on the back of individual consumer lending as well as overall portfolio growth. On a quarterly basis, loan loss provisions fell and the 3-month cost of risk in the quarter was 4.4%.

This performance was supported by the high quality of our portfolio. The nonperforming loan ratio continued to improve, falling to 3.05% from 3.26% in March 2022. The main improvements came in Spain and DCB in part due to portfolio sales in the period and as well as Mexico. The portfolio distribution by stages remained stable. On the right-hand side, there is a brief overview of our loan portfolio structure. Around 80% of loans are mostly concentrated in mature markets. And if we look at the segments, our mortgages have low average loan to values. The consumer lending portfolio is well collateralized short term and has high returns, and the SME and corporate portfolio is well covered as well as over 50% has guarantees. Finally, a high weight of our corporate investment banking portfolio is investment grade.

Finally, let me comment briefly on our exposure to commercial real estate, which is controlled and diversified across countries. Our exposure to CRE is 6% of total group’s drawn uncommitted exposure. This is concentrated in the U.S., the U.K. and Spain, accounting for 75% of the total. Over half corresponds to social housing in the U.K. and multifamily in the U.S. The NPL ratio is 1.6% below the group’s total NPL ratio. In the U.S., we have a total of €21 billion of total drawn and committed exposure with an average loan-to-value of between 50% to 60%. Office CRE is just €2 billion and it has an occupancy rate of 92% compared with around 80% for the sector as a whole. Let me also go into more detail in Brazil and the U.S., two countries that have raised some questions in the past quarters.

In Brazil, the Brazilian economy has been performing well in recent years and interest rate hikes were implemented promptly and decisively to contain inflation growth in early stages. This environment accelerated the credit cycle and increased cost of risk in 2022. From now on, we expect interest rates to remain stable and probably start to come down after the summer. Additionally, during the last few years, we have been working on improving our portfolio mix in order to structurally reduce our cost of risk. We have enhanced our customer profile, the weight of new vintages with the best ratings has increased. We have been more selective in new business to increase our exposure to lower-risk secured portfolios like mortgages, agro or payroll.

All in all, given our risk management, the enhanced portfolio mix and new lending profile, we expect to remain on target. Excluding one-offs in 2023, cost of risk should remain stable compared to 2022. Regarding the U.S., despite the bumpy start of the year in the country, the messages we gave at Investor Day have not changed. We expect normalization of the cost of risk to continue throughout 2023, but remain below pre-pandemic levels. We actually had a better start of the year than initially anticipated in terms of credit quality, which was supported by a stable used car prices and better late-stage delinquency payments. Our focus in auto at the moment is on quality and profitability over volumes. Moreover, we were able to further increase the share of auto loans funded by deposits.

We have demonstrated that our conservative structural risk management and solid liquidity place us in a very strong position to face very challenging scenarios. At the end of the quarter, our liquidity buffer comprising high-quality liquid assets exceeded €300 billion, 97% of which were Level 1 assets. Two-thirds of this liquidity buffer is in cash, which is equivalent to 20% of our deposit base. Our liquidity is strong and stable with ratios well above regulatory requirements. The group LCR remained in line with year-end at 152% and the NSFR around 120%. The ALCO portfolio represents 6% of total assets, which is below industry average. The duration of the available-for-sale portfolio is very low and the current mark-to-market of the whole held to collect portfolio would have an impact equivalent to only 2% of our fully loaded CET1 capital.

This demonstrates that impact from the change of the value of bond portfolio and capital would be very limited even in a very adverse scenario. Customer deposits are our primary source of funding and are mainly based on sticky retail deposits in our core markets. This diversified and stable funding structure supported year-on-year growth as deposits rose with positive performances across almost all countries and segments. The quarter-on-quarter decline in deposit balances is explained by the seasonal drop in CIB clients deposits, while retail remained stable in the quarter. Some customers using savings to prepay mortgages given the rising interest rates in Europe. And we have seen some flows from current accounts, time deposits and mutual funds.

We have not seen any unusual deposit movements in recent weeks following the troubles of banks in the U.S. and Europe. In fact, we actually saw net inflows in the group in deposits in February and March of over €2 billion. Regarding capital, we ended the quarter at 12.2%. Let me give you some color about the variations in the quarter. 24 basis points of organic growth, which was basically driven by the strong profit generation in the quarter partially offset by risk-weighted asset growth. This includes a negative 4 basis point impact due to the extraordinary banking tax in Spain. 25 basis points drop from shareholder remuneration, which includes the total impact of the second 2022 share buyback program, 15 basis points and the accrual of the cash dividend 10 basis points for the first quarter, taking into account a 50% payout.

11 basis points were related to the update of the regulatory framework mainly following the EBA’s clarification of its interpretation of CET1 minority interest calculation. And finally, a positive 7 basis points from markets, basically available for sale. So we have increased our fully loaded capital ratio while delivering on our capital productivity targets. As you can see on the right-hand side of the slide, improved front book RoRWA to 2.8% continued asset rotation and increase the percentage of risk-weighted assets, which deliver returns above the cost of equity. All in all, a disciplined capital allocation, which combined with our model, gives us confidence in the sustainability of our commitment to remuneration to our shareholders. Now I will hand it back to our CEO for the conclusions.

Thank you.

Hector Grisi: Thank you, Jose. To conclude the presentation and open the Q&A, I will briefly outline some final remarks that our vision for the coming quarters. Growth in customer volumes, robust revenue performance, double-digit NII growth, driven by positive sensitivity to rising rates in most countries and customer margin management. Fee income grew at high single digits, driven by our CIB payments and payment businesses. We expect this trend to continue in the coming quarters, mainly in Europe and Mexico. We are implementing our One Transformation plan. Our aim is to serve our customers more efficiently and foster process automation and simplification supporting our efficiency improvements. We will accelerate One Transformation further in the coming quarters.

We have already identified business opportunities across the group, which will enable us to maintain strong global network businesses revenue. Finally, we have a solid balance sheet in terms of liquidity, solvency and risk profile. We will remain focused on maintaining a medium, low-risk profile and on capital efficiency and asset rotation to ensure a solid capital ratio. So as we embark on our new strategy phase, all these plans should increase revenue and improve the efficiency and profitability of our banks with the overall aim of supporting shareholder value creation and sustainability in profitability. As previously explained, our outstanding results in the first quarter puts us in an excellent position to meet our ’23 financial targets.

However, we may meet them in a slightly different way than initially anticipated, depending on the evolution of the macro environment. We are convinced that we are going to achieve our 15% RoTE target, but probably through a higher contribution from Europe and Mexico and a potential lower contribution from the U.S. Finally, we’re also optimistic regarding our medium-term targets that we announced at the Investor Day. As I told our shareholders at the Annual General Meeting, these targets are specific, ambitious and achievable. We have the vision of where we want to go and the right strategy to get there, and we have the best team in place to put it in motion. So I am convinced that we will progress quarter by quarter to achieve our targets.

Thank you very much.

Begona Morenes: Thank you, Jose and Hector. We can start the Q&A session now.

See also 12 Most Promising Healthcare Stocks and 11 Most Promising Gene Editing Stocks.

Q&A Session

Operator: We already have the first question from Ignacio Ulargui from BNP Paribas. Please go ahead.

Ignacio Ulargui: Hi. Good morning, everyone. And thanks for taking my questions. I just have two questions. The first one is on the outlook at group level for NII and fees. If I just look to 1Q, you have made the guidance provided by the bank in Investor Day and for 2023 of double-digit revenue growth. But as the year goes by, I think that, that target gets challenged a bit. So I wanted just to get a bit of your thoughts on what should we — particularly on NII, what should see the acceleration coming? And based on the comments that you made at the end Hector, a bit of what would be the outlook for the U.S. NII after the performance of the first quarter. The second one is on cost of risk. I have seen a decline in NPLs in Brazil. Just wanted to be — to get a bit of your thoughts about how should we expect cost of risk evolving from here in Brazil and whether we have seen a beginning in NPL or it’s just a seasonal effect? Thank you.

Hector Grisi: Okay, Ignacio, thank you very much for your question. Okay. First of all, as I basically discussed, it’s quite important to understand that we will achieve what the numbers that we said at the Investor Day and also our guidance, given that with the combination that the group is giving you, okay? So as I basically said, we’re going to be a little lower in Brazil and the U.S., and we will be much better in Europe and in Mexico, okay? So it’s quite important to understand exactly the combination and the work we’re managing the group to get to the levels that we want, okay? So Europe is the one that is going to give us the strongest performance for the full 2023, okay? Mexico should be up — what we call low double digit, okay?

And we expect also, as I said, weaker performance in LatAm with the exception of Mexico, the U.S. and DCB. The U.S. is down mid-single digits. DCB will be low single-digit decline, and Brazil is basically mid-single-digit growth back ended, and we expect improvements towards the second half of the — and towards the end of the year, okay? On the cost of risk, I will have Jose basically give you some ideas.

Jose Garcia-Cantera: Yes. So if I may complement the NII. In Europe, we have not seen the full repricing of our portfolio, obviously because, as you know, mortgages reprice every 12 months. So we still have a long way to go in the repricing of mortgages in Spain. Again, they are 12-month, Euribor based. And in Portugal is 6-month Euribor based. So we still have, again, way to go to reflect the full impact of the repricing or the rebasing of our portfolio in Europe. In terms of cost of risk in Brazil, as I said during my presentation, we expect cost of risk to remain fairly flat in 2023 relative to 2022, excluding the one-offs. The cost of risk in the first quarter was 4.4%. The €474 million provision that we took in Brazil in the first quarter to strengthen the balance sheet was used more or less one-fourth for one-off cases for specific cases and the rest it was just to strengthen our balance sheet.

So in that sense, the 4.4% of the quarter is clean. It excludes one-off cases and it reflects the true asset quality evolution of the quarter. So for the rest of the year, as the interest rates are expected to remain high, we expect a better performance of our individuals portfolios because these are very short term. And obviously, they — most of them have matured already, and we have been adding high-quality new vintages, but we might expect some more challenging evolution in the corporate sector. So again, all in all, excluding one-offs, more or less flat year-on-year.

Begona Morenes: Thank you, Jose and Hector. Can we have the next question, please?

Operator: Next question from Francisco Riquel from Alantra. Please go ahead.

Francisco Riquel: Yes, hello. So I wanted to ask about following the recent turmoil in the sector. I wonder if you as a management have changed anything within the group in terms of liquidity and interest rate risk and/or if you expect any regulatory changes in this front in general? And more specifically, I wonder if you can elaborate a bit more the fall in deposits during the quarter. You mentioned seasonality in CIB, so do you expect to recover those deposits in the coming quarters? And also, if you can update your guidance in terms of deposit betas by the end of ’23. You were previously guiding for 25, 30 in Spain, 40-50 in the U.K., 50 — above 50 in the U.S. And just last question in terms of the ALCO portfolio in Spain, if you have changed your plans. You were aiming for €16 billion on average in ’23 in terms of size, you’re already above? I have seen in the slide, so you can also update on this. Thank you.

Hector Grisi: Thank you, Francisco. I mean, first of all, let me tell you, I mean, given the turmoil and everything, I mean, the group is actually responding quite well, okay? We have seen all the levels in deposits basically maintain themselves. Individuals probably is the most important part in which 80% to 85% of our deposits are basically individuals, families, et cetera, which are basically very solid and very stable, okay? In that regard, also, I mean, with all these times, you always be prudent about how you manage things. But I can tell you that our units are performing really well in that sense, okay? In terms of the deposits, it’s always cyclical. The decrease in deposits was mainly in CIB as we described. It was actually not very meaningful to the total size of the portfolio, and we expect basically to get them back and is the normal flow of the business, okay? In terms of the betas, I will have Jose give you a little bit of detail on that.