Good morning, everyone and welcome to BBVA First Quarter ‘20 Results Presentation. I hope all of you are healthy and safe. I’m Gloria Couceiro, Head of Investor Relations and we have also Onur Genc, Chief Executive Officer of the Group and Jaime Saenz de Tejada, BBVA Group CFO participating in this webcast. This time we’re doing it remotely.As in previous quarters, Onur will begin with the presentation of Group’s results and then Jaime will review the business areas. We will move straight to the live Q&A session after that.And now, I will turn it over to Onur to start with the presentation.

Thank you, Gloria. Gracias. Good morning, everyone. Welcome and thank you for joining BBVA’s first quarter 2020 results. We are doing this through the webcast obviously. So thank you for your flexibility and the availability. I really hope also that you and your families and friends are all healthy and safe, let me also express my condolences to the relatives and friends of those who passed away during these hard days.So moving to our presentation. On Slide number 3, let me start with the BBVA’s response to this exceptional environment. I have to say that I’m very proud of our organization. We are rising up for the challenge in my view. Our purpose creating opportunities has become more important than ever in my view in this environment. And we have established very clear priorities in our response to the crisis.First, and you can see that on the left-hand side of the page, to protect the health and the safety of our employees, clients and the community in general from the very beginning before the official government measures were put in place, we implemented plans for our employees to work from home.As of today, more than 86,000 employees of BBVA, 95% of our central services and 71% of our network are working remotely. We have a strong commitment to save lives. BBVA, we have donated EUR 35 million globally for the fighting against COVID. And we have also launched internally several initiatives for our employees to directly contribute to the effort. So more than EUR 1 million in terms of contributions from our employees which is matched one to one by BBVA is also another tool that we have put in place to fight against COVID.Lastly, a clear commitment was also shown by our 300 members of our BBVA top management…

Thank you very much, Onur and good morning, everybody. I hope you’re all well as also your family and friends. Let me start with Spain, as Onur has already mentioned that the expectations have been severely reduced due to the current health crisis and the lockdown of the economy. BBVA research is expecting now a GDP contraction of around minus 5.5% and 10.5% in 2020, and a V-shaped recovery to a range of between 4.2% and 7.2% for 2021.In terms of activity, loans have increased by 1% over the quarter, driven by corporate and CIB up by 7% in this Q1, due to a number of short-term operations and credit lines being drawn down at the end of the quarter. Q1 – in Q1, BBVA Spain showed a very strong pre-provision profit by 10.3% year-on-year, thanks to the good performance of core revenues and the higher than expected reduction in operating expenses. We have achieved these strong operating income growth, but despite the significant decrease in net trading income, which is down by 44%. Overall, the revenues are up by over 5% year-on-year, driven by strong growth in fees over 13%, thanks to the higher asset management and banking services.NII is up by 1.7% year-on-year mainly due to the lower cost of excess liquidity at the ECB, the higher contribution from the ALCO portfolio. The contribution from the commercial activity remain [technical difficulty] last year. Operating expenses went down by a minus 4.4% and exceeding expectations. This strength should continue going forward for – for 2020 expenses will decrease more than we previously expected.This strong performance of operating income has been more than offset by the higher impairments and as we have front-loaded EUR 517 millions of provisions related to [technical difficulty] included as Onur mentioned, an updated IFRS macro…

Thank you, Jaime. Before concluding, so on the last two pages, Slide 24, let me give you some color on the operating trends that we could expect for the rest of the year. So given the current environment first on costs, we are going to see real negative growth in expenses in all business areas better than expected across the board. It will partially offset the impact on NII and fees, but we are going to be very diligent on costs obviously going forward.Second on cost of risk, we mentioned that already 2020 cost of risk will be significantly below the first quarter in the range between 150 bps to 180 bps according to our best estimate. But there is still obviously a lot of uncertainty on this topic, we’ll see how it evolves.Finally on capital, in our base case scenario, we should be close to the upper part of the range by the end of the year, considering transactions pending to be closed, certain capital relief by the regulators, and obviously our track record of capital generation. And the last page, so the conclusion and the key messages I would like to reiterate, the outstanding operating income growth, demonstrating resilience as we manage through the crisis.Second, these indicators have been impacted by significant COVID-19 provisions front-loading, including updated macro scenarios and specific provisions for most effective exposures where we operate from a position of strength in terms of capital and liquidity to face this crisis. And last one highlighted our priorities continues to be very clear in this context, protecting the safety and health of our employees, our clients, society in general and support our clients navigate through this crisis as we continue.With this, I conclude the presentation. Now I’ll give the floor back to Gloria for the Q&A. Gloria?

Thank you. Thank you, Onur. We are now ready to move into the live Q&A session. So first question, please.

Of course. [Operator Instructions] The first question today comes from Carlos Cobo of Societe Generale. Carlos, your line is now open.

Hello, good morning. Thank you for the presentation, and hope you’re all fine and the families. A quick question on capital. It’s very clear your new guidance on the target, but it is still substantially lower than the average this quarter. And I was wondering if there is any plan to rebuild back to where you were before, you know, theoretically all this crisis only proves that expected losses if anything should be – on expected losses, if anything should be higher than before.So, there is no reason to maintain a long-term capital target below where it was in the – before COVID. So clearly understand why the capital realization has happened. But, you know, when do you plan to reveal how and what’s the plan there? What would be the post-crisis capital targets of the bank, if it would still be 12%?Also on capital, if you could explain is there any regulatory headwinds left during the year or you’ve already booked everything, I know it’s a detailed, but just to understand all the moving parts. And I’d like to understand finally volumes in Mexico and Spain we’ve seen a lot of corporate slowing down crossing different trade lines. Do you see that as sustainable over the longer-term like 2021, 2022 or they will be leveraged back when they are more comfortable with the cash flows and the macro? Thank you very much.

Thank you, Carlos. On capital, as you have seen in the presentation, our new target methodology is 225 bps to 275 bps. We are currently at 225 bps, we intend to go upper in that range obviously, as you know as we said also before, pre-COVID December 2019 capital position as you know what 11.74% which is 247 bps in terms of the – in buffer versus the requirement, 247 bps. We are currently at 225 bps. Our goal and our expectation is by the end of the year by the way we will be moving within that range very nicely. And we’re going to be towards the upper end of that range. So yes, that’s the goal that we have and we plan to move upwards within the range.The regulatory headwinds for the remainder of the year. As you know, we guided in the end of the year presentation that we are expecting 15 bps, we were expecting 15 bps TRIMs for the low default portfolios and also 5 bps from PD, LGD definitions, that 15 bps, given the latest guidance and information that we are getting from ECB, the TRIMs would be delayed minimum six months and so on. So they might not be arriving in this year, but we are planning – our capital planning is such that we can have them in our capital planning and we will still again move within the range towards the upper end of that range that we are quoting.Volumes in Spain and Mexico, as you said, is – you’re asking is this sustainable over the long-term and what has happened, especially in the month of March, especially in the second half of March, there were these big draws from large corporate clients, obviously it was driven by the liquidity needs of certain large scale clients. It’s mainly the CIB meaning, the wholesale – large wholesale clients. We have seen that drain on the draw has come down dramatically in the month of March. So obviously it was more conjectural and it will not continue. And our expectation is some of that is going to be deleveraged for sure in the coming quarters. Thank you, Carlos.

Thank you – thank you, Carlos. Next question, please.

[technical difficulty] comes from Benjamin Toms of RBC. Benjamin, your line is now open.

Hello, thank you for taking my question. Firstly, can you say how you think the shape of impairments will look in the coming quarters? If I run the numbers and using the top end of your 2020 guidance across the rest, I think it roughly implies impairment in future quarters will be about 30% higher compared to kind of 2019 run rate. Is that kind of a fair view? And should most of this come in the next quarter or do you think it will be evenly distributed?And then secondly, in your presentation you noted a lower standard deviation, volatility of earnings versus peers, just interested in your thoughts on whether you expect the bank to outperform peers in this measure when the downturn is a global one rather than just on a local geography basis? Thank you.

Perfecto, Benjamin. Thank you for the questions. So on the first one, the provisioning, is it going to be in the next quarter? In the next year? Very rough numbers so that you all have a clear perspective around that typically – in a typical quarter and if you look into past year 2019, even before, we do 1.1 – EUR 1.0 billion to EUR 1.1 billion provisioning impairments every quarter, okay, that’s the baseline.As you have seen in this quarter, in the first quarter of 2020, we have done the EUR 1.1 billion which is the regular provisioning, which is based on our rules, meaning, in retail and SME, if you past the 90 days, you become NPL, you take the provisions. In the wholesale, of course, there are dates and there are days also, but also when you become insolvent, we immediately take the provisioning and so on, our rules stayed the same. And with those rules, the quarterly number came out to be as before, EUR 1.1 billion.On top of that EUR 1.1 billion, quarterly figure, as you have seen we have taken a provisioning of EUR 1.43 billion let’s say for simplicity, EUR 1.4 billion. That EUR 1.4 billion is the additional provisioning that we are taking. And we are guiding for the rest of the year and for the full year to 150 bps to 180 bps as you see, 150 bps to 180 bps. The 150 bps basically assumes basically assumes and that’s what we did a bit differently than other European peers, we have really front-loaded all the COVID related provisioning into the first quarter.So EUR 1.4 billion. It’s quite a drastic figure compared to our risk weighted assets compared to our size. So that EUR 1.4 billion is, in our view, if…

Thank you, Ben. Next question, please.

The next question comes from Alvaro Serrano from Morgan Stanley. Alvaro, your line is now open.

Thank you very much. Can you hear me properly? Hopefully, you can. Thanks very much for the detail on the provisions. I’ve got a follow-up there. Obviously visibly you range low as you’ve mentioned. Just curious on your assumptions on unemployment rate, maybe in particular in Spain, and any sensitivity you can give us because obviously acknowledging that there’s 19% of the workforce currently on temporary sort of leaves. What’s the sensitivity if it’s – they don’t know will go back to work? Can you color around that?And on payment holidays can you give us details of how many of your mortgage on consumer books on payment holidays and what is the underlying assumption on how many of these could default? And just one more question on the pro-cyclicality the draw – drawing up lines as in the US your loan book is 8% you say it’s healthy demand, but can you reassure us to talk us through how you’re sure that that’s healthy demand, given the 8% in the US, which is obviously centered around Texas a lot of the business and what’s going on with the oil price, can you run us through why you feel comfortable about? Thank you.

Jaime, if that’s okay, I’ll take one and three. If you take the restructurings in Spain for mortgage which would be great. So, Alvaro thanks for the questions. Let me start with number three. Let’s go with Spain first and then we will follow-up on the unemployment. Again, we are taking the scenarios published by BBVA Research as the base case. So they publish a range and we took within that range a meaningful point – figure. And then, there are many other parameters as you know in the provisioning, there’s the house prices and many other macro parameters.In terms of unemployment, you might have seen it. The unemployment expectation for BBVA Research is around 20% for 2020, 20% okay. So that is basically somehow, not as 20% but again, as the range, it kicks into the modeling as well. And that 20% feeds through the models in terms of impact on different portfolios and so on, which then makes up the provisioning that we are doing.And as you have seen in Spain, we are increasing the provisioning – annualized quarterly provisioning is 154 bps, 154 bps versus our typical 20 to 25 last year of numbers, it is stressing all those scenarios. For you to know in our case, 43% of our Spain lending book, 43% is mortgages. One-third of our book is what we call empresas and large corporates.So in terms of the direct impact of that unemployment into different books, obviously there will be impact which is then again taken into account in the modeling, but given the portfolio, mortgage and again, large corporate and empresas you think that 154 bps is quite, quite, quite a conservative figure for the rest of the year.On the US 8% loan book, is it healthy? Where is it coming from…

Yes, sure. And let me add to your previous answer, that the US numbers also include the New York branch. There we have lines to the top us corporate and some of those drawns explain the significant increase that we’ve seen in the US, okay.Let me try to answer the question around payment holidays. As you know, we have two different sets of programs. First of all, the Spanish government moratorium that applies to both mortgages and consumer loans. But this only applies to vulnerable clients and this is a quite restrictive definitions. Clients need to meet a number of conditions at the same time and the rate for these vulnerable debtors, it deviates on stock is very low.On top of these, as you know, and through the Spanish Banking Association we’ve established a sector agreement to which of course BBVA has adhered to complement the measures adopted by the government under this agreement BBVA, Spain will allow individual consumers affected by COVID to defer the loan payments for up to six months for consumer loans and up to 12 months for mortgages, instead of the three months announced by the government.So I think that the moratorium is quite flexible in the approach. But what is important, I think is a government moratorium will affect a narrow number of clients. It’s too soon to really have a clear picture on the extent of the use of these measures. So far in Spain it hasn’t been that large and it’s even more difficult to try to answer your second questions now, how many of these will actually default? What I would like to say is that, that as you know, in general, cost of risk in Spain and PDs and LGDs, due to the very large portfolio that we have are very much driven not only by unemployment, but also to real estate prices.But as you also know, and we’ve been discussing this over the last six years, the Spanish household has been deleveraging since the start of the previous crisis since 2010. So we have a very resilient household, we can average that that has now reached the European average. And which in general, hold a significant equity in their houses. And as you know, house ownership ratios are very high in Spain much higher than the – than [indiscernible].So I would expect for NPL ratios to be quite below the numbers that we’ve reached in previous crisis. And these will also apply to the commercial sector, as you know, their average debt is now even below the European average by over 5%. So I think the Spanish economy, the private sector as a whole enters this crisis in a very resilient situation that will definitely help cost of risk-wise.

Thank you. Thank you, Alvaro for your questions. Next question, please.

The next question comes from Jose Abad from Goldman Sachs. Jose, your line is now open.

Hello, good morning. Thank you very much. Thank you and congrats for the presentation. So I have three questions possible. So the first one is, I assume that you’re splitting out your expected losses over a couple of years even impact going to be here for a number of measures that you discussed. So you guided for between 150 bps to 180 bps for the cost of risk this year, should we assume a similar number for next year?Also, the second question is about whether you are incorporating your analysis, the potential positive impact in terms of actually a lower fee regarding warranties, particularly in Spain. And the last one is on OpEx. So you mentioned that your target you mentioned your real negative growth in OpEx. Could you please elaborate a bit more on this? So this actually, I presume you’re not expecting an inflation or very high inflation. So I presume you’re targeting actually negative actually a nominal growth in OpEx. The question is whether you think this is actually socially and politically acceptable in the growth? Thank you very much.

Thank you. Thank you, Jose for the question. So let’s do very quick. Number one, because I want to get all the questions and we don’t want to run out of time. We expect loss was 150 bps to 180 bps. What about 2021 and afterwards? We don’t know, Jose. It’s too early to tell. But as you know, what we are doing is, we are front-loading that even the future years with some smoothing out.The smoothing out is basically taking out the impact of certain quarters. But we are front-loading all the future provisioning in this new modeling. So some of it, because of that smoothing might tickle down to 2021. My expectation is it’s not going to be, it’s not going to be as high in 2021, if the disease curve, the health situation doesn’t turn out to be much worse than what we currently see.The second one, lower PDS are we taking into account the government guarantees? The answer is yes. You see it in the numbers there’s a huge provisioning we do in Spain, because of the PD impact of those government guarantees it’s around EUR 80 million roughly, if I remember correctly. So it’s not as huge of an impact in the provisioning. But yes, we are taking them into account.OpEx you said, real negative growth, because we are operating in many different countries. That’s why we said real negative growth. And to highlight the fact that this is going to be a clear discipline for us going forward. The reason is Argentina will still have a very high inflation and we want Argentina to grow much lower than inflation in costs. That’s the reason why we said real growth.But in the case of Spain, for example, our current goal is, we are going to be less than 5%. Meaning, our cost reduction is going to be more than 5%, which is quite an aggressive figure as compared to previous years. We have always done minus 4% two years ago, minus 3%, minus 2.4% in 2019, this year we are going to do more than minus 5%. So, can we do it? We think we can. We think we can, because there’s the variable compensation part, there is a natural impact on the cost space, less travel, less training a bit and so on all of that then we’ll model it, we are expecting minus 5%.So, in the case of Spain, because the inflation is going to be nil or even maybe negative this year, we are expecting obviously a much lower figure. I gave you the Spain figures, but it is true for many other countries, whatever the inflation is, even in high inflation countries, we are going to do much better than that. Thank you, Jose.

Thank you, Onur. Thank you, Jose for your questions. Next question, please.

The next question comes from Mario Ropero of Fidentiis. Mario, your line is now open.

Hi, good morning. Yes. My first question is, you said you’re expecting 6 bps from the sale of Paraguay. I’m assuming that this should happen in the short-term. So with these I’m also considering that you should have taken the bulk of the COVID-19 impact in light of what we know today, you should have taken the impact in the first quarter. So are you basically expecting the CET1 ratio to be close to 11% in the second quarter, considering how things is done today?And my second question is, please could you comment on how much you want to go or how much TLTRO III funds you are planned to take and related to these, if you can make some comments from your expectations for NII in Spain? Thank you.

How much, Mario you said how much what, sorry I missed the question. The second question.

TLTRO III funds.

TLTRO. Is it? Sorry I’m having a difficulty hearing you. TLTRO?

TLTRO III funds. Yeah. TLTRO III funds, yeah.

Okay, well perfect. TLTRO, I met your topic. So take it on the first one. Are we going to be above 11% at the end of the second quarter? We don’t know, we don’t know. But what I’m telling you is, because the second quarter is too short and we might see some, again, not as much as in the first quarter, because we have done a lot of front-loading, but we have to watch the macro, watch the situation and so on. So there’s a lot of uncertainty there.What I can tell you is, we are going to be going up in that range. We gave 225 bps to 275 bps. Our expectation is, every quarter we are going to go up within that range. You said, 6 bps from sale of Paraguay, it’s going to happen in the second quarter. Again, that’s the expectation. If it happens, it’s definitely going to help to get to that 11% number that you are mentioning, but hopefully it will be done, because the – given the situation it is – see our expectation is, it will be completed in the second quarter, but you never know.So given the high uncertainty, I’m not going to answer whether we’re going to be at 11%, because it’s kind of a commitment. But what I can tell you is, we are going to continue to go up in every quarter, given where we are and if things turn up to be as we expect them today.On TLTRO. Jaime?

Yes, so as you guys know, we can borrow now 50% of the outstanding eligible loans before it was only 30%. So that means that we can draw instead of the former EUR 21 billion, an amount of EUR 35 billion, that is EUR 14 billion additional that we will hope to draw in June. As you know, we drew EUR 7 billion in December and additional EUR 7 billion in March that we were expecting to draw EUR 7 billion in June, but this number has now changed to EUR 21 billion.The net contribution will be EUR 14 billion as will be repaid back EUR 7 billion that we have outstanding. This will – this amount – these additional amount plus the better remuneration that we will have, because as you know, we can obtain up to minus 75 basis points if we grow the eligible portfolio – well the eligible portfolio remains flat between April ‘20 and March ‘21 means that, we expect to have an additional positive contribution in NII in Spain of roughly EUR 150 million that will be evenly distributed in 2020 and 2021.

Thank you. Thank you, Mario. Next question, please.

The next question comes from Ignacio Ulargui of Exane BNP. Ignacio, your line is now open.

Yeah. Hi, good morning, everyone. Thanks for the presentation. Just have two questions. One, if I just looked at your macro scenarios, Mexico growth looks like the weakest of all your footprint. So how do you think that will impact operating trends? How do we see Mexico in 2020?The second one, with the recent changes from the European Commission in IT intangible deductions from capital, you plan to change your strategy regarding OpEx and the CapEx and how that and whether that is behind the negative real growth in costs? Thanks.

Thanks, Ignacio. The second one, Jaime, you take it. On the first one Mexico, yes, it’s a wide range. It’s a negative range 6% to 12% negative, mainly because of the fact that it’s, as you know, very relatively informal economy in Mexico. And the government support program in terms of size is a little bit less than other countries. So that’s one of the reasons driving that negativity.But as you know, as you know, our bank in Mexico is in our view and, again, I keep saying it every quarter, it’s like our baby. So maybe we are a bit subjective, but I think I’m not because of the numbers that we see we have the strongest bank in the country. We have the strongest bank in the country in terms of size, scale, in terms of customer franchise and so on.So the operating trends, obviously, net interest income will be affected a little bit. Net fee income will be affected, because the payment systems is very important for us. The payment system revenues in Mexico, it might be a bit on the lower side, obviously. But we do think that given the franchise that we have in Mexico, we will do really well in the country.On the second one then. Jaime?

Well, as you know we’re deducting – a little over 45 basis points almost 50 basis points in CET1 and due to intangibles, but evolution of both OpEx and CapEx has nothing to do with this. The EBA still needs to issue its regulatory technical standards until that happens, there’s still not a clear certainty on what’s going to be the CET1 uplift from this regulation.The evolution of OpEx and CapEx is explained by what Onur has said. In general, personnel expenses are on the low side, because of lower variable compensation across the board and also general expenses are behaving very well, less travel, less discretionary expenses, in general. And also CapEx amounts will probably go down this year versus last. All these measures are already helping in Q1 numbers and will help additionally as the years go by.

Thank you. Thank you, Ignacio. Next question, please.

The next question comes from Andrea Filtri of Mediobanca. Andrea, your line is now open.

Yes, good morning and thank you for taking my questions. I have got one on capital and one on emerging markets. And on capital, we hear loud and clear the changes in the targets, but can I ask you, what is the lowest level that optically you would be prepared to report if the evolution of the crisis went south from here? And could you quantify in bulk, the benefits from the regulatory relaxation that has been made over the past period including yesterday or two days ago from the European Commission?And secondly on emerging markets. Your provision has seen largely focused on developed markets. Even if there is an oil and gas exposure in emerging markets if you have included in your upfronting. Yes, emerging markets seems to – seem to be badly hit by COVID as well and with little government responses. How are you picturing your emerging markets to manage the COVID-19 crisis? And why are there such low provisions upfronting in Mexico despite the large downturn? Thank you.

Thank you, Andrea. Let’s just jump into it. So the capital – on the capital. What is the lowest level that you would be going to? As I mentioned, we have a clear goal, because of market and so on, maybe there can be a bit lower – you can see lower figures, but our goal is 225 bps to 275 bps. That’s where we feel – we will feel comfortable. And we are at the 225 bps already within the range and we are guiding you that we will be moving up within the range. That’s where we will feel comfortable. We wouldn’t feel comfortable with any other figure, let me say very clearly.On the regulatory adjustment, yes, we will get some help. Again, I hope it was clear to all of you who are watching this, we were very conservative in our calculations of provisioning, again as compared to others that we have seen in the past few days and weeks, especially the European banks, very conservative also in the capital calculation or capital planning.In the sense that we haven’t taken any of the potential regulatory levers that were kind of mentioned, but not fully finalized. We haven’t taken any of that. We haven't taken the proven valuation guidance, because it's not finalized, it has to be first published in by EC and so on. So that’s going to – for example, bring us when it’s published and we’re expecting it in the second quarter, 3 bps, which is not included in the current figures.Yesterday’s EC decisions, the SME supporting factor and software deduction, they are going to help us in a very important way. The software deduction the impact on CET1 today or the full deduction that we are doing is 46 bps today. Obviously, we don’t know how much of that we can release, but and it will depend on the final details of the statement that will be coming out, the details will be worked out. But soon enough, we will recover some part of that 46 bps. Some part will be driven by the final guideline.SME supporting factors similarly 5 bps to 9 bps, we will get when it’s publicized and finalized. All of that will be coming hopefully some of that is going to be coming in the second quarter and in the coming quarters. But we haven’t put any of that into our current March ‘20 figures unless we see it written and done, we decided to be on the conservative side.Then emerging markets –

Onur – Onur, let me add to these that – not only that, additionally in Q1 numbers, there’s no benefit from market risk in the flexibility on the multiplier that the supervisor has given as well on IFRS 9 phasing our 10.84% is fully-loaded, okay as opposed to what other banks have done.

And then you mentioned Jaime, what other banks have done, but as compared to some other banks, very quickly I mean there are very few, very important levers that we haven’t tapped into or we are different than others. First of all the dividends, many other banks have cancelled their 2019 dividends. In our case, given the fact that we did complete our general assembly on March 13th, we had to legally pay it. And that’s a 29 bps difference versus some other banks who chose not to pay any dividends for 2019 results.The COVID provisioning, we did mention it again, we did compare what we have been doing with the announcement of different European banks. We are clearly on the conservative side of the provisioning, we think it is well worth to be conservative in these days, but in our calculation compared to some other banks that we have looked into as compared to our RWAs that’s another 15 bps, 20 bps of a difference in terms of conservatism.Then we have had a high growth as compared to others. If you look into our lending growth in the first quarter, we grew way bit higher. I would reiterate this topic that although you also asked the profitability of that new production that we are doing is really good. I mean, the risk adjusted returns, which is our key management metric for – to manage the profitability of new capital deployed, we are seeing 3 times more, 3 times more profitability in that new production. So we have grown a bit more than others that additional growth is another 10 bps or so.As Jaime mentioned, many other banks have used some regulatory flexibilities. We haven’t. The market risk multiplier was not applicable to us in any case, the TRIM reversions…

Thank you. Yes. Thank you, Andrea. Next question, please.

The next question comes from Sofie Peterzens of JPMorgan. Sofie, your line is now open.

Yeah, hi. Here it’s Sofie from JPMorgan. So I was wondering if you could give us an update on your FX sensitivity and also your FX hedging policy. Then I – if you could also make a comment on the Spanish government guaranteed lending, how much of the ICO lending have you taken up? And what kind of ROEs are you making on this type of lending?And then my final question would be on payment holidays outside of Spain. What kind of level of payment holidays do you see in the US and Mexico and Turkey and South America, please? Thank you.

The FX hedging policy, do you want to start Jaime?

Yes, sure. We currently have hedged around 100% of the expected results coming out of Mexico for 2020. And roughly 50% of the results are coming – expected results coming from Turkey. Regarding CET1 excess hedges, we currently have 75% of Mexican CET1 excess hedge and 52% in the case of the Turkish lira.These two numbers leave us a sensitivity of around minus 3 basis points for every 10% depreciation for the Mexican peso and the Turkish lira. And we have a minus 1% minus 1 basis points sensitivity for the Peruvian sol –

And Sofie, on the second and the third question is on the Spanish government lending, the ROEs. First of all, that whole program is very strictly managed. You can only lend to our core clients and every bank can lend to their own clients, you cannot go to new clients, number one. And number two, you have to go with the prices before the crisis. So the pricing policy is also partially controlled in the sense that, you cannot go beyond the usual prices of pre-COVID it’s not clearly strictly defined, but I think their messaging is very clear in the program. Cut the long story short.So the returns are very high, because we are maintaining the spreads and there is a government guarantee which help on the risk adjusted returns, because the government guarantee helps on the risk weights. So it’s very high, because of the pricing policy and because of the ROEs, but the pricing again is managed in such a way that the customer doesn’t pay much more than what he was paying before.On the payment holidays in other countries, it is happening everywhere. It is happening everywhere. In certain cases, it is government guided and directed as in the case of Spain, there’s the mortgage moratorium as you know, and then beyond that the sector has come up with additional measures to help the customers.But our policy in general, is the same in every single country, which is, we try to restructure as much as possible in the context of, if this is going to be a v-shaped as we are projecting the payment capacity of customers will come back up, if things continue to be as we are projecting, which implies that if there is not a major issue in the credibility of the customer, so if there is no solvency potential issues, we try to restructure.

Thank you. Thank you, Sofie. We are running out of time. So probably we have time for the very last question.

Because we took the presentation a bit long. Gloria, if you like we can continue for the ones who can stay until 11:15. Okay.

That’s perfect. Next question, please.

The next question comes from Stefan Nedialkov of Citigroup. Stefan, [technical difficulty]

Yeah, hi guys. Good morning. A couple of questions. So just coming back on an earlier question on the payment holidays. Could you tell us what’s the percent of defaults that you expect when you came up with your provisioning for this quarter? Is it 10%, 20%, 30%, 0%? Some color on that would be very useful.And the second question is on the 150 basis points to 180 basis points guidance for 2020. Can you provide us with a breakdown by country, especially interested in Mexico, US and Turkey and Spain obviously? Thank you.

Thank you, Stefan. Very quickly on the first one, the payment holidays. What are we expecting? It’s in the numbers. In the sense that we already put that into this extraordinary provisioning. So we are basically more than doubling every single portfolio more or less, it changes from one portfolio to another, I’m giving you a general number. But as you know, our typical provisioning is around 110 bps. And we have taken 257 bps, is multiple, the multiple that we are looking into there is basically on average apply to all the portfolios.And as you have seen in – for example, you were asking certain countries, the Mexico number, the cost of risk implied with the provisioning that we are taking is 530 bps, 530 bps is the cost of risk so but any NPL, any delinquency you take it, you multiply it by that multiple of 257 bps divided by 116 bps more or less.On the 150 bps to 180 bps, the breakdown by country. As I mentioned, this is a broader guidance given the huge uncertainty of the evolution in different countries, we don’t want to mislead you at all. So that’s why we have chosen to do that. Obviously, we have done our work at the country level. And that’s why the provisioning you see in that table that we provided, but for the forecast or the future going forward.What I can tell you is what we said throughout the presentation, which is, take the first quarter numbers as front-loaded provisioning and expect in every single country that we are going to be below that. That’s what we would be guiding you for different countries, significantly below that 257 bps, as I said, is going to, in our view, as it stands, we’ll come down to 150 bps to 180 bps. Thank you, Stefan.

Thank you, Stefan. Next question, please.

The next question comes from Ignacio Cerezo from UBS. Ignacio, your line is now open.

Yeah. Hi. Good morning. Thank you for the presentation. I have three questions on capital. If you can share with us what kind of RWA inflation are you factoring in your yearend guidance from the Q1 number? If you can remind us the percentage of FX lending you have on the main emerging market economies. And if you can give us a flavor of the capital sensitivity to the bond portfolio in the main countries as well for 100 basis points increase over –

What was the – Ignacio what is the third question? Sorry, I miss it again?

Yeah, the CET1 sensitivity to the OCI portfolio, the dips of OCI portfolio in the main countries for 100 basis points increase of the [indiscernible]?

We have it in the appendix but the third one, the OCI portfolio, I leave it to you, Jaime. On the percentage of FX lending let me give you very precisely the figures. Obviously, it is higher in Turkey, in Peru. So the in terms of total lending, total lending 36% of the portfolio in Turkey is FX, in Argentina 19%, in Peru 34%, Mexico 17%, Colombia 3%. Okay so that’s the percentage of FX lending.The debt OCI portfolio, Jaime? Jaime?

Yeah, sorry, I didn’t press the right button. It’s – I’ll give you the number in Spain. It’s a 100 basis points, a 100 basis points decrease will affect 13 basis points the CET1 ratio in Spain. As you know, the Spanish sovereign is the most relevant ALCO portfolio that we have.

Ignacio, the key one is the Spanish sovereign again, 100 bps is 1,300 bps in the curve is 13 bps in capital. On the RWA inflation, Jaime anything to add? We won’t provide guidance, Ignacio, that’s the thing –

Correct. That’s what I was going to say.

Because there is also market in the credit RWAs are also affected by the growth, our expectation is the boost that we have seen in the first quarter obviously cannot be extrapolated, because of the dynamics that we have talked about. But we don’t provide guidance on RWAs, because we have to see how it moves along. As long as it’s profitable and our key clients, we’ll continue to grow but it’s not going to be as large as the first quarter. See, let’s go. Now we are late, but yeah. Gloria?

Yeah, thank you, Ignacio. Next question, please.

The next question comes from Benjie Creeland-Sandford of Jefferies. Benjie, your line is now open.

Yeah, good morning, everyone. A couple of questions from me. You’ve just touched on it, but just going back to the 4.5% loan growth that we saw in the first quarter, maybe perhaps you could give us an update and how that has trended through April? And related to that, I mean, I’m guessing a lot of that growth came through in the latter part of 1Q. So do you expect any later uplift or benefit to revenues to come through from that growth in 2Q numbers?And the second question is on capital. I know you’ve given us the sensitivities. But perhaps if you could just break out the 47 basis point negative impact from FX and mark-to-market this quarter just the different components of 47 basis points in 1Q? Thank you.

Very good, Benjie. Very quickly on first of all, the growth, the 4.5% that was mentioned, 4.5% was mentioned is one-third came in January, February, two-thirds came in March, as you say and towards the latter part of March, as we mentioned, because of the liquidity draws of different clients. Are we going to see some benefit from this in the second quarter? Obviously, yes, there are so many other moving parts in the accounts, but that piece particularly is going to help obviously. Are we seeing some stabilization in that number? Are we seeing some, again, normalization in that number? The answer is absolutely yes.Then in those two weeks, for example, from our large – very large CIB clients, which are very healthy and very credible clients, let’s say, we have seen – let me just give you a segment of the total growth is EUR 7 billion of increase, that EUR 7 billion of increase for that same sub-segment or very large clients is less than EUR 1 billion in the month of March. So there’s clearly some stabilization in that draw.On the breakdown of the FX impact. So it’s 18 bps came from FX, mainly Mexican peso, but 18 bps from FX, equity was 16 bps. As you know, we have an equity portfolio mainly Telefonica, it had an impact on that one, and fixed income was 13 bps, mainly the Spanish sovereign. Okay, next one.

Thank you, Benjie. Next one, please.

The next question comes from Fernando Gil De Santivanes from Barclays. Fernando, your line is now open.

Hi, hello. Thank you for taking my question. Just a question on the US. What is the current book value after these goodwill’s depreciation that we have seen? Thank you. That's it.

It’s EUR 185 billion, EUR 185 billion. So in –it started at 2007 with 9.2%. Now we are at 1.85%. And the total goodwill that we have in all of the books is around 2.7%. So most of it is remaining is the US. Well next one.

Thank you, Fernando. Next –

The current book value is EUR 8.1 billion for US.

You were asking, okay, but I thought you were asking the goodwill. In any case, yeah, you have the numbers. Perfect. Britta – Gloria, sorry?

Yeah. Next question, please, operator.

The next question comes from Britta Schmidt of Autonomous. Britta Schmidt, your line is now open.

Yeah, hi there. Thank you very much. Just one question, please. In line with some of the other banks you manage now a CET1 buffer and not the MDA buffer? Can you explain a little bit as to why that is your AT1 shortfall is not very large? But of course, numbers are going to change a bit depending on our RWA for this year? And maybe you can also give us an insight as to whether you have got any intention to fix that this year the AT1 shortfall? Thank you.

See, the AT1 shortfall is EUR 575 million, when the markets are open in terms of also pricing our intention is to cover that, yes. Depends on the market a little bit. CET1 and MDA, yes. We have chosen to CET1 management buffer because it’s more in the eyes of everyone. But obviously we keep an eye on MDA as well, given the fact that we can’t finance ourselves in AT1 and Tier 2. We thought the MDA buffers expressed in CET1 management buffer terms is a better way to approach this. That’s why we have the CET1, because we can access the markets in AT1 and Tier 2. Okay, next one.

Thank you. Thank you, Britta. Next one.

The next one comes from Marta Romero of Bank of America. Marta, your line is now open.

Thank you very much. And thank you very much for the presentation and answering so clearly to all the answers. I’ve got a couple of quick ones on Turkey and Mexico. The first one on Turkey. What do you think of the continuous regulatory interference there? How are you going to be managing your new asset ratio target? Are you buying more bonds? Are you getting more loans? And are you going to be very productive on the new credit guarantee fund?And the second one on Mexico? And I know it’s tough, but it would be very helpful if you have a rough estimate of the potential impact on regulatory capital if Mexico were to lose its investment grade rating? Thank you.

Jaime, I leave the second to you. On the first one on the Turkish. What we think about the continuous regulatory pressure? It comes in different shapes and forms, Marta, but we are an emerging market bank as well and we do operate in many emerging markets. So we do see different versions of regulatory scrutiny and regulatory rules in every single country. We have – that’s who we think we are. We do manage emerging market banks in many countries. So we will manage it through.As long as the regulatory topics – as long as it is for the benefit of the country, as long as it helps the growth of the country actually, we are all pro for that. We do exist with the countries that we are operating in. So as long as the regulatory rules are helping the growth of the economy in general, we are fine with it, because you will benefit it in the long-term.In the context of the asset ratio, it’s kind of an anti-liquidity measure to be fair, we are not that far off from the 100% that the government is putting on the table. So we have multiple levers to achieve the 100%. Our expectation is because it’s going to start as you know, to kick in as of May the 1st, our expectation is, we will be within that 100% range, because we were not that far off as the policies implemented as of May.Jaime, on the second one.

Yes, in general, as you know, we have a lot of internal models in Mexico, especially for the corporate – for the corporate portfolio. So it is an internal rating, the one that applies to calculate the PDs and LGDs and so RWAs. As you also know, we have regulatory equivalence in Mexico. So local currency sovereign bonds exposure has zero weighting.The foreign currency bond portfolio is the one that it will be affected. But in order for it to increase from 50%, the current 50% risk weighting to a 100% we will need an additional reduction of between 1 and 3 notches by 2 of the 3 rating agencies. So it’s something that is still as I think far away, and the impact will not be that relevant.

Thank you. And I’m afraid we are now just running out of time. So we need to end it here. And thank you very much for participating in this call. And let me remind you that of course, the entire IR team will remain available to answer any questions you might have. So Onur I don’t know if you would like to close.

Thank you to everyone. Stay safe, stay healthy. See you next quarter. Thank you to everyone. Bye-bye.

Thank you so much.