Okay, I think we are ready to go. Morning all, welcome to this Q3 Earnings Presentation from Banco Santander. Just to be consistent with previous conference calls, our CEO will address the Group performance as of nine months 2015; the CFO, our Group CFO, will cover the different business areas’ performance, and obviously, the CEO will conclude the presentation with the concluding remarks. We will have time for Q&A. As always, I will appreciate if no more than two questions per caller are asked. With no further delay, José Antonio, the floor is yours. José Antonio: Thank you, Sergio. Thank you to everyone for attending this third quarter result presentation. Let me to start the session just going through the environment, which we have been developing our business in the quarter. As you know the macroeconomic environment has been different depending on the geographies. We have had the relatively recovery or good macro-economic developments in several countries, particularly UK, U.S., Spain and also in Poland. Some slowdown in emerging markets, particularly Mexico and Chile, and adjustment that is going on in Brazil that we expect to continue for a while. In relation with the banking business, so two major impacts are affecting profits. The first one has been highly recurrent in the results session, thus not affect that much us, that is the market’s high volatility. That for our business, the only part that is affected is the valuation of the portfolios, but not the commercial business, being mainly retail and commercial one. The second impact that it affects us is the ForEx, exchange rates, which reflects on appreciation of emerging countries’ currencies against the euro and the dollar. At the same time, and this is not new, interest rates remains historic lows comparison, in some markets remain – the…

Thanks, José Antonio. Indeed we open now the Q&A session. I will appreciate if you limit the number of questions to two so everyone can participate. So please, Operator, proceed to pass the first question.

[Operator Instructions] The first question comes from the line of Raoul Leonard from Deutsche Bank Research. Please go ahead.

Good morning. I just wanted to ask two questions. One was, can you go into a little bit more detail on the changes in the valuation with us. It looks like they fell €4.6 billion quarter-on-quarter. I mean, I think there is obviously FX and the deferred tax liabilities expenses and FX. But if you could just break that down a bit more, so we can get a sense of where this might go in the future as different market rates move around. Secondly, this is more of a generic question on consumer finance. Are you seeing any ripple impact from the VW diesel issues. I don’t know whether that is a positive for you guys; could you distribute VW cars or Audis or Fiat. Can you just give us a sense on how you’re looking at that fuel business? Thank you. José Antonio: Okay, so the first question is about valuation adjustments. Well, let me explain our FX hedging. So as we’ve been stating to you for well, we have a policy that is to hedge the capital ratio at the Group level. That means that in a given geography, it doesn’t matter which is the currency, the capital ratio is in line with the Group one, we do not hedge anything, because all the impact of the FX comes at the same time from the risk-weighted assets and the capital in the same currency. If the capital ratio in a given geography is higher than the Group capital ratio, we hedge the cess. The opposite happens when there is a deficit in a country compared with the Group. So that means that the capital at the level of 10%, 11%, remain unhedged in the sense that if we hedge the ratio, not the absolute level of capital. So…

Thanks for your question, Raoul. Operator, next question please.

The next question comes from Ignacio Ulargui Lopez from BBVA. Please go ahead, sir.

Hi, good morning, gentlemen, [indiscernible] the capital accumulation that we have seen over the past two quarters, 13 basis points that you have [indiscernible] slightly above the 10 basis points you have guided for on Investors Day on a quarterly basis. [Indiscernible] explain because of lower risk weighted asset [indiscernible] what you expect or because of a stronger profit? And also just to understand whether any of the [indiscernible] in the FX could be [indiscernible] any time soon. And finally, [indiscernible] in Spain, if you could elaborate a bit on the cost of risk outlook that you see for the domestic unit, whether we should [indiscernible] in terms of operations over there; 55, 60 basis points where you have been [indiscernible]? Thanks. José Antonio: Well, capital generation, as I mentioned in the presentation, you refer to which part. It is true that we have been generating organic way above our guidance of 10 basis points. I mentioned in the first two quarter 45 basis points, but well 10 basis points, let me to say is the safe play, yes, so we may be above this and we have been above this for three quarters in a row, but in some jurisdictions we were expecting to have higher growth. As I mentioned in Spain we were expecting higher volume growth in risk-weighted assets, and it has not materialized. But let’s say 10 basis points is in the safer side on organic capital generation, and in relation with risk-weighted assets we will plan to stick or we expect to stick with the guidance we gave you to grow in mid-single digits in risk-weighted assets going forward. Domestic Spain cost of credit, while it’s true that we have been telling you for a while that the cost of credit in Spain across the…

Thanks for your question Ignacio, let’s move on to the next one, please.

The next question comes from Stefan Nedialkov from Citi Group. Please go ahead, sir.

Hi guys good morning. It’s Stefan from Citi. I’ve got two questions. The first one is on Brazil. You did give us some guidance over the short term on the NPL ratio. You said 4.5% – sorry cost of risk 4.5% to 5%. But if I were to take a step back and look through 2017, if you were to look at the next couple of years as a cycle, where do you see the NPL ratio and the cost of risk peaking? Are you still looking at 5% for the cost of risk or something higher or maybe lower by 2017 so over the next couple of years? And the second question is actually a combination of a couple of I guess, quick – quicker smaller questions. The Metrovacesa consolidation, does that impact capital at all? Secondly, the tax rate in Brazil and Mexico came in quite a bit lower versus – at least to my expectations and also q-on-q and year-on-year. Anything interesting going on there that we should be taking into account? And the third small question is hedge benefits in the P&L, the FX hedging benefits for 3Q, what was that at the Group level? Thank you very much. José Antonio: The second question the tax rate in Brazil and Mexico and the hedge benefits. Okay, Metrovacesa. Okay. Brazil, let me to elaborate on the asset quality on Brazil. To understand our expectations in Brazil, you should start – how much we have changed the mix in the last two years. It is necessary to understand this. We reduced significantly the weight of the consumer portfolio, the unsecured part of the portfolio, and we increased significantly our exposure to the large corporates and to the mortgage market. So our portfolio is now much more secure than…

Okay, thanks Stefan. Let’s move on to the next question, please.

The next question comes from Alvaro Serrano from Morgan Stanley. Please go ahead, sir.

Thank you for taking my questions. Two questions. One on the NII outlook in Spain over the next couple of quarters, is this the level of deterioration we should expect as you roll out the 1/2/3 account in particular? Can you comment how you expect in the next few quarters the loan growth to play out? Obviously, loan demand is improving. You’ve given us some data, but the stock continues to control. When do you think the stock loans in Spain is going to start growing as we expected earlier in this year, but it doesn’t seem to come though. Then the second question is around the NII outlook in Brazil. You see in the quarter, you had a good development in local currency. I seem to remember you had the trade finance book in dollars in Brazil and I assume part of that is the reason for the good NII trends. What kind of NII growth is sustainable over next – looking into next year in Brazil? Thank you. José Antonio: Okay. Let’s start with Spain NII outlook. Well, the NII in Spain as we said on the liability side, we expect the cost of deposits to remain flat. We announced and we said that in Investor Day that we still that we – this is our best view in relation with this. When it comes to the asset side, there is still some depreciation trending down the mortgage book given the level of [indiscernible] one year now compared to one year ago, so still some trend down. Having said that, we are not as pessimistic as we were in the front book, and the front book we think that there is margin compression, there is competitive pressures on the asset side, but there are less so now than…

Thanks, Alvaro. Next question please.

And next question comes from Mario Ropero from Fidentiis. Please go ahead, sir.

Hello, good morning, two questions. The first one is since the 1/2/3 strategy is so important in Spain could you please give us some more color on the delta that this strategy has cost in the quarter in terms of fee income and also in terms of net interest income? And then second question is please if you could give us the breakdown of ALCO book in Spain average duration, average yield? Thank you. José Antonio: Okay. As I mentioned, as José mentioned clearly 1/2/3 is and the strategy to take into account this strategy probably in the short run and we said in the Investor Day this year is going to be overall slightly negative in €30 million to €40 million in the P&L in Spain. But it should be in a strategy we are betting in more loyal customers in Spain and in gathering not more deposit in gathering more transactionality with the customers more customers engaged and with more than transactionality. We are progressing well on this. Very well on this, we are as José also mentioned regarding 1,000 payrolls a day on average and we expect as we said that overall taking into account NII fees and transactionality with those customers in 2016 the 1/2/3 to be breakeven level. So everything taking into account, naturally this has some negative NII and some positives in fee income and mainly in fee income that will – but at the end we will have a much better franchise with more capacity to generate profits going forward. And this is our bet to have more loyal customer in Spain with more transactionality with the Bank. The Bank being the first bank for those customers. Naturally this has balance between NII and fee income that – but overall, I said to you numbers are slightly negative this year breakeven next year. This is our expectation for the 1/2/3.

The ALCO portfolio in Spain, at the end of September was €28 billion to 2% average yield and four year average duration. Thanks Mario. Operator, next question, please.

The next question comes from Johan De Mulder from Bernstein. Please go ahead, sir.

Thank you. One specific question actually about the increase in client provisions. So we see there is a 5% increase over last quarter. So we are just wondering what exactly does that consist of? Thank you. José Antonio: I think you refer to the corporate center in – this is basically in the corporate center. We are anticipating provisions that we think that we should do it in the next quarter. So there is some kind of anticipation there and this is what why mainly in the corporate center, this figure goes up.

Thank you. Next question. Operator The next question comes from Darrell Queen from KBW. Please go ahead, sir.

Hi, it’s Darrel here from KBW. Just had a couple of questions. One on Brazil just on the asset quality, if you could just give us maybe a bit more color on the asset quality by segments and [indiscernible] if there is any differential performance in asset quality from the corporates U.S. dollar loan book. And then Spain, just a follow-up question just to be clear on the – your comments on the competition, competitive environment in Spain and your [indiscernible] being less intense than before and close to the bottom. Is that [indiscernible] competition in Spain? José Antonio: Okay. Brazil some color by segment you ask, as I said before the [indiscernible] we are seeing as of today and I mentioned before, we are now seeing deterioration on the retail book those are the factors as of today. We are seeing some deterioration in the book in mid-size large corporates and we are now seeing deterioration in the very large corporates that belong to the global corporate banking model. Naturally we acknowledge that the economic situation is difficult, the country is in recession. GDP is going down significantly and that reason and for that reason we recommend us to be proven. And we are being proven in our provisioning policy in relation with those situations that within that they can deteriorate in the future. But as a matter of fact we gave you the comparison with other local banks in local terms and you see that quarter-on-quarter our over 90 days NPLs remain flat in the quarter. We acknowledge that there is some deterioration and we may more impacts in the future. In Spain, referring to the competitive environment, already mentioned well we saw a significant drop in asset spreads particularly in terms you’ve seen because it is fairly…

Thanks, Darrel, for your question, next one please.

The next question comes from Robert Nobel from RBC. Please go ahead, Sir.

Hello, good morning. Sorry to oppress you on Brazil again, you must be getting bored. You said the cost of risk could be in the 4% to 4.5% to 5% region and NII you are positive. I just wanted to square those two things off. Do you expect further pressure in NIM adjusted for provisions? And on a worse case in your internal stress test where do you see Brazilian cost of risk going? And then on the UK, I know that the NIM is in line with your full year guidance and that kind of means it will come down in Q4? Do you expect NIM to continue to going down in the UK in 2016? Thank you. José Antonio: [Indiscernible]. So Brazil – I referred already to this. Brazil, different book spreads are going up, so probably – we need to mention. So, the same products today and one year ago the spreads went up, yes, this year it went up and the spread went up on a like-for-like basis. What has happened to us, the change in this is so significant and remember that we have – the gap between the spreads in different segment is huge in Brazil. So, when you go to the consumer side probably the spread is in the region of mid double digits 16%, 17% or 15% when it comes to large corporate it is below 2%. So small changes, it means translating into material changes in the overall spread. So for that reason I am relatively positive constructive I said in the NII, because I do expect the spreads to continue to go up mainly in corporates and large corporates but also in some consumer products. At the same time the costs of risk from the 4.3%, 4.4% we expect to go up in the region 4.5% to 5% and this is what I elaborate about this before. NII in UK, two developments here, the mortgage market has become more competitive, we saw some – in the margin – there is more competitive pressure there. On the other side, we are growing faster in SMEs, so we are growing at 11%, 12% if I remember well in SMEs. So the combination of both make us to be not positive but probably we have some pressure there but not a significant pressure. The SBR continues to be the main drag on NII. So, as you know this is always difficult to forecast the volumes that we are going to keep in NII but overall in mortgages some margin pressure, while in companies we expect to have positive developments both in volumes and in fee income generation and NII. So overall we remain overall constructive on developments in the UK. JoséGarcía Cantera: Obviously if interest rates – when interest rates go up obviously that will help, we are positively geared towards increases in interest rates in the UK.

Thanks Robert. Next question please.

The next question comes from Carlos Peixoto from BPI. Please go ahead.

Hello, good morning. Just a couple of quick questions. The first one will – what is related with the NPL and new entries, we witnessed an increase at the consolidated level. My assumption here would be that this is mainly related with Brazil but I would ask if you could give us some color on that. The second one would be relative with Core Tier 1 targets for year end, the 10% targets. Do you stick to it or do you see the risk of FX or other items hampering organic generation throughout the first quarter as it was the case in the – in the third one? Thank you. José Antonio: So, I don’t have the figure from the – do you have it? JoséGarcía Cantera: Yes, it was up – let me go to the second one –, José Antonio: Well, I’ll go with the second question while José looks for the numbers and your answers in Brazil. The Core Equity Tier 1 at the yearend I would target this to be a 10%, and we think that we can get there. Yes, so naturally we already elaborate about the volatility coming from available for sale portfolio that had some volatility. But we have what is in our control we think that we are going to stick with the target we have for this year and also I mentioned the target we have, the medium-term target that is to go to 11% but we feel comfortable with the target for the year end knowing that there is some volatility out of our control. And the new entries in Brazil you have… JoséGarcía Cantera: No, we don’t have that figure, we’ll get back to you. Most of the impact was due to companies or 100% of the increase was due to the deterioration in the corporate and companies sector. José Antonio: Now we don’t have…

We will come back to you with these figures in new entries in Brazil because we don’t have in local currency and in euros probably this figure is distorted by the FX. José García Cantera: Yes, thanks Carlos. Next question please

The next question comes from Francisco Raquel from N+1. Please go ahead, sir.

Two questions. First and I wanted to ask about the contribution of the bond portfolios to the NII in both Spain and Brazil in this first quarter. And how much was it in the second quarter? And also on the UK we saw some [indiscernible] of loan losses and you mention micro housing sector, so how much is left here to recover and what should be the cost of risk for the coming quarters? JoséGarcía Cantera: In terms of the ALCO portfolios I already gave you the figures. In Spain it’s – we have €28 billion with an average yield of 2% and an average duration of 4% and in – four years and in Brazil we have BRL30 billion plus at an average yield of around 10%, 10.5%. José Antonio: Cost of risk in UK. So, this quarter came normally low because we had some release in provisions, but going forward we do not see a material change not from this quarter from the previous quarter. So, we see a very good environment for cost of risk in the UK and we are not seeing any kind of sign that we should or we should expect any kind of change in this dynamic. Not in this quarter. JoséGarcía Cantera: Sorry, there was one off – you ask about reversals in the quarter, there was a one off reversal in the quarter basically as a result of the improvement in the ratings and quality of our customers in the mortgage portfolio.

Next question please.

The next question comes from Britta Schmidt from Autonomous Research. Please go ahead, madam.

I’ve got two questions please. The first one would be on Poland. What do you think is the odds or what are your expectations with regards to a potential banking tax after the elections and also a solution to the [indiscernible] lending issues? And can you perhaps tell us what capital target Visa-W has been given and whether you anticipate any measures to offset any negative impacts on the P&L going forward? And the second one would just be a clarification on some of the Spanish impact with regard to the DTA solution that has been found. Can you give us any guidance as to what this was cost to you the 1.5% agreed with the European Commission? And secondly, should we expect any impairments on the side of equity investment or potential subordinated debt conversion? José Antonio: Okay. The first question in relation with Poland. Well, you know that in Poland the market has been talking for a while about the Swiss franc portfolio, our Swiss franc portfolio is now is in the region of €3.6 billion or €3.7 billion. While we need more clarification on this you made your own numbers we don’t have any material information to add what has been discussed in the parliament and we are expecting the new government to put some proposal on this. We are not particularly pessimistic on these and we think that we will find a balanced solution and we are working along with other banks in the country to find out a balanced solution for this problem that so far has now created [indiscernible] relation in portfolio, the non-performing loans in the portfolio is very low, and the affordability ration of the portfolio remains at the very good levels. So, there’s now a problem, a financial problem in the sense that the borrowers cannot afford to repay the debt. This – an old proportion that’s coming and going in relation with potential higher taxes we already elaborate before about what we expect on taxes at the Group level. DTH in Spain, the government reached an agreement – and I don’t know it will publish – is public but we expect this has to cost in the region of €60 million or €50 million, €60 million per year. Initially, this [indiscernible] depends on the amounts of DTH we have under this so called warrantee government work.

I’m afraid we just have time for one last question, please.

The last question comes from Rohith Chandra Rajan from Barclays. Please go ahead sir.

Hi, good morning. Thank you, just two quick ones from me, please one on currency and the other one is coming back to UK revenues. So, just on currencies, you talked before about selectively hedging budgeted earnings one year forward. Just wondering what the appropriate exchange rate we should think about for next year would be. Is it something around like current levels? And then secondly, on UK revenues. On NIM if I understood your previous comments correctly current trends should continue until we get a change in the UK interest rate environment, which could prove to be an inflation point in margin I just wanted to check I correctly understood that. And also fees are down 7% quarter-on-quarter the lowest for instance the beginning of 2014, just want to make sure if anything in particular we should bear in mind there? Thank you. José Antonio: Okay. The first question on hedging policy also it is very well known we hedge the capital ratio. This is our policy, we always hedge the capital ratio and expect the results of the next 12 months this practical approach. Sometimes we do hedge, sometimes we don’t and José before refers to the impact in this quarter of the hedge in the P&L this hedge was mainly Brazil and the impact was mainly coming from the hedge we had and we still have on the expected results on Brazil. The impact in capital levels from the hedge the cost of the hedge is around 10 basis points per year –yes. Seven, they tell me seven basis points per year is the cost of the hedge, just the capital hedge – the capital ratio hedge we have in place, this is the cost per year. Referring to the net interest margin in UK, I already elaborate on this. I tell you basically we see some margin compression on mortgages, we are changing the mix we made offset partially this – mortgages is mainly due to the main effect comes from SBR this the major effect. But the front book is some margin – some competitive pressure on the side and on the SMEs side we see quite stable environment in terms of NIM generation, as we grow 12% in one, and 4% to 5% we are growing the mortgage book, probably some margin compress is expectable there, and we can expect that – that we expect to offset with partially or totally with higher income – high fee income.