Good morning, everybody, and welcome to Banco Santander's Conference Call to discuss our Financial Results for the First Half 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. [Operator Instructions] With this, I will hand over to Mr. Grisi. Hector, the floor is yours.

Thank you, Begona. Good morning 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 half one results on the context of how we are progressing with the strategy we outlined at our Investor Day. Jose will then review our financial performance in greater detail. And then, I'll conclude with a few closing remarks. Despite the challenges the financial system experienced at the beginning of the year, Q2 was another strong quarter for Santander demonstrating the strength and resilience of our strategy and unique business model even in times of market volatility. We delivered record profit of €2.7 billion, an increase of 14% compared with Q2 in ‘22, thus plus 17% in constant euros. In the first half of ‘23, profit was €5.2 billion, up 7% supported by robust customer revenue growth. Revenue increased double-digits year-on-year, supported by all regions and global businesses. Global scale and network businesses are contributing around 40% of total Group revenue. Our number of customers grew by nine million year-on-year taking the total to 164 million and loans increased by 1% and deposits by 5%. The Group continues progressing towards a simpler and more integrated model through One Transformation. The program that is accelerating our structural model change to drive efficiency improvement, and growth in profitability. As a result, our efficiency ratio improved one point-three percentage points year-on-year to 44.2% and our net operating income grew double-digits. Our return on tangible equity RoTE rose 80 basis points year-on-year to 14.5, while our earnings per shares improved 13% year-on-year supported by greater profit and share buybacks. At the same time, our strong balance sheet with solid and sound capital ratio, liquidity at comfortable levels and robust credit quality contributed to solid…

Thank you, Hector, and good morning, everyone. [Audio Gap] and Latin America driven by growth in volumes and fees. Digital Consumer Bank benefited from asset repricing actions and gains on financial transactions due to FX hedges. We also saw a strong performance across businesses. The only exception was auto, the result of lower leasing income in the US, which as in previous quarters, was affected by an increase in the share of end of leased vehicles, repurchase at the dealership. Revenue at the corporate center also improved up nearly €400 million due to higher liquidity buffer remuneration and a lower impact from FX hedging, which negatively affected revenue last year. Most of our revenue growth came from NII, which continued its upward trend increasing 6% in the quarter alone, driven in particular by Europe. We see upside potential for further growth in the coming quarters. First half 2023 was 15% higher year-on-year in constant euros with positive sensitivity to raising rates mainly in Europe and Mexico and volume growth in auto, North America and South America, which more than offset negative in duration sensitivity in Brazil, Chile and auto. In terms of profitability, we have improved our margins every quarter since the first quarter of 2021. We continue to actively manage our credit spreads to make the most of the higher interest rate environment. Gains from credit yields outweighed higher funding costs. Thanks to our disciplined deposit remuneration strategy adapted to each country's specific needs. In Europe, we are strictly managing deposit costs, especially in Spain and Portugal where there is excess liquidity in the system and much lower credit amount. The UK has a more competitive environment in line with our expectations. In LATAM, deposit rates are more directly linked to market interest rates, which implies negative sensitivity and…

Thank you, Jose. In summary, Q2 of ‘23 was another strong quarter supported by customer growth, double-digit revenue increase, and also backed by strong performance by all the regions and businesses. We are accelerating the structural change to a simpler and more integrated model through One Transformation spreading the initiative all across the Group, which is driving efficiency improvement, and also profitable growth. A rock solid balance sheet and robust credit quality are contributing to growth, calue creation and shareholder remuneration. In summary, we have a very strong first half of the year and we are confident that we will achieve our 2023 targets and remunerate our shareholders in line with our 50% payout policy supported by our global and network businesses while we continue with our structural model transformation. We see upside potential for further net interest income growth in the coming quarters, as tailwinds in Europe and Mexico, are expected to remain and inflation and interest rates in our largest Latin American - Latin American countries seem to have picked or nearly picked resulting in a positive outlook for margins in the next 6 to 9 months. Cost of risk is normalizing in line with our expectation. In a context of an expected soft landing of the economy and a strong labor markets, we continue to see resilient customer and corporate behavior in most of the geographies. Group RoTE has reached 14.5% in the first half and we expect to close above 15% at the end of the year. All in all, our TNAV plus cash dividend is growing at a double-digit, well on track with our target of average growth through the cycle. And now, we will be happy to take any of your questions. Thank you.

[Operator Instructions] We already have the first question from Carlos Peixoto from CaixaBank BPI. Please go ahead.

Hi, good morning. Thank you for taking my call - my question. The first question would actually be on Brazil. Margin stabilized quarter-on-quarter, it’s still a bit under pressure year-on-year. I was wondering what evolution you expect for the rest of the year? And also on cost of risk what's the Outlook there? Then the second question would actually be on capital. So basically the capital generation in this quarter was only three basis points a bit below the runrate you have discussed in previous quarters. I reckon that this partially has to do with the Mexico minorities incorporation, but I was wondering how do you see this evolving throughout the rest of the year? And also, what is behind the increase in RWAs in this quarter? Thank you very much.

Thank you, Carlpos. What I'll do is, I'll – last - the first question on. Brazil we will give you a comment on capital and then Jose will tell you a little bit about what's going on with increasing RWA, okay? In terms of the Brazil margin quarter-on-quarter, as we say, basically is explained by the following: our launch since 2021, we have become much more conservative and growth – grown volumes very selectively changing the loan mix to lower risk. Okay? So we mainly get out - we're out of credit cards. Went on to Consignado, auto loans and mortgages. On deposits also the fast increase in rates has meant a rapid rise in the cost of deposits, okay, as well as a change of the mix on the deposits. Rates are staying higher for longer has prevented the cost of deposit from coming down impacting NII. Remember that in Brazil, we have negative sensitivity to rates, okay? So Brazilian NIIs in the second quarter of ‘23 is already flat. Okay? As we set and Jose was very precise on that the worst since behind us and we are already seeing a reduction on the average cost of deposits and we also see an improved customer spread. Okay? So we expect NII in the second half of ‘23 to be higher than the first half of the year leading to a flat NII in the year with a substantial improvement in ‘24, okay? In terms of the cost of risk, not only the macro outlook is improving, but since ‘21, I just – I explained, we've been very selective in the approach of the new lending extension and focusing to more secure and higher rate customers as I explained, okay? This is showing good results and we believe the worst, as I said, it repeatedly is worst - sorry the worst is behind now. Cost of risk in the second quarter is already improving, versus the first quarter and the vintages are showing really good performance as we have seen. So we don't expect cost of risk that will deteriorate in Brazil in ‘23 versus ‘22, excluding the one-off that which implies staying close to around 4.6%, okay? And then, to be on capital to be very precise, we expect to generate at least 10 basis points of organical capital on average per quarter with the current shareholder remuneration policy that we put in place. As a result, we will be on track to meet our target to be above 12% even when the final implementation of BASEL III comes into effect on January 1st on ‘25, okay? And with that, I don't know, Jose, you can comment on RWAs please.

Yes. Thank you. So, morning, Carlos. You are right. Loan growth was zero, but risk-weighted assets grew more or less than 2%. Half of that growth is due to FX as we consolidate the Latin America, basically, the peso and the Brazilian based assets in to the Group. Of the other half, half of the other half, so a substantial amount corresponds to a stock finance. And this is due to the recovery of the new auto business in Europe. This will eventually translate into auto loans. So, this is obviously short term that will eventually lead a higher profitability going forward. When we look at the outlook, as Hector said, we don't expect any significant regulatory or supervisory capital impacts in the second half of the year. We see no inorganic charges in the second half of the year. Obviously, it looks like the available for sale portfolio valuation also will stay relatively stable. We see improving profitability, as we have mentioned, particularly driven by higher NII in the second half. An increased weighted assets should be probably under control. So net-net, we see a stronger capital - organic capital generation in the next couple of quarters again, leading to a capital that will remain well above 12% every quarter and building up sufficient capital to be above 12%, post BASEL III.

Thank you Hector, and Jose can I have the next question, please?

Next question from Alvaro Serrano from Morgan Stanley. Please go ahead.

Hi, good morning. Thanks for taking my questions. A couple of questions please from my side on US and Spain. US has obviously done much better in provisions. I know you've touched on it a little bit, maybe you can give a bit more detail as to why the provision was so low in the quarter? Is its collateral? Is it default rates? And when you think about the rest of the year maybe you can update us about the guidance. Would you expect in costs of risk for the full year. I think you gave us some color in Q1, maybe an updated view on the moving parts there. And second question on Spain. Deposit is much more stable this quarter, previous quarter. I wonder if you can give - again a bit more color on the deposit migration and remuneration and, and when do you, what would you expect NII to peak in Spain, I am extrapolating, Spain, Portugal, which I assume it's the same dynamics. Thank you.

Thank you, Alvaro. Okay, let me give you our outlook in the US, okay? And I explained it – it’s basically the same dynamic I explained in the first quarter, okay? Credit provision, as you know decreased as credit quality is remaining robust and credit net charge-offs actually, what we called realized losses show better than anticipated performance. And this is basically on the back, use prices continue to be strong, okay, as I explained and declining at slower pace that we previously anticipated. The changing out to loan portfolio mixed of our subprime, do you remember that I told you that before 2018, we had a lot more subprime than Prime and the change on the mix has helped. Also, we have robust and better than expected labor market in the US, okay, which is sustaining that, okay? And out of customers that are delinquent exactly as I was explaining in the first quarter for more than 90 days are rolling into charge of status at historical low levels, okay? Normally, they were above 90%, 95%. Last quarter they were around 59%, this quarter around 67% percent, okay? So it's still much better than we expect and much better than it was actually happening pre-COVID, okay? And in 2023, we expect cost or risk to continue on the normalization at around 2%. And after two years of artificially low figures given COVID et cetera, as I was saying, normalized levels should be below pre-pandemic, cost, or risk at around - you remember, pre-pandemic was around, 285, it’s never going to get there, okay? Because of the change of mix and what I was explaining, okay? In terms of the Spain, okay? In Spain, the deposits, I mean continued to be stable, okay, I at around, we have around €299 billion, okay? We have excess liquidity in Santander Spain, LTVs around 78% as is the case for the whole Spanish system that is around 80%. Quarterly the claim is most linked to CIB deposits, flat in retail in the quarter despite the early repayments of mortgages, okay. 60% compared to the same period of 2022 and increased volume of deposits moving off-balance sheet products. Also, what we see between the first half of ’23 versus the first half of ‘22 is plus 0.9% okay? So we have a different change of the mix with time deposits going up at around 61% up year-on-year, while demand deposits are going down around 5% on the back of the higher rates, driven by the growth of CIB, which allows us to maintain also - and maintain a stable net liquidity position, okay? In terms of - what I was saying NII, we don't expect to peak yet. I mean we have still revisions and I will have horses playing in detail exactly how we’ll see an eye evolution in the Spain.

Good morning, Alvaro. Let me talk about all the Corporate Center, because Santander SA more than and Spain because this is going to give you a better view of our Euro sensitivity to rates in Spain. So we have assets of €330 billion, 60% floating 40% fixed. This fixed includes the ALCO, which is €27 billion that we've been buying recently with an average duration of six years on an interest rate of over 3%. We also have intra-group transactions, et cetera, money markets that are fixed, but these are very short term. So they will reprice as short term ULIBOR actually goes up. Of the floating €200 billion, €65 billion. will reprice or reprices with 12-month ULIBOR. We expect the - if we use today’s ULIBOR, compared with the average of the first half, so let’s assume that the ULIBOR remains flat in the first half of next year, we have at least 50 basis points pick up in the repricing of this part of the portfolio next year. And then we have 60 – sorry, €30 billion with reprices with a six months €40 billion with a three months and €65 billion with one month. So, we would still expect significant repricing upwards in the first half of next year, as interest rates in Europe may go up once or twice, but as they stabilize, we will still have significant repricing of a big chunk of the portfolio in the first half of next year. So obviously, the asset yields are expected still to expand well into 2024. Obviously, margins will depend on the cost of deposits but as Hector said, we are not seeing any pressures today to increase their remuneration of retail deposits. We are already paying almost ULIBOR for CIB deposits, institutional deposits, but we don't see any pressures on the retail side of deposits, which means that probably the peak in net interest margins will not happen until well into 2024 in the Eurozone.

Thank you, Alvaros for the questions and Jose and Hector for the answers. Can we have the next question?

The next question is from Francisco Riquel from Alantra. Please go ahead.

Wanted to ask about NII in the UK and in the U.S., if you can please update your guidance in the UK I see lending is week following a local mortgage market is declining, asset spreads are low, the deposit betas are still relatively low. How do you see all these dynamics from going forward and the NII? And also in the US, you are gaining market share, but are you gaining new clients or do you paying out for deposits. How do you see the beta compared to the local peers and - in absolute terms going forward and then NII there in the US? Thank you.

Thank you, Francisco. Okay. Let me give you the details, okay? In the - let's talk about first about the UK. NII, it was up double-digit in the first half of ‘23, okay? It was driven mainly by higher rates on the strong focus on managing the spreads and profitability. Although the UK tends to be more competitive than other Europeans markets as you know, okay? So we're putting profitability ahead of market share, okay? And we have a lower risk appetite, but we're expecting good performance to continue leading to and NIM expansion, okay? So, we expect it to stabilize towards the second half. Okay, 2023 with a high-single-digit growth on higher rates. And despite the lower volumes that we have because of what I just explained about profitability, okay? In the second quarter, NII was flattish. Okay? Higher yields on loans did not offset the higher cost of retail funding and the slowdown in new originations, okay? In terms of the betas, Jose will tell you afterwards that I tell you about what's going on in the U.S. In terms of the U.S., overall, as you have seen has one better than expected given the change of mix towards prime, okay as I explained in detail, lower yield, but also better risk profile and the lower grade provisioning is helping us, okay? NII is flattish in the quarter and year-on-year on funding pressures on the wholesale and retail as you know, a lot of this is funded by wholesale, as well and a common trend across the sector which has been partially offset by higher yields that we have. Santander, U.S. betas are above the what we expected but lower than the average of our peers. Just to give you exactly what's going on. And we expect NII to be down mid-single-digit on lower originations and also the higher funding pressure again in line with the peers. However, given the strong behavior that we have on the labor market and seeing the performance on the first half, the US NII could do better than we expect, okay? U.S. NII is not the only one that has a cost of risk and profitability, are also better than expected in the country, okay? So Jose, I don't know, if you can comment on the betas please.

Yes, betas in the UK, when we look at the cost of deposits today relative to the level of rates today, that's around slightly below 30% is increasing slightly in the quarter three percentage points. We still think that that will continue. So the UK is a market with less excess liquidity than Spain for instance. So we would expect as Hector said, margins probably - they were stable in the second quarter relative to the first and we would expect them to remain more or less flattish in the third and probably slightly going down from there. In the US, as Hector said, we kept our deposits flat, paying less than our regional bank competitors. The beta in the U.S. is 36.8%, up two percentage points quarter-on-quarter. So after the spike that we saw in February, March, the betas in the US have remained very stable. And we are actually increasing deposit market share at a lower cost than our competitors.

Thank you, Paco. Can we have the next question, please?

Next question from Ignacio Ulargui from BNP Paribas Exane. Please go ahead.

Thanks very much for taking my questions. I have two questions. One is on the Spanish loan book. You could update a bit on the trends that we have seen in the quarter. Year-on-year rate you see an 8% decline. If you could elaborate a bit on, what are the dynamics there and what we should expect going forward? And the second question is a bit at a Group level? If I just look to the first half cost of case, 100 around 106 basis points, you are speaking to the guidance below 120. And is there any region besides the US whether we could see some deterioration in the second half that makes you to keep that conservative guidance, which would imply around – a rate of around 135 basis points, 140 basis points in the second half to make the 120? Thank you.

Thank you, Ignacio. Let me tell you a little bit about what's the dynamics on the Spanish loan book and then, Jose we'll talk about your second question, okay? In the Spanish loan book, the dynamic that we have seen is quite clear, okay? We have seen low demand of credit, okay, which is impacting us a little bit, mainly also we have seen an increase on the prepayment mainly on the mortgages, okay? Because of the increased rates, remember that a lot of a big percentage of our portfolio is some variable rates and floating rate. So in that sense, that’s the dynamic that we have seen. And also we have seen due to the increased rates, the corporates and the SMEs being more cautious in new credit demand, okay? And the dynamics, we lived throughout the year continuing that way, let's see what happens at the beginning of the year. And also, if we can see more confidence a little bit on investment, okay? But now we see the dynamics in that way. Please Jose, on the second one.

Morning, Ignacio. Cost of risk, well, we see cost of risk normalizing in the US as we discussed. Also in Mexico, where we are seeing the normalization of the cost of risk as we change the business, the business mix. In auto, it will very much depend on the amount of loans that we are able to sell, but it should remain stable in the second half of the year. So, we feel very comfortable that we will beat our 1.2% guidance for the end of the year. We expect it to be better than the 1.2% that we gave as a guidance.

Thank you, Ignacio. Can we have the next question, please?

Next question from Sofie Peterzens from JPMorgan. Please go ahead.

Yeah. This is Sofie from JPMorgan. Thanks for taking my question. So, could you just explain that the difference between your reported net interest income which was €10.5 billion on the underlying €10.7 billion. What explains the €200 million delta? And are there any more one-offs in an interest income that we should be aware of I mean, in the short-term? And then, the second question would be on the capital headwinds you mentioned that you're expected to remain above 12%, but could you just outlined what capital or core equity Tier 1 headwinds you're expecting in the coming quarters or at least on the year-end. And also, if you could remind us what the Basel IV impacts are? Thank you.

Okay. Thank you. So, Jose will explain you the NII evolution. On capital, let me reiterate exactly what I said and then Jose and can expand a little bit. So, as I told you we expect to generate at least ten basis points of organic capital on average per quarter, okay? And that is included with the current remuneration policy that we have, okay? So, as a result, what I told you we will be on track to meet our target to be above 12%. Also with the final implementation of Basel III comes into effect in 2025 to be precise on that point. Jose will comment a little bit more on that and explain you the NII evolution.

Yeah. So, Sofie. Hi, good morning. As I said, we don't expect any headwinds significant headwinds from any of the three big components that could affect capital regulatory or supervisory charges, inorganic charges or other charges basically market-related pensions, intangibles, we don't see significant headwinds in the second half of the year. In terms of BASEL III, we have seen the proposal. It’s still a proposal. So we need to wait to see exactly how is - how the regulation is approved. We still think we will have an impact of between 40 to 60 basis points, probably and again depending on how this is finally written, probably towards the lower end of that range, if things are confirmed when the final proposal is approved. In terms of the accounting, well, I think Investor Relations will give you more details about - this is pretty detailed. But in the first half, there is no impact or no adjustments between net interest income statutory and underlying zero. What happened in the first quarter is, we had an positive adjustment of €211 million and we have reversed exactly the same amount in the second quarter, which by the way in terms of the €20 billion, it's a very small amount. So, no adjustments to NII in the first half. What we added to underlying in the first quarter was reversed in the second quarter. There are other adjustments in the P&L, but basically netting out in most cases will happen in the first quarter in the second quarter. But Investor Relations will give you all the details line-by-line of the differences between the first and the second quarter. Thanks Sofie.

Thank you, Sofie. Can we have the next question, please?

Next question from Marta Sánchez Romero from Citi. Please go ahead. Marta Sánchez Romero : Thank you very much. My first question is on the digital bank. Could you please provide an update on your strategy for gathering deposits here. You've raised possibly €3.4 billion year-to-date, but seems a bit below what you had planned a few months ago. And also possibly, you are trying at 200%. So how much more deposit do you expect to get? And where do you feel like you need to put rates in order to be - to be more successful in Northern Europe and Germany? The second question is a follow-up on mortgages in the UK? You are shrinking pretty fast for €1 billion per quarter. When do you expect to stabilize that book? Thank you.

Thank you, Marta. Okay, on the study the open bank is quite clear. Okay. And we just don't have open bank as the only vehicle to raise deposits. We have some other vehicles also. We are having some of the other different countries, okay? We believe that strategy is right? And the one that we manage at open bank is going along to our expectations and we believe that we are going to continue to manage that accordingly. Okay? And in the some other different initiatives that we have, for example in Germany and some other places, the study has been proving very successful and we don't believe we need to basically continue raising rates depending on what the market reacts to it. Okay? So we're going to be moving it according to the market. In terms of mortgages in the UK, I was very specific about what we're thinking in terms of profitability, okay? And the way we're managing the portfolio. First of all, we've been very cautious in the way we manage and our risk appetite is being very prudent in the way we’re managing the UK, okay? If we see that there is a change of how we see the market, then we'll adjust at the point. But right now, we’re concentrated in the two things I told you. First of all, profitability and being cautious on the risk appetite there. If we see one of these changes, then we will adjust in any way. I don't know Jose, do you like to comment a little bit more?

In the digital consumer bank, now includes open bank. We have €60 billion in deposits, like you said. And I think we obviously manage that to maximize profitability. So it's not only a question of the amount of deposits, but the question is, managing the margins in a business that has negative sensitivity to rates. And I think we've been very successful if you compared these figures to what it was a couple of years ago and you look at margins and interest rate sensitivity management, I think you have to look at a whole picture and I think we've been very successful in managing interest rate sensitivity in a business that is naturally – that has naturally negative sensitivity to raising rates. Thanks Marta.

Thank you, Marta. Can we have the next question, please?

Next question from Andrea Filtri from Mediobanca. Please go ahead.

Yes. I wanted to get more clarity in basically in page so to speak of [Indiscernible] going to the different geographies and particularly you've given a lot of detail on NII in a lot of countries. Can you do the same for Brazil please? And the second question is on Spain. And if you could split the drivers of NII there between the effect of increasing interest rates of deposit beta and the ALCO portfolio contribution? Thank you.

Okay. Thank you, Andrea. Let me explain a little bit, the NII in Brazil, and then Jose will give you the details of the drivers of NII and the betas in Spain, okay? Yeah, in Spain. So to start, I mean, Brazil NII, okay, performance in the recent quarter has explained first of all on loans in 2021 I have been very specific on that. We have become very much conservative and we have changed the mix, okay? And we have grown volume selectively, okay, changing the loan mix the low mix – the loan mix to lower risk on deposits, okay. The fast increasing rates, means a rapid rise in the cost of deposits, okay. We expect NII in the second half of ‘23 to be higher than in the first half of the year leading to a flat NII in the year with a substantial improvement in ’24, okay? If we see that the rates basically start to come down because it's very important to understand that Brazil has negative sensitivity to the, we should gain traction. And we maintain, we're going to maintain our cautious stance, but we believe that we can go back to the market, okay? And we believe that the functional rates could fall in the second half, bringing the cost down in retail funding, okay? And then in the drivers of NII in Spain and Jose will give you more details. Spain is one of the countries that has benefited most from the higher rates, okay? We will continue to see strong growth in clients. Just in the first half of the year we have 300,000 more active clients, okay? NII in Spain is up around 57% in the first half of the year and 60% just alone this second quarter is mostly supported by the pricing of the loan portfolio. The height yields and remain contained on the cost of deposits. So, we have been managing very well in that sense. We expect double-digit growth for NII in 2023 and regarding the peak of NII in Spain, there are several things to consider that Jose will explain you as this will continue to reprice at least during the first half of ’24, clients which we expect will continue to grow and betas, which will be key. We're still seeing a rational competition with low betas for individuals in a system which remains highly liquid, okay? So as of today, we don't speak much higher remuneration on the foreseeable future.

So, hi Andrea. The ALCO in Spain we have €27 billion ALCO, €21 billion is a structural long-term held to collect with an average maturity of - duration of 7.7 years on a yield of 3.3%, 3.4%. And then we have €6 billion which is more associated with short-term liquidity management average duration of 1.2 years and yields slightly below at 3%. We expect to continue increasing the amount of the ALCO portfolio in Spain to gradually reposition the balance sheet towards a lower positive sensitivity because as interest rates start reaching a peak, we don't want to run a balance sheet with such huge positive sensitivity to rates. So one way of doing that is not the only we are also taking other measures, but one way is obviously increasing the ALCO portfolio. In terms of betas, the beta for deposits in Spain is 17.8%. If we exclude CIB, by the way this is three percentage points higher than in the first quarter. If we exclude CIB, the beta is 9.5%. The beta in CIB is around 60%. So I think I've given you all the numbers to figure out exactly how we see the betas and the NII going forward. Thanks.

Thank you Andrea. Can we have the next question, please?

Next question from Britta Schmidt from Autonomous. Please go ahead.

Yeah, hi there. Thanks for taking my question. Could you give a bit more color on the NII increase, the absolute NII increase in Spain Q-on-Q? The customer spread was up less in the previous quarter, but NII was up a lot more? And then, secondly, you could also update us on the net interest income sensitivity in Brazil over one year and two years? And lastly on the €500 million rate benefits that you see more so than previously. Can you give us an idea as to where you see them and how much of that has been recognized in the current runrate? Thank you.

Okay. So let me go backwards here. Yeah, in the first half, the sensitivity was more or less €500 million higher than what we - the guidance we gave in - at the Investor Day. We would expect more or less a similar amount in the second half in Euros. So, we - relative to the figures, we gave at Investor Day, the interest rate sensitivity in Euros due to the fact that obviously rates are higher and we are seeing better betas remember that the betas we use to give that sensitivity at Investor Day in Euros were around 30%. We are below 20% right now and it's already half of the year. So we would expect another €500 million more in the second half over €1 billion higher than what we mentioned at Investor Day. NII sensitivity in Brazil I'm going to give you the rest of the currencies, as well. So if today, we had a 100 basis points parallel shift upwards, we would make €1.1 billion, €1.2 billion more in Euros. €250 million, more in the UK, flat slightly negative in the US and €100 million less in Brazil. I think we gave you all the details to understand the NII sensitivity in Spain, but we can take it offline and if you wanted, you know, more detail analysis, but I think we gave you all the details. I give you the composition of the balance sheet by repricing on the asset side. So I think that's sufficient, I think, but we will take it, we will take it offline.

Thank you, Britta. Can we have the next question please?

The next question is from Carlos Cobo Catena from Societe Generale. Please go ahead.

Hi. Thank you very much for taking my questions. Just a quick follow up for NIM capital. You mentioned the finance impact, could you please quantify that in terms of stock and one single specific impact on risk-weighted assets just to clear that out from other impacts? Thank you.

Okay. So, the stock finance is seasonal. It tends to go up in December, which is the peak in the year, then it goes down in March, goes up a little bit in June and then same in September to peak again in the December. This year, the increase in June was higher than we expected. We are talking around €6 billion in total risk-weighted assets from stock financein the first half.

Thank you, Carlos. Can we have, what I believe is the last question please. [Operator Instructions] Thank you.

Next question Fernando Gil de Santivañes from Bestinver. Please go ahead. Fernando Gil de Santivañes : All right, thank you for taking my question. Two questions please. One is on Poland. What we expect in terms of mortgage provisions related to these funds going forward at least you can comment on the average and this was helping out. And a second one is on average rate growth I am looking at your key figures and Poland figures I am looking at loans – loan growth and FX impacts and it seems like part of the result increase in – and if you can comment on why it’s happening there and those would be changing? Thank you very much.

Okay, so Fernando, what you said at the beginning was mortgage provisions in Poland? Yeah. Okay. So, Fernando, let me tell you exactly how we are in Poland, okay, up to today, okay? And with the extra that we did, okay, we believe that is completely adequate. Okay, we're talking about that in the blended provisions that we have we are provisioned up to 58%, okay, of the outstanding that we have, okay and we believe that's enough to sustain exactly what needs to be done over there given the dynamics that we have seen in the market, and if you basically changing towards lot these when the these mortgages just started be about there, okay? So I believe that we're at the right point and we believe the provisions at this level is completely adequate, okay? On the second, I will have Jose give you the answer. Thank you.

No, as I explained, loan growth year-on-year was zero. Risk-weighted assets increased 2%, half of which is FX and I can’t take you through the composition of risk-weighted assets by country. But half of the risk-weighted asset inflation has to do with FX. Of the other half, we had some positives and negatives. As I said, we have contraction in the UK. We have contraction in terms of risk-weighted assets ex stock finance in auto, a slight contraction in Europe. And then we have the contraction in Europe and also risk-weighted asset growth both in ex FX in Mexico and in Brazil.

Thank you Fernando. I'm unclear if there are any further questions?

We have a question from the line of Ignacio Cerezo from UBS. Please go ahead.

Yeah. Hi, good morning. Sorry, it’s just a quick follow-up on Brazil. If you can give us a little bit more color or at least ballpark magnitude of the substantial growth of NII you are expecting in ‘24 and the sensitivity to rates, Jose was mentioning so I guess, it’s probably around yeah 1% for 100 basis points decline. So, just trying to understand basically, I guess, what kind of magnitude in terms of acceleration of NII you are expecting next year in Brazil. Thank you.

Okay. Thank you, Ignacio. I will answer the first part of the question and then Jose you will help me out with the rest, okay? This is sensitivity. What I told you is that, we believe that the worst is over in Brazil. Okay, and we're starting to see a little bit more growth in the portfolio. Okay. So we're changing that around. We're starting to basically go back to the open market, which, you know, in ‘21 we decided basically to come out of it, given the what we saw in the core environment, okay. So at this point, we believe that Brazil is going to be able to turn around and also we see that the rates are going to be helping us out because we believe that the rate in August should start coming down. So in that sense, we don't know exactly how the trends are going to work. But we see that is - this is coming much better than we expect okay. And we see that we're going to end up the year basically flattish to where we started, okay.

So, hi, Ignacio. We Believe interest rates in Brazil will start coming down in August. They are at 13.75 our central scenario is for rates during the year at around 12, twelve and a quarter and then probably below 10 by the end of next year. So NII, when you look at sequentially quarter-on-quarter, NII probably will be flattish in the third, but it should increase in the fourth and more so into next year and the exact sensitivity, I mentioned the sensitivity to higher rates, but the sensitivity in Brazil to a 100 basis point. But it is a parallel shift I insist the parallel shift, which is not what will happen probably because we are what we will see is lower rates in the short end of the curve, but flattish in the long end of the curve. But through a parallel shift, a drop in 100 basis points will generate €140 million higher revenue in Brazil. Thank you Ignacio.

Thank you, Ignacio. I believe there are no further the questions. So thank you everybody, for your attendance and the Investor Relations team is at your disposal for any other questions that you may have. Thank you very much.