Banco Bilbao Vizcaya Argentaria SA (BBVA) 2015 Q3 法說會逐字稿

Good morning, everyone, and welcome to the third-quarter result presentation of BBVA. I'm Luisa Gomez Bravo, Head of Investor Relations, and joining me today are Carlos Torres, President and COO of the Group; and Jaime Saenz de Tejada, our CFO.

As in the past, Carlos will begin with the presentation of results and we will be moving straight on to the Q&A after that. As you know, we will try to answer as many questions as possible during this presentation and the IR team will remain available throughout the day to answer any pending questions.

So over to you, Carlos.

Thank you, Lusia. Hello, everyone. Thank you for joining us this morning.

Before reviewing our quarterly results, I like to give some macro context for our footprint given the volatility that we have seen over the past few months, especially in the emerging markets. The global financial markets have been quite affected by a combination of factors and concerns around China and its slower growth, the lower commodity prices associated with that, including oil, and the continuing uncertainty surrounding the Fed's rate hikes extent and schedule of that, and problems of more of a local nature in some relevant emerging countries such as Brazil.

And all of that has had undoubtedly an effect on sentiment regarding the emerging markets and it will have an effect on growth going forward and inflation as well at a global level and also in our footprint.

Now, even in this slower scenario, slower growth, we still expect growth levels of 2% to 3% for both 2015 and 2016, next year, in the majority of the countries where we operate, assuming a best case scenario of a gradual slowdown in China. And our developed economies, the US and Spain, will continue to grow well and the US will continue to see solid domestic demand, healthy indicators such as employment and disposable income favored by the lower oil price.

In Spain, the macro fundamentals are strong. GDP growth this year will be above 3% and next year above 2.5%. And we are seeing Eurozone peripheral risks reduced. And as you have seen, the ECB has reinforced its commitment to additional support as required to spur growth.

In the emerging market footprint, growth will slow down. But I would like to distinguish three different areas. In Turkey, we expect growth rates at around 3% for this year and next. Fundamentals of the economy in Turkey are good. Of course we have high geopolitical risks right now as well as the uncertainty -- domestic uncertainty on the political front and also around the economic policies and how to tackle the inflation pressure.

Mexican economy will also continue growing at a slower clip of 2% to 2.5% on the back of the US growth and recovery, and then longer term we expect a positive impact in Mexico of the reform agenda that supports GDP growth. And in South America, we have had quite negative effects and headwinds, specific shocks of various natures in various countries, and all of that has affected trade and inflation. But nevertheless, these economies are all in general much better prepared than they have ever been, and even with a slower China scenario, we see growth clearly above 2% definitely in the Pacific Alliance economies both in 2015 and 2016.

So all in, despite the turmoil and a no doubt slower 2016 than we envisioned a few months ago in our emerging markets footprint, we continue to see overall growth at levels that are similar to this year.

And now, let's move on to the third quarter's highlights. Undoubtedly, one of the strongest points I'd like to make of the quarter is the good performance of our recurring income, both because of good activity growth as well as how we have been able to manage the spreads. So recurring revenue maintains a clear upward trend.

On the other hand, we have been affected by market volatility this quarter; it has had a negative impact as it has had in the broader sector, but in our case affecting primarily the trading income and capital as well.

Very good news around loan loss and real estate asset provisions that continue to trend down mainly in Spain and that has had a significant bottom line effect. And finally, this quarter we have the extraordinary effect that we announced already in July of EUR1.8 billion negative impact on the attributable profit, a non-cash effect, due to the change in accounting method in Garanti associated with the increase in the stake through the additional purchase of 14.89% that we already mentioned in July.

We have also included the sale of CIFH, but that has had no material impact in the P&L of the quarter. And overall, despite the difficult conditions in the market, our quarterly results, excluding the corporate operations that I just mentioned, increased by 38.2% versus last year and that indicates I think strong underlying performance.

Now, in this number I just mentioned and all that follow, we are not including Venezuela as we have done in previous quarters, but we are also excluding for comparison purposes the impact of that increase in stake in Garanti -- that 14.89% additional stake, we are not including it for comparison purposes.

By the way, the full consolidation of Garanti has started July 1st, so it's the entire quarter that we are accounting for Garanti full consolidation.

And the quarter at a glance, I was saying the items in the P&L are quite similar in terms of evolution as in prior quarters; strong activity growth in all geographies that lead to double-digit recurring revenue, a growth of around 11%, and total net profit -- attributable profit without those corporate operations of EUR784 million in the quarter.

Risk indicators continue to improve; the Group's NPL at 5.9%; coverage ratio 71%; and without Catalunya Caixa, both the NPL ratio dropped 100% basis points to 5.3%.

In terms of capital, we ended the quarter with a ratio of 11.7% phased-in and 9.8% on a fully-loaded basis, leverage ratio of 5.7%. The capital ratios include the impact -- closing impact of both Garanti and CIFH, which combined were negative 44 basis points, as we had anticipated in July. And the ratios have been negatively affected in the quarter impacted by market volatility both in the equity and the FX markets. But as markets have recovered now in October, this negative impact has reversed very significantly.

A couple of words on the transformation journey that we are embarked on. We continue to secure our roadmap as planned, which is in essence that we want to be a better bank for our customers by developing and providing better solutions to our customers' problems and leveraging data and leveraging technology in order to achieve that goal. And in that journey, we are continuing to grow in a significant way our digital active customers and our mobile active customers, growing at high rates, as you can see, and meeting our goals for the end of the year already or almost in both penetration and total customer numbers.

In contrast, we also see -- continue to see the activity at branches through traditional channels that continues to decrease and alternative channels are gaining relevance. And then on digital sales, we continue to grow very fast. For example, as you can see, consumer loans in Spain through digital reached almost 24% in September, continuing the trend in prior quarters, and we see similar trends in other products and in other countries as well.

And what's important is that we are seeing that digital customers are more engaged, they are more profitable than non-digital and they interact more often, which leads to opportunity, opportunity to sell more products and to provide better service, leading also to improving NPS scores.

We are particularly excited about the success of our remote managers service that we've talked about before, the BBVA Contigo. In Spain, that's achieving very high NPS scores as compared to the rest of the channels, the rest of the portfolios. So lots of things going on, lots of ongoing projects and very promising results in the transformation journey.

Moving on to the numbers and running through the P&L, our net interest income again this quarter is strong, continues to grow at double-digit rates on the back of robust activity especially in emerging markets and the US. So growth of 12.5% in current terms and 14% excluding the FX in constant terms. And this is something I particularly value, this excellent underlying performance in a low interest rate environment that we have seen.

Revenue growth; gross income was up nearly 10% in constant euros. Excellent performance of net interest income and fees, growing 2.5% versus last quarter and 12% in constant euros again versus a year ago. On the other hand, the volatility in the markets in the quarter has had a significant impact on the net trading income, which has decreased by EUR350 million versus the prior quarter in constant euros. Part of this is because in the second quarter we did include the dividend payment from Telefonica. But all in, total gross income amounted to EUR5.5 billion in the quarter, growing at 9.6% versus costs that grew at 8%, affected by the integration of Catalunya Caixa and also the increasing costs in some emerging markets, mainly in Mexico and Turkey.

So we still have positive jaws even with these effects and pre-provision profit, as a result, grew at 7.5% versus last year, reaching EUR2.5 billion in the quarter excluding the FX in that growth rate that I just mentioned. Very good trend as well in the accumulated year-on-year trends, growing 12% in constant euros versus the nine months -- first nine months of 2014.

In terms of cost of risk, impairment losses have fallen mainly in Spain and that consolidates the trend that we were seeing and the change in mix that we have already mentioned in prior quarters of less impairment in Spain versus the rest of the countries. As a result, the premium continues to go down to 1.1%, evidence of the good risk quality dynamics in all of our franchises -- so good news in this front.

And in summary, for the quarter comparing versus last year, the main trends is the upward evolution of recurring revenue despite the seasonality that typically we have in many of the countries in the third quarter; negative impact of market volatility in net trading income; the costs affected by Catalunya Caixa and emerging market expansion and investment plans; significant decline in loan loss provisions, particularly in Spain; and the extraordinary negative impact of the closing of the Garanti and the change in accounting method.

Overall, the net attributable profit without corporate operations was a total of EUR763 million, growing at 38% in current terms versus the third quarter of 2014.

In an accumulated basis, the first nine months the profit of the Group reached EUR2.8 billion, excluding again the corporate operations and Venezuela and the increased stake in Garanti. That's up 54% at current euros, so a very strong growth. The main drivers in year-on-year terms, excellent performance of all of the income lines, primarily the recurring revenues; positive jaws. So that leads to a strong pre-provision profit performance, that's up 12%.

Loan loss and real estate asset provisions fall significantly, which give good support to earnings growth. Negative impact of 1.1% of the corporate operations, mainly explained by the sale of CNCB and the impact of the Garanti acquisition, and again, in some, a strong set of results and excellent performance with high recurrence and positive prospects for the year.

In terms of asset quality, the positive trends that we have been observing in prior quarters persist; risk indicators maintain an excellent trend; NPL is down EUR3.1 billion over the last 12 months if we don't consider Catalunya Caixa; and that's, as I already mentioned, because of the decrease in Spain mainly. NPL ratio is down 41 basis points to 5.9% versus the third quarter of last year and the coverage ratio stays relatively stable at 71%.

With respect to capital, in fully-loaded terms the Group ended the quarter with a common equity Tier I ratio, as I already mentioned at the beginning, of 9.8% on a fully-loaded basis. I already mentioned also the 44 basis points associated with CIFH and Garanti transactions, as that was expected. Organic growth in similar numbers to prior quarters, 18 basis points earnings ex-dividends, minus 7 basis points of growth of risk-weighted assets. And then we have other impacts, primarily market related impacts, including those associated with FX and equity stakes that amounted to 29 basis points.

Now, the truth is that the quarter closing date coincided with the bottom of the downturn pretty much to the day in the markets. If we take account of the recovery of October and we incorporate that in the numbers, the fully-loaded ratio would be around 20 bps higher. I also like to remind you that as we reflect here in the chart, we do not include in our core capital ratios the unrealized gains on the AFS portfolio, the sovereign portfolio, estimated in 40 bps. Also, we continue to expect the recovery of the regulatory equivalence in Turkey, in Colombia and in Peru, which will add 11 basis points.

We also had good news in the quarter of guaranteed DTAs treatment that has been cleared by the European authorities, as you have seen. And overall, we have generated 34 basis points organically year-to-date. We maintain our year-end expectation of a 10% fully-loaded ratio and we believe the quality of our capital ratios is very strong, show the highest risk-weighted asset density and strong leverage ratios, the highest of our European peer group, at 53% density and 5.7% leverage ratio.

Moving to some of the details, main points on the business areas, the overall picture you can see that we have good performance in all of the businesses, remarkable bottom line growth in the first three quarters of the year across the board, particularly in Spain with a 32% growth of the banking activity net profit. Also the US, 12% or 36% in current terms, but strong throughout. And by the way, the numbers on the rest of Eurasia are affected by the sale of our stake in CNCB. That's why it's a negative number in terms of the evolution.

Starting with Spain, the recovery of the market continues in Spain with similar growth prospects, positive growth prospects supported by demand -- strong domestic demand and the dynamism in exports, also helped by the depreciation of the euro.

Lending volumes; we had increased lending volumes -- well, you can see here 11.5%. That's including Catalunya Caixa that had an impact on that. But it's a slight decrease of 2.3% without Catalunya Caixa. That's mainly due to the drop in the public sector portfolio following the government decree that was providing financing to some of the government authorities and communities.

But we see strong growth in new credit. In Spain, the growth of new operations is maintained. New mortgage loan production, for example, growing at 57% in the third quarter of 2015 versus the second quarter of 2015, consumer lending growing by 48% or SME loans by 31%.

On the customer funds side, we have growth, but also impacted by Catalunya Caixa. Without that, we have a slight decrease, impacted by the lower cost of deposits and the impact that has had on volumes.

Core revenues; so net interest income and fees are up by 8.2% versus third quarter last year, down 1.1% without Catalunya Caixa, as expected, given the spread pressure and despite quite robust growth in fees, pension and mutual funds.

Gross income growth came in at 12.1% including Catalunya and 3% without it, impacted by the decline in trading income in the quarter. Costs were negatively affected by the Catalunya Caixa integration and some reallocation of expenses from the corporate center. And the resulting operating income was thus up by 3%, below the 12% income growth. I'm fully committed to continuing the cost reduction in Spain.

Risk indicators continued to show positive trends also in Spain. NPL ratio evolving well, closed the quarter at 6.7% due to the drop in non-performing loan volumes, and the cost of risk falling to 0.6% in the third quarter. And we expect that improvement trend to continue throughout the year on the back of the good evolution of asset quality.

And overall for the nine months year-to-date, attributable profit grew at 32% that I already mentioned, gross income growth supported by positive trending fees, trading income and other income. Cost reduction, I already mentioned that we maintain our focus on that, although we were impacted by Catalunya Caixa integration. We had improvement in asset quality and declines in loan loan [sic -- loss] provisions. That was a good driver of earning growth in the quarter.

And then a comment on the distribution model transformation in Spain. We are moving forward to better serve our customers, as I was saying earlier, through the channel of their choice. I already mentioned our excitement around the remote model. We're also improving branch and workforce productivity along the way as their focus continues to shift to value-added services versus the operating tasks. And we are also leveraging more efficient processes and achieving significant cost reductions.

In real estate in Spain, we continue to see improved outlook in the market. Demand is increasing basically in all regions and inventories are coming down about 20% since a couple of years ago. The housing trend prices have turned positive. Mortgage loan originations are strong, as I already said.

Sales; we still focus on value. In fact, that has been what we have been doing in the last few months, kept on selling at prices above net book value, and that generated capital gains in the year up to EUR73 million in the first nine months. Net exposure to real estate assets continues to go down. Excluding Catalunya Caixa, net exposure came down by 11% versus a year ago.

And the combination of lower loss provisions, fall of impairments and higher capital gains on the sales has lead to less losses than last year, EUR407 million, which is 36% less loss than a year ago.

In total, in Spain, the aggregate P&L shows positive evaluation of both the banking and real estate businesses. In every line of the P&L in total is EUR694 million profit, which is up almost EUR500 million from a year ago.

And now moving on to the US, I already mentioned the macro environment in the US, quite supportive of growth. In that environment, the US franchise continues to have good growth in volumes, 13% in lending, 8% in customer funds. New loan production is growing strongly, driven by retail as well as commercial.

In terms of results, net interest income keeps improving despite the low interest rate environment and the spread pressure that goes with it. Gross income grew at 3.3% compared to third quarter of last year and the cost control efforts have enabled us to achieve double-digit growth rates in operating income, 12% in the quarter.

Asset quality and risk management indicators, the best among the best in the Group. In the third quarter, NPL at 0.9%, in line with previous quarters and cost of risk at very, very low numbers. Year on year, P&L dynamics similarly strong and strong bottom line growth.

So the growth in activity is reflected in the net interest income performance. We, as you know, also have the positive sensitivity to the hikes that might come as the Fed shifts to raising rates -- rising rates. Costs continue to be under control in the US, flat trend, and that leads to operating performance that grows nearly 13% in the year. Loan loss provisions are, as I said already, quite low and the net attributable profit EUR410 million, up 12% in constant levels -- constant euros.

In Turkey, as I already mentioned, all figures that we show here are shown excluding the increase in the stake for comparison purposes. So year on year, the activity has grown at a fast pace, 22% in lending, 30% in customer funds. Core revenues is growing at 21%, driven by net interest income with good growth because of the activity and also because of the good spread management.

Gross income was down, however, by 1.7% quarter on quarter versus a year ago, sorry, and that decline is due to the trading income performance. Trading income fell during the quarter mainly due to market volatility, FX and the inflation-linked bonds. And that negative impact of the CPI linkers will be offset partially in coming months following the trend in inflation that we have seen already in Turkey.

The revenue trend and the increase in costs due to non-recurring items and the negative impact of the depreciation of lira that has had an impact in costs as well and the IT costs has lead to an operating income that declines by 21.5% versus the third quarter of last year.

In terms of risk and risk management, Garanti shows good metrics, positive P&L and coverage ratios and stable trends that confirm the quality of the assets. So Garanti Bank, coverage ratio at 119%, NPL 2.6%, in line with prior quarter -- and also low cost of risk.

And for the nine months, a slight decrease in the bottom line affected by the negative trading income performance that I mentioned, but good business trends in Turkish lira, partially offset by the FX performance. I would highlight the excellent net interest income thanks to active spread management; negative trading income because of the downturn in markets and the inflation-linked bonds; increasing costs, very significant, but impacted by non-recurring items. And if we were to include the additional stake, the additional 14.89%, the attributable profit would be -- or is EUR249 million in the first nine months.

Going forward, we're still optimistic and satisfied with the investment in Garanti. We see that Turkey continues to show strong robust activity levels and high business activity growth rates, good asset quality and good risk management performance indicators. So that reflect a healthy underlying asset quality. And of course it's a leading bank and a leading franchise in the Turkish market, the most advanced bank in technology in Turkey.

Moving onto Mexico, once again Bancomer has had good performance despite the less favorable macro. Activity grew at double-digit rate during the first nine months both in lending and in customer funds. Lending, mainly driven by wholesale portfolios, is growing above 20%, while the retail book is growing at 7%. So we have -- consolidating this change in mix that we've been seeing in prior quarters.

Core revenue is growing at 9% as compared to the third quarter of 2014, driven by improvements in net interest income with strong growth of 11%. And this top line growth has translated into the P&L. Operating income of EUR1.1 billion in the third quarter, growing above 8% as compared to the third quarter of last year.

In terms of asset quality and risk management, the indicators continue also with positive trend and this reflects the healthy underlying asset quality of our Mexico business, a very favorable comparison with peers and this is really a result of the strategy that we follow and our anticipation and early exit from the riskier segments.

Coverage ratio is stable at 121%, NPL coming down to 2.6%, in line -- a little bit down from prior quarter and also lower cost of risk, 3.3%. For the nine months, net interest income showed also good growth of 10% on the net interest income line; gross income growing at 7.3%, impacted by slightly lower trading income and lower dividends; operating income performing in line at 7.2%.

And in aggregate for the nine months, Bancomer generated EUR1.5 billion, a little bit more than that, up 10% from last year. Clearly, Bancomer is the clear market leader in the Mexican system with sound management, improving risk indicators, gaining market share in lending and stable in funding, a leader in efficiency, profitability, capital adequacy, a very strong bank.

And moving on finally to South America, we talk about South America always ex-Venezuela. In the annex, you can see the details of the Venezuela P&L. But the region continues to be a relevant contributor to the results of the Group.

Business activity; strong dynamic growth rates, and that's reflected in revenue in the P&L. Net interest income growing 12% in the quarter; commissions also with good performance, growing at 11%. We also have high growth rates in costs explained both by the investments and the expansion plans in the regions and the high inflations in some of the countries like Argentina. And overall, we have attained EUR611 million, which is almost 7% growth.

Risk; very strong, very good indicators; coverage ratio, 123%, similar to last quarter; NPL stable as well; cost of risk, 1.2%, and coming down. So we see a region that continues to show dynamic activity rates but strong metrics in credit quality.

And as I said earlier, despite the negative impact by the external headwinds and some specific shocks in some of the countries, we see positive growth on an accumulated basis as well, especially in the Pacific Alliance economies. In the nine months, we have net interest income growing almost 12% as compared to last year; gross income above 11%; and the growth in costs, as I mentioned, can be explained by the investment plan in the region -- and on the net attributable profit line, EUR689 million contribution, growing up by 7% versus 2014.

And overall, summing up, as you have seen throughout my slightly long presentation -- sorry for that -- the third-quarter results have been affected by the market volatility, and then on cash item, related to the change in accounting method of the Garanti Bank. But we see operating trends in all of the businesses that are very positive. And that's why we can say that we are on track to meet our capital guidance and our P&L guidance.

And looking at the future and the future trends, thanks to our diversified portfolio we will be able to maintain our recurrence and our delivery in earnings; we are optimistic regarding our footprint; developed countries are recovering their macro and that will support our results; and in emerging markets, results and asset quality trends remain solid despite lower macro expectations.

Now, I'll give the floor back to Luisa so we can begin the Q&A. Luisa?

Thank you, Carlos. So we will go off straightaway to the Q&A because we have plenty of questions today. Starting off with capital, Francisco Raquel from Enemasuno, Stefan Nedialkov from Citi, Robert Noble from RBC, Alfredo Alonso from Kepler and Francisco Raquel from -- oh, sorry -- again, Francisco from Enemasuno, could you give some detail on the CET1 changes in the quarter? I'll just read all the questions together so that we can answer in a more efficient way.

Could you give some detail on the CET1 changes in the quarter? Can you elaborate on the 29 basis points market related impact in capital? Why is this so negative? Can you detail what is the available for sale exposure which is impacting your capital ratios? What is the FX impact on capital ratios? What has been the cost of hedging? Please break down the quarter-on-quarter increase in RWAs by organic growth ex-foreign exchange; Turkey, ex-foreign exchange; foreign exchange and others? So, Carlos?

Yes, thank you. Thank you for the questions. On capital, I think it's important to give a bit of color to better understand what has happened in the quarter and what we can expect going forward as well. I would start by repeating what I said just now in the review of the presentation that we've had quite an exceptional quarter in terms of the market evolution. It's really an exceptional downturn; that we have not seen such a movement on a quarterly basis over the last seven years -- actually since the Lehman Brothers event -- in many of the markets and that has affected our footprint in particular quite sharply.

Currencies within our footprint were really down in a sharp way quarter on quarter. Depreciations, for example, of 8% on the Mexican peso or 17% on the Columbian or 13% on the Turkish lira, et cetera. So that's quite worse than even the second quarter of 2013 when tapering started. The same applies to the evolution of our main equity stakes, which have had in the quarter very sharp corrections. Telefonica was down 15% and the remaining stake that we have in CITIC went down 18%.

So it's this market volatility that has impacted our core capital in an extraordinary way, in a very significant way as well. And as I was saying, the combined effect of the market movements and others was 29 basis points.

And to the questions on the specifics, I'll give a highlight and then IR can probably give more detail if needed to those of you who have more questions. But I would say that this is distributed more or less on an evenly way between the various effects of the mark-to-market on the non-sovereign available for sale portfolio, which is mainly the two stakes I just mentioned, Telefonica and CITIC.

Again, I remind you, as I just said, that we do not incorporate the gains on the sovereign portfolio -- the available for sale sovereign portfolio because we do apply the sovereign filter -- and those represent 40 basis points as of September.

The second element of impact has to do with the treasury stock position. And the third of the impact has to do with the impact on capital of the depreciation of the currencies even after the FX hedging strategy and the natural hedge that that ratio has.

But again it's really a very unusual quarter. As of today, the market has recovered about two-thirds of the movement. So there will be about 20 basis points that we would add if we did a proforma.

And also this was the quarter on a year-to-date basis and thanks to a large part to our successful hedging strategy, the FX impact year-to-date is almost negligible -- it's positive actually 2 basis points. Similarly, with the treasury stock -- it's also positive. And the stakes in Telefonica and CITIC are slightly only impacting the ratio.

Now, going forward, I would highlight our ability to generate capital organically. We have shown over the last few quarters including this third quarter that we are generating 11 basis points per quarter, so that means that going forward our capital ratio -- as I just said, we will be finishing the year at or above 10% and then that ratio should be increasing over the year 2016 on a fully-loaded basis -- and that is what I just mentioned.

And then again, the comments I made during the presentation around the fact that given our business model, we are very comfortable with our capital ratios. We have high quality capital. We have high density of risk-weighted assets. The highest, actually, leverage ratio also of the peer group.

And the other comments I just made on the sovereign filter; we have seen during the quarter that the DTA issue that some of you might have had, all the uncertainty has been cleared by the Commission. And then we also expect to recover the regulatory equivalence in several countries, adding up to another 11 basis points.

So in sum, it was a very tough quarter, very unusual quarter in the series -- in the historical series, but we are comfortable with where we are, where we will end up the year and how it will evolve next year.

Okay, thank you. A few more questions actually on capital. Stefan Nedialkov from Citi and Raul Leonard from Deutsche Bank are asking what drove the EUR3 billion decline in equity and specifically also tangible book value per share including valuation adjustments fell quarter on quarter. How much of this will recover if you add back in the two quarters scrip dividend and October's market related impacts, the 20 basis points fully-loaded that we referred to on slide 14? Can you give us the sensitivity of euro versus Mexican peso currency movements to your tangible net asset value and core capital fully-loaded ratios so we can forecast this going forward? Jaime?

Yes, good morning to all. Okay, regarding the evolution of total equity, total equity went up by EUR2.6 billion in the quarter, but it's true that shareholder funds were down by minus EUR2.3 billion. The main explanation, as you can imagine, is a minus EUR1.1 billion loss that we had in the quarter and then the two dividends that we had to recognize also took out an additional EUR1 billion.

The evaluation adjustments are down by EUR650 million, and in there is roughly all the available for sale portfolios. In here, there's no filter. We're talking minus EUR500 million. And then the FX movements add an additional EUR250 million. In this quarter, as we have the full consolidation of Garanti, minority interest increased by EUR5.6 billion, which adds to that EUR2.6 billion in total equity that we have.

Regarding sensitivities and how much we will recover, as I just said, we had a very good performance in the scrip dividend that was closed a week ago. 89.7% of our shareholders wanted to receive shares. So we will recover around EUR500 million in the fourth quarter. And as Carlos has already mentioned, market volatility has allowed us to recover already 20 basis points.

So I would say that a significant piece of what we've lost in the second quarter -- in the third quarter, sorry, has already been recovered.

In the case of sensitivity to the Mexican peso, I think we've shared in the past these numbers. For every 10% devaluation of the peso, we lose 7 basis points in core. So we close the year -- the quarter, sorry, at around 19 pesos against the euro. We're now at around MXN18.3. So a portion of the recovery has had to do with Mexico already.

Thank you. More questions on capital. Stefan Nedialkov from Citi asks have you received your [stress] requirement and are you comfortable with it? Carlos?

Well, as you know, this is a dialogue between the supervisor and the banks on a bilateral basis and we have had meetings as part of that dialogue. We have also received a draft of the letter but have not received the final one, and we are very comfortable with what the letter says and the requirements associated with it.

And going on, [Darrell Quinn] from KBW, Stefan Nedialkov from Citi, [Alexander Podolsky] from Kames Capital and Carlo Digrandi from HSBC asks where do you see your core Tier I ratio at the end of this year? What is your objective for capital in 2016 and do you think this is the lower limit? Do you reiterate your dividend policy for 2015 and what do you expect to pay in dividends in 2016?

Well, I think we already touched upon some of those. So end of the year we will be at or above the 10% that we envisioned for 2016. We see that ratio going up given the capital generation that we're having and the other effects that I mentioned.

Dividend policy, there's no change, neither now nor for the further, so that we remain with the policy of gradually transitioning to a cash dividend with a payout ratio of 35% to 40% over the next couple of years.

On DTAs, Andrea Filtri from Mediobanca and Raoul Leonard from Deutsche Bank asks if we can indicate how the DTA, DTC levy will impact our P&L? Will you be able to net off historical taxes paid by Unnim and Catalunya Banc in your calculation of your net DTC position?

Yes, we will. And in terms of the impact, we don't have a final number, but the estimate we have it's around EUR70 million after tax for 2016. And then that will be coming down as we of course pay taxes and the asset -- the deferred tax asset base goes down.

And [Sameera Daisha] from Morgan Stanley asks following the consolidation of Garanti do you have any near-term plans to issue AT1 and/or Tier II?

We do not have any near-term plan to do any issuance in Garanti. Of course we're monitoring the evolution of the core Tier I ratio and the total capital ratio, which has been affected by not only the FX volatility, but also by the market volatility in Turkey. But we feel that we have sufficient levers at our disposal in the next few quarters to increase significantly these numbers and we don't expect anything in the short-term locally.

At Group level, we haven't done any Tier II transactions this year. As you know, the bucket is at -- the 2% bucket is at 2.8%. So it's filled already at 2.8%. So we are very strong there. So no short-term needs.

And in the case of the Tier I bucket at the 1.5%, we are already at 1.1%. You know that we've done transactions not only at the beginning of each year. We will see what is the situation in the market. But, yes, I think we still have one more transaction to go to fill completely the Tier I bucket. Eventually, we will do it.

Moving onto FX to ForEx, Stefan Nedialkov from Citi and Britta Schmidt from Autonomous ask how much was the P&L FX hedging benefit or loss in the third quarter. How much FX hedging benefit goes away in 2016 versus 2015 and what are your hedging plans for 2016?

Okay, let's start from the last questions. Our hedging policy has not changed regarding earnings. We will try to hedge between 30% and 50% of earnings on a 12 months view. The 2015 fourth quarter P&L is hedged at around 50% and 2016 hedging is still in the low range of the numbers that I've shared with you. Because we do believe that the lira and the Mexican peso should not behave as bad as they've had in the last few months.

And regarding impact in the quarter on the hedging policy, FX has been negative -- FX impact in the quarter has been negative. On the year, without Venezuela, we've been able to have a positive impact of EUR131 million and EUR24 million of those comes from actual hedging, okay. So that's I think the answer to the first question.

Britta Schmidt from Autonomous also asks if the trading loss in the corporate center is largely FX related?

No, we have a positive on the corporate center because of FX movements, as you can imagine, in this quarter. The loss in the corporate center has mainly to do with the equity portfolio that we have accounted there.

Alexander Podolsky from Kames Capital and [Thomas Nicola] from MainFirst asks if core capital hedging policy across geographies, especially in Turkey. Do you hedge on commercial equity from FX volatility? I think you answered.

Yes, I think I've already answered that. We are thinking about increasing our hedging percentage. As I've just said, we are around 50% in terms of core. All the excess in core that is not naturally hedged by the ratio is what we hedge. We hedge that 50% and we are thinking about increasing that to probably 70%. And it is something that we will do in the course of the following quarters.

And Darrell Quinn from KBW asks how big a depreciation do you think there could be in Argentina and what is the sensitivity of capital to any depreciation there?

In our case -- well, the book value of Argentina is roughly EUR900 million. In countries in Latin America we operate with a huge asset density. So as you've been able to experience when we did the very significant adjustment in the first quarter in Venezuela that did not lead to any impact whatsoever in our core capital ratio. So that would be what we would expect if anything happens in Venezuela regarding the currency.

The peso is now at 10.9 roughly. Our research department believes that it could go to maybe 14 during the course of 2016. But that probably very much depends on who eventually wins the presidential election. So I would say that we still have sufficient unknown facts to have a certain answer there.

Okay, we're moving now to questions on business areas. Let's start with Spain, the banking business, and we'll start with spreads. Let's start with lending spreads. Johan De Mulder from Bernstein, Mario Ropero from Fidentiis, Darrell Quinn from KBW asks if you can give more detail on front and back book lending spreads. What is the average duration of your back book? What is your opinion on asset spreads going forward? Is competition over? And then on the deposit cost, Mario Ropero from Fidentiis asks if we can talk a little bit also about the front and back book levels of time deposits in Spain.

Okay, I think on this front, I'm going to talk ex-Catalunya Caixa and then I'll give the numbers for Catalunya Caixa because they complicate the comparison. I think we had a very good quarter. I don't think that competition is going to go away. But from what we've seen in this third quarter, I think -- it seems like we are acting much more rationally in Spain. And I say this because the front book in mortgages is flat in the quarter. We just lost 1 basis points there, from 190 to 189 -- that's the spread.

In the commercial portfolio, we increased the spread -- in the consumer loan portfolio, sorry, we increased the spread from 679 to 683. Spread went down in the public sector portfolio 13 basis points to 87 basis points. We saw an increase in the mid-sized segment -- in the mid-sized Company segment from 202 to 215 and we also saw an increase in the corporate segment from the very low second quarter that there were some one-off transactions from 138 to 172 in this segment. So very positive news I think on the loan side.

The trends on the funding side remain pretty much the same. In third quarter, time deposit cost went down by 4 basis points over the second quarter from 30 to 26, which allowed the total stock of time deposit to go down by 19 basis points from 93 to 74 basis points. This has allowed BBVA ex-Catalunya Caixa to increase the customer spread by 2 basis points in the quarter to 198 from 196 in the second quarter, which was also an increase from the first quarter -- that was 193.

And it's important to realize that the minus 9 basis points that we've had in the loan yield side, again this quarter 70% of it is due to the lower Euribor rates that we are still experiencing and only 3 basis points is due to actual competition. The overall deposit cost went down to 11 basis points -- went up -- yes, went down, sorry, 11 basis points from 56 to 44. So minus 9 plus 11 leads to plus 2. And I think very positive news in this third quarter.

On public sector loans, Raoul Leonard from Deutsche Bank asks about our public sector lending portfolio strategy. Can you give us color on the size and can you give us some color also on the yield of this portfolio in the third quarter and what impact does the government ruling have on reducing this and will you substitute this income through government sovereign bonds?

Okay, I think in the question of spreads we already talked about it. The thing that I didn't tell you, Raoul, is that the total spread of the book is currently at 1.91, okay. That's the only piece of info that I didn't give you.

Okay, regarding this portfolio which we're talking, roughly EUR24.3 billion, there's very significant news this quarter, it went down by 6.3% quarter on quarter. I think it remained surprisingly stable during the first six months of the year. But all along the year we've been sharing with the market that the impact of the Royal Decree that was issued at the end of last year will eventually have an impact and that will probably concentrate in the second half of the year. So that is what has actually happened and more should go down in the fourth quarter of the year.

On the sovereign bond side, nothing is changing. Our ALCO portfolio remains exactly the same at roughly EUR37 billion and our overall public sector exposure remains exactly the same at around EUR33 billion. So numbers are completely stable.

Thank you. Moving on to some questions on NII, although I think we've answered a few of these perhaps. But Darrell Quinn from KBW, Stefan Nedialkov from Citi, Britta Schmidt from Autonomous, Raoul Leonard from Deutsche Bank, Andrea Filtri from Mediobanca, Arturo de Frias from Santander, Francisco Raquel from Enemasuno ask, first of all, the customer spread declined 5 basis points in Spain quarter-on-quarter to 1.83%. What is the outlook in coming quarters and do you see any lessening of asset spread competition and increase in deposit costs?

Do you still expect low single-digit growth in loans and NII in 2015 in Spain and what is the outlook for NII, NIM and loan growth in Spain for 2016?

Okay, the way I answered the question before was without Catalunya Caixa and that's the way we explained the plus 2 in the quarter. With Catalunya Caixa it's minus 5 and that's because Catalunya Caixa's customer spread went down by 33 basis points in the quarter from 119 to 86 basis points because of the removal of the floors, okay, which was something that we knew we were going to do and it was taken into account when we bought the franchise.

Regarding volume growth, I think that if we take out what is happening in the public sector portfolio that I've just talked about, I think that the dynamics in the retail side remained pretty much the same. The consumer loan book is growing. The mortgage portfolio will end up the year around minus 2% as we were expecting. So no major news there.

We've seen a decrease in the commercial portfolio this quarter. This has been the first time that it has happened. In the last four quarters, we have been growing roughly at about EUR1 billion per quarter since the third quarter of last year and this has changed a little bit the trend, although we believe it is for different one-offs. So we are pretty sure that that trend will change so that we will be able to be flat year-on-year in terms of volume ex the public sector portfolio.

That, with the good behavior of customer spreads that we are having ex-Catalunya Caixa, allow us to be confident that we will be flat to slightly positive in NII in 2015. And as you all know, we don't give guidance for 2016.

Let's move to costs, Alfredo Alonso from Kepler, Francisco Raquel from Enemasuno, Stefan Nedialkov from Citi, Britta Schmidt from Autonomous, Darrell Quinn from KBW and Mario Ropero from Fidentiis ask the following questions on costs. What part of the increase of expanses in Spain is due to the non-recurrent items? Which ones have been registered in the quarter and how much could be expected in the next quarters?

Please could you quantify the allocations of costs from the corporate center to Spain? What drove costs in Spain so high, digitization? Outlook for fourth quarter in 2016? Can you explain the jump in costs in Spain during the third quarter and what is the cost base expected post Caixa Catalunya synergies in 2016 and 2017?

Okay, let me take that one, Jaime, on costs. First of all, the increase that you have seen in Spain has nothing to do with the digitization. So that is very clear. In fact, we will be expecting that digitization will be driving efficiencies, as I mentioned during the presentation as well.

We are already seeing increases in productivity that are quite impressive in some of the products. We were only showing [relatively]; for example, the consumer loans. But within that, for example, I recall about a year ago I was presenting in a conference to some of you in London and was giving some statistics on how, for example, the financing of credit card transactions through the mobile phone was exploding and growing exponentially, doubling the total amount of loans that the bank was financing, including all channels in just a few months.

Well, that trend has continued. And we were doing before that functionality was available on the phone. We were doing around 7,000 to 8,000 loans of that type per month. We had already doubled that by October last year to around 15,000. Well, that number now is around 30,000 per month. So it has quadrupled, the total amount, and the exponential trend continues. And that is happening in product after product with some variations of course on the rates of growth. But it's happening -- it's happening throughout. So digitization will have a positive impact, not a negative impact on our numbers and that includes costs.

So what has driven cost is really the -- of course the integration of Catalunya Caixa, that this quarter is contributing three months fully in the quarter and it was only two months in the second quarter and of course it was not there last year. And then the reallocation of expenses that we have referred to from the corporate center to Spain, which is just a reallocation -- it's not a cost increase.

The reallocation, it's almost finished, but there might be some fine-tuning in the fourth quarter around some cost categories that we are still to reallocate. And apart from those two things, the underlying trends, excluding them, remain in line with the expectations to meet the decrease year-on-year by the end of this year that we mentioned of around 3%.

This is clearly an area of focus as we strive to improve efficiency, which, as you know, is one of the six priorities that I shared last quarter. So we expect to meet that guidance.

Okay, just a fallback question on NII and to clarify, Alvaro Serrano from Morgan Stanley asks if the flat positive NII in Spain guidance that we gave does it include Caixa Catalunya or is it excluding Caixa Catalunya?

Alvaro, the guidance that we gave is excluding Caixa Catalunya.

And the last question on Spain regarding the ALCO portfolio, Stefan Nedialkov from Citi and Robert Noble from RBC is asking about the amount, yield and the duration of the book in Spain.

Numbers are pretty much the same as they were last quarter. The total ALCO portfolio is 36.6 versus 36.7, duration is 3.4 versus 3.5 and yield is around 275, something like that, okay. And those are numbers excluding Caixa, okay.

Okay. And one question on asset quality, Andrea Filtri from Mediobanca asks if we can guide on loan loss provisions in Spain in 2016.

What we've said for loan loss provisions 2016 is that it should be between 60 and 65 basis points cost of risk. The good behavior that we are seeing in Spain I think gives us a lot of confidence that we should achieve that.

Okay. And Carlos Peixoto from BPI asks regarding mortgage floors. Do you believe that any retroactive impacts could be enforced for BBVA if the European Court rules that floors declared now have full retroactive impact, what would be the impact of full retroactions?

Yes, there has been some news this week on this and maybe too much. As you know, we had a Supreme Court sentence that cost us to stop applying the floors to all of our clients starting in May 13th and this is a final decision by the Supreme Court of Spain and we believe that -- as the Commission believes as well -- that the matter as it regards BBVA has been judged and it's final. So we don't expect any impact coming from that in our particular case.

Okay, let's move on to Mexico. And I'm going to have to speed up a little bit here so that we can go through all the questions that remain and I'm a little bit conscious about time. Mexico; Alfredo Alonso from Kepler and Stefan Nedialkov from Citi ask what are the reasons for pressure on NIMs in Mexico and what the outlook for 2016 is. Regarding competition in loans, Stefan Nedialkov from Citi asks if we're seeing increased competition in lending.

And regarding NII, a few questions as well. Arturo de Frias from Santander, Raoul Leonard from Deutsche Bank ask regarding NII -- or NIMs fell 28 basis points quarter-on-quarter to 5.7%. What is the outlook for margins going forward? What is the outlook for NII in terms of volume growth versus NIM? Which loan segments are you focusing on and if we can update our guidance and expectations regarding loan growth and NIMs in Mexico in 2015 and 2016? And finally, on NII as well, if we can explain the P&L sensitivity to the Fed's interest rate hikes.

Okay, I'll try to go fast and try to answer everything. This quarter we've seen a very significant growth in loan volumes. So, yes, we might have competition. But quarter-on-quarter growth has been 5.1% when year-on-year is 15.2%. So Bancomer's franchise is growing very strongly. This is allowing us to increase our market share overall, as this has been the case year-on-year, once again.

This growth is been driven by the commercial portfolio, which enjoys lower spreads than the credit card portfolio that we continue to experience in the [Finamfia] side, lower increases. And that's what is leading to smaller customer spread, which is down slightly to 10.6% in the third quarter of this year from 10.9% in the second quarter of 2015.

This explains this 15% year-on-year growth in volumes because they are true for loans. And customer deposit has only translated in a 12% growth in NII ex-global markets, because, as you know, especially at the beginning of the year the global market area did not perform well.

So even the country growing at roughly 2%, the behavior that Bancomer is having is very strong and this is having very positive consequences in the cost of risk side, which is clearly below the expected guidance of EUR350 million.

Our sensitivity in Mexico to interest rate increases is a little bit below 2% for every 100 basis points increase in the curve and we do expect the Central Bank to follow whatever the Fed does.

Okay, moving on to costs in Mexico, Stefan Nedialkov from Citi, Britta Schmidt from Autonomous and Francisco Raquel from Enemasuno asks if you can explain the jump in costs in Mexico and when shall we expect positive jaws, if any?

I think the main reason for the deterioration in Mexico, which is the main reason also in Latin America, is the FX impact. We have contracts denominated in US dollars and the very significant depreciation in the quarter is affecting the cost side. And then things we knew that were going to happen like the double costs that we're experiencing this year because of the two buildings that we are currently operating. The best that I think we can achieve this year is for flat jaws. I don't think that we are going to be able to generate positive jaws this year.

Okay. And another question as well is, do you stick to the 10% profit growth target in local currency for 2015?

Completely. And I think the quarter has shown that Bancomer is getting closer to that number. We've been improving the top line quarter-on-quarter every single quarter during 2015 as we were expecting and the same is true for the bottom line. We are at 9.6% and sufficiently close to the 10%. And you know there's always seasonality and the fourth quarter tends to be very strong in Mexico.

And in asset quality, Francisco Raquel from Enemasuno asks if we can comment on the outlook for asset quality and cost of risk in the coming quarters in Mexico?

I think I've already mentioned that. I mean NPLs have fallen by 21 basis points in the last three months. Cost of risk is below our initial guidance. I think trends remain very positive. The cost of risk in the quarter, you've been able to see it in the presentation of Carlos, 3.3 -- I think also helped by the change in mix. Clearly, the dynamics are very positive there.

Okay. And we move to South America. Mario Ropero from Fidentiis asks when can we expect a relaxation in the level of growth of costs.

I think I've already answered. I think partially it's due to the depreciation of the local currencies. Many service agreements that we have in the region are denominated in dollars. And I think that's the most important reason apart from the expansionary plans that we had in some countries until last year. So that's the only reason.

Okay. And on asset quality, Robert Noble from RBC and Francisco Raquel from Enemasuno asks if we can comment on the outlook for asset quality and cost of risk in the coming quarters. And Latin American cost of risk is surprisingly good compared to previous guidance of increasing into year-end. Should we expect this to continue? Is there any impact from lower commodity prices in provisioning yet?

Yes, cost of risk is good overall. It's better than expected in the US. It's better than expected in Mexico. It's better than expected -- it's around what was expected in Spain, lower in Turkey and that's also the case in Latin America.

We were expecting between 15 and 20 basis points deterioration year-on-year ex-Venezuela and only 10 basis points have been reflected in the P&L year-on-year -- sorry, year-to-date. And so the quarter has shown an improve of 5 basis points. And dynamics are very good. We haven't seen so far any deterioration in pretty much any country except probably Peru. Peru and slightly Columbia are the only countries where we are seeing a slight deterioration in the cost of risk.

Okay, we are moving to Turkey now. Britta Schmidt from Autonomous asks Garanti's results have disappointed. What is your expectation for future performance? How happy are you with the return on investment and would you support a potential Garanti investment in [Finance] Bank?

Okay, I can answer on the P&L part, but not on the second part that Carlos will answer. Are we disappointed? I think the underlying trends, as was clearly shown in the results presentation two days ago, have been very solid and this quarter impact have been affected by the very low recognition of income coming from the CPI linkers and partially also by the mark-to-market of certain portfolios due to the FX movements.

NII line remains very strong. It is true that we had those capital gains impact and cost of risk -- and the cost [rate] has also shown a significant increase partially due to the FX impact plus a series of one-offs, fines, et cetera, that I think you're very aware of. And cost of risk behaving very well.

So the underlying trend I think in Turkey has not changed and even this very volatile market conditions, Garanti is demonstrating that it's very good at managing volatile situations, managing prices very well -- and I think that should remain true in the future.

On the M&A question, I think, as we always do, we don't comment on specific deals. But I think already Jamie mentioned our position in Turkey and how happy we are with our ownership of Garanti. It's the leading bank. If there are consolidation opportunities they will surely look at them, and if they make sense, we would report. But I would not like to comment on any specifics.

Okay. Arturo de Frias from Santander asks if on an ongoing basis revenue has increased 5% and cost more than double, can you explain the performance.

Arturo, I think we -- Jamie just answered that. Johan De Mulder from Bernstein asks if we can give guidance in Turkish credit costs and NPL formation and is there stress being witnessed on FX denominated loans, 40% of total, given that lira is trading at record low levels versus the dollar.

The dollar portfolio is only going down, so that's I think very positive news. We're gaining market share significantly in lira loans, but that's not the case in dollar loans. We are down by 96 basis points only in the quarter. And that I think is a reflection of the conservative approach that I think we generally have in all our subsidiaries. And I think that's clearly reflected in the NPL ratio that has gone down in this situation by 7 basis points quarter-on-quarter to 2.6% in Garanti.

And recoveries have improved very significantly and has led to a cost of risk of 103, which it is an increase, but only of 3 basis points versus the second quarter of this year and definitely much lower than what we have the third quarter of 2014, which was 110. We stress the portfolio every single month for FX movements in Turkey and no significant deterioration has been seen as of yet.

Thank you. Moving on to the US, Stefan Nedialkov from Citi asks about the outlook for loan growth, NIM, cost of risk and cost growth in 2016. And also Stefan asks about an update on digitization initiatives at Compass. So maybe, Carlos --

So let me start with that one. Like in the other countries, we are moving ahead with many initiatives in Compass regarding digitization. Some of them are of a global nature. In fact, we are driving a single development agenda to ensure that the solutions -- the good solutions that we develop for our customers are deployed in all of our geographies as fast as possible and that we avoid multiple fragmented efforts in the various places. And Compass is part of that. It's both contributing as well as benefiting from the global developments.

I would highlight the few products that have been launched with the digital. First the Mobile First Mentality, including the MBA AMEX card -- and we're just starting the season now and we have good hopes of that being a success, that product -- or the ClearSpend product that was launched a couple of months ago with -- or even less I think; just a few weeks ago -- with impressive pickup in customers on a weekly basis.

Our mobile app was redesigned and the new deployment has won the award for the best mobile baking app. We have inaugurated a development center in Birmingham where we have scrum teams working in all of these developments not only for the front-end, but also in streamlining the processes at Compass.

I would finally highlight the open platform project, which has lots of potential to add additional business. It's really about connecting our new state-of-the-art backend platform, banking platform that you know we invested heavily in the past and that it's really a competitive advantage to really provide services to third parties leveraging that platform. We have connected -- as you know probably from press releases, we have connected with [Doula] and are now in the process of connecting with Simple Bank -- and that will be the start of that open platform strategy.

And regarding 2016 guidance, as you know, we don't give any. But 2015 numbers are moving as expected; good strong loan growth, around 13%; customer deposit around 10%; spread stable, only 1 basis point in customer spread down versus last quarter -- we're down to 310 basis points, robust numbers. Nothing in cost of risk, as I mentioned, lower than what we were expecting for the year. We're still at around 20-23 basis points for the year. So I think very good numbers coming from States.

Okay, we're going to finish -- because we just have practically 5 minutes to go -- on strategy. Raoul Leonard from Deutsche Bank asks or says that we have been very busy on structural changes, Garanti, Catalunya Bank, sales tax in China, are you now largely finished or should we expect further changes.

Okay, I would make two comments. One is that capital allocation and the return on our capital is a core part of our strategy not just for M&A, but even for all decisions that go from day-to-day origination to longer term planning, capital planning and growth planning. That's again the same as efficiency. It's one of the priorities to ensure that we maximize return on capital taking into account also the new regulatory requirements.

So that has a bearing also on the configuration of our portfolio. But beyond commenting on M&A, which we of course don't do, we are continuously reviewing that portfolio and considering opportunities to strengthen the positioning in the markets where we see higher potential and also exiting those that don't -- or moving capital away from business segments that generate less to those that do generate the return that we require. I think we have a clear strategy that in terms of what fits and what doesn't fit and of course this focus on value creation for our shareholders.

Now, having said all of that, what we're focused on is really to be a better bank for our customers, as I said, leveraging technology, leveraging data to do that in the markets where we operate and generating organic growth in the markets where we operate in the most attractive segments.

Okay, a few questions on consolidation in Spain from Johan De Mulder from Bernstein and Andrea Filtri from Mediobanca asks if we can please elaborate on our M&A strategy in Spain and specifically if we're planning any further acquisitions in Spain, Bankia acquisition rumors and so on.

Yes, been the same. In Spain we have grown significantly through acquisitions, taking advantage of the crisis and the concentration that the industry has gone through. So thanks to the Catalunya Caixa and Unnim deals we now have a market share of around 15% and we're focusing now on gaining share organically. Of course if there are opportunities, we will look at them, but we have an organic growth strategy.

Also on Spain, Darrell Quinn from KBW asks if given the growth in digital, could you close 25% of the braches in Spain.

I think longer term we will see a significant reconfiguration of the channels through which the customers relate to the Bank. As you can see, the transactions in branch continues to go down as mobile customers continue to grow exponentially. That trend will surely continue because our customers are demanding that. The customers that relate to the Bank through digital channels interact more often and they are more happy with the Bank -- they love us. And they are really promoters in a big way

And that will continue also as we continue to deploy lots of maybe small thing that together they add up to really a revolution. And we have many things already in the hands of our customers that simplify their lives, really take away the need for them to come to the branch for low value added activities, servicing activities, operating tasks that are really best done by the customer in their free time or when it's more convenient for them. And that will definitely longer term have an impact.

But I think here we cannot put really the cart before the horse. We have the branches also to drive sales and that's a very relevant factor in today's business model. So it will be a gradual approach as we shift interaction both on the sale side as well as on the servicing side through channels that the customers demand. It will have that consequence that you're referring to in the longer term.

Okay, thank you. Robert Thomas from T. Rowe Price asks given the negative impact this quarter from equity stakes, what is the rational for continuing to hold these stakes.

Well, as you know, we have two main equity stakes, Telefonica and CNCB, as Carlos has said at the beginning of the call. In the case of CNCB, we've been slowly but surely disinvesting. We used to have 15% and now we are down to 3.26% at the end of this quarter and it has been a very profitable investment.

In Telefonica we owned a little over 5% of the company. And it's true that with some volatility quarter-on-quarter the reality is that this is a very efficient stake in terms of both capital consumption and fiscal and financial cost especially during these days and I think we -- it adds value to our shareholders and also to the shareholders of Telefonica. But we must also take note that its in available for sale, so eventually this stake could potentially be sold out.

And the last question, as we're running out of time, is on Turkey. [Murat Bosvoga] from [Emerging] Market asks if we are planning to increase our shareholding percentage in Garanti via the Turkish markets.

No, we're not planning. We're happy with the stake that we have in Garanti Bank of 39.9% and the control we have of the bank through the board and all the plans that we're putting in place to work together in really capturing synergies and leveraging things in which BBVA is adding value to Garanti and vice versa. But there is no plan at all to do what you say.

Okay, thank you very much, Carlos. Thank you very much, Jaime. And thanks to you all for attending the call. As of right now, the Investor Relations team remains available throughout the day to answer any remaining questions that you all may have. Thank you very much.