Banco Santander SA (SAN) 2008 Q1 法說會逐字稿

(Interpreted). (Technical difficulty). They can also connect through voice to listen to the presentation and they can also see it over the web. So, we will follow our traditional presentation order. We'll begin with our CEO and then the CFO, Jose Antonio Alvares, and then we'll take questions. I'd like to remind you that first we're going to take the questions we get over the web, the written questions. And afterwards we will take voice questions. So, without any further ado, we begin the presentation with our CEO.

(Interpreted). (Technical difficulty). Also give you conclusions on the quarter and how we see the rest of the year. So, my first idea is that we are living in a very complicated environment, as you all know. But in this difficult environment Santander has shown its capacity to generate profit. We are going through an economic slowdown and uncertainties in markets. But, nevertheless, we continue to show our capacity to generate recurring profits. Our business model and our capacity to execute projects and to anticipate and adapt to market conditions has enabled us to absorb the slowdown in some of the markets and businesses where we operate, offsetting it with the excellent situation of others. This is the advantage of our high degree of diversification.

Also, as you can see, the quality of our results is vertical as well as -- or as horizontal, in terms -- in other words, the way in which the cascade of the account has been booked, as well as in terms of businesses or geographies all the units are in an excellent path of growth. The important commercial unit, which is our core business, the Retail Banking business, that represents 80% of the Group's profit and that is growing consistently. Therefore, we're making progress and we are progressing toward our goal of increasing EPS by 15%, which as you know is our target.

Quarterly profit in the first quarter is EUR2.206b, 22% more than in the first quarter of last year. This figure includes, as you can see in the graph, the contribution of EUR151m from the Real Bank, Banco Real, which is the difference between profits of EUR252m and the financing cost net of taxes of EUR101m. So, that will give us a net figure of EUR151m.

As you know, until the definite separation of Banco Real, these profits are recorded in income accounted for by the equity method and financial management in equity stakes. These results, therefore, are not included in the operational business. They are not included in the operating businesses. They are included in the corporate center or what we call financial management and equity stakes.

I'd also like to remind you that in terms of earnings per share we are already including in the denominated the total number of shares. So, this is for you to better understand what the [PBA] means -- what the -- our earnings -- profits before taxes are.

So, the important year to year growth of profits as well as earnings per share I think show the great soundness of our business. And right now, in the circumstances where -- that we're living I think it sets us apart from many of our international competitors that are presenting strong fluctuations in their profits and even losses. We offer a fourth quarter in a row with profits of more than EUR2b, with 22% growth as compared to the first quarter of 2007, and with a 4% growth -- or 4% more than in the fourth quarter, the last quarter of 2007. And we can say the same thing regarding EPS, which was 4% higher than in the fourth quarter of 2007.

And all of this, if we look at it by business unit, where I repeat the Banco Real part is not included, then we can see how all our units are growing consistently. Our Retail Banking units in Europe, mainly the Santander branch network and Banesto, all these Retail Banking units are growing at about 15%. I remind you we're talking about Santander Banesto, Santander Consumer Finance and Portugal. The U.K. increased results by 17% in sterling, growing 13% more than the fourth quarter of 2007. And our businesses in Latin America are growing at rates of 22% in dollars, which is a currency with which we manage the region.

And this may seem repetitive, but I repeat that ABN Amro contribute -- is contributing what I mentioned before, but it's not included in any of the operating businesses, but in the corporate center. When we take a look at the different business units, Jose Antonio Alvares, our CFO, will be more specific unit by unit and business by business.

In order to describe these results of the first quarter, I'm going to use a little house that we have been using on other occasions, which I think summarize very well the pillars on which the growth of our results is based on, are based on. The first aspect is the strong growth in earnings per share, its sustainability and the quality of these results.

The second point would be the strong rise in recurrent revenues. In this regard we must say that although we are experiencing in some markets a slowdown in the volumes, we are focusing on improving the spreads of our assets and going deeper in our relations with our customers. And this is giving us this strength to our recurrent revenues. It isn't by chance that it's very helpful to have the largest distribution network in the world.

The third idea is improvement in our cost to income ratio. When we presented results in the month of February, we said that one of our tactical priorities in 2008 would be to emphasize on the cost in order to keep our jaws wide open. And this has also been achieved in the first quarter of 2008. All of this, this cost and revenues management has allowed us to absorb an increase in provisions which, although it is part of our forecasts within our budget, nevertheless it is true that there has been an increase in our provisions, a significant increase.

And all of this is surrounded by a strong balance sheet in terms of credit quality, as well as in terms of liquidity and solvency.

If we take a look at the results for the first quarter, we can see that growth is strong. Perhaps we haven't grown as much as we have been growing in terms of our earnings in previous quarters. But, nevertheless, it is significant.

In the chart you will see two things, two visions, a vision of the Group including ABN Amro, the Banco Real, and the Group excluding the Bank -- the part from this unit. Both are excellent, very difficult to imitate by our international competitors, very few can get these results. 19% is by how much income has increased. This multiplies by three the increase in cost, which is only 5.7%. Last year revenue grew by 21% and costs grew by 11%. Well, now the income has grown 19% and the cost has been under control. They have only risen by 5.7%. So, the net operating income has risen 31%, very similar to the figure we obtained at the end of 2007, 32%, practically the same figure as in 2007. And this enables us to absorb the rise in provisions and offer an increase in the net operating income less provisions of 21%, which is very similar to what we see on the last line, which is 22.4% rise in attributable profit.

If we take a look at the series, because we can see that there is a consistency of revenues then we can see how the core part of our business, which is the net interest income, excluding dividends, and fee income and insurance activity, has been increasing every quarter the last three years, and yet again in the first three months of 2008. And this clearly reflects the good performance of all our units, the soundness provided by our high degree of geographic and business diversification in circumstances as current circumstances.

And within this performance the main source of growth is the net interest income, which in like for like terms, excluding the cost of financing ABN, was 19% higher than in the first quarter of 2007. Why this growth of 19%? Well, basically because of the improvement in customer spreads, asset spreads, basically, in the past two quarters. The growth in business volumes, which while slowing down, are still increasing at around double-digit rates. And these, as a result of these spreads, volumes and good management in the cost of the whole to be financed, that is the absolute difference between loans and deposit. All the retail units in Continental Europe, Abbey and the main countries of Latin America are registering notable rises in net interest income. All grew at more than 10%. And of note, were Santander branch network and Banesto, which combined, increased 24%. And Abbey, which in the British market which is a very difficult and competitive market, is growing at rates of 15% in terms of revenues, which is what I'm referring to right now.

The third point of our little house that I showed you earlier, is the improvement of the efficiency ratio. Before I said how our management of revenues and costs enabled us to end 2006 and 2007 with jaws of about 10 points in 2006 -- in 2007, and this is also how we started the year 2008. I think the Santander Group has a track record in cost management. We ended 2007 with an increase of cost of 10.5% and we began 2008 with growth in cost of 5.7%. Have the faith that this trend will continue. And we believe that by the end of the year our growth in costs will be below this figure that we have right now, 5.7%. Well, for many years we have been continuously improving our cost to income and we will continue to do so in 2008. We closed the quarter with a cost to income with 41.9%, 4 points less than in the same period of 2007 and 9 points below that of 2006. We are, I think, among the most efficient banks in the world.

And the fourth point is provisions. The Group's total loan-loss provisions were 69% higher than in the first quarter of 2007 and 5% more than in the fourth quarter. The year on year rise was due to several factors and these referred to previously. On the one hand, the growth in lending, which in some Latin American countries is still growing at more than 20%, and this justifies part of this growth. On the other hand, the change of mix in some units where we are growing basically more in market segments of individual customers. And thirdly, that in the first quarter of 2007, and in what we call Global Banking and Markets, we have made provisions that did not occur in 2008. And, of course, the risk premium has increased in some markets, because of the less favorable macroeconomic environment. Nevertheless, I remind you, and this is proven on the graph on the right hand side, that the net operating income, deducting provisions, grows at 21%, very similar to growth in earnings.

If we compare now more in detail the figures by -- or the provisions by business area. If we start by the right hand side, I wanted to point out that we are still making provisions and we're still making generic funds. They were less in Retail units, because of the lower growth in lending and we made some in Global Wholesale Banking releases in the first quarter of 2007. The net figure was almost the same on the Europe side.

Specific provisions, these have increased in Europe and in Latin America. And following the latest trends, perhaps in Chile it was a little bit higher, but in the other countries we still keep the same trends that we had in preceding quarters. And in Europe we have two increases, which are the most important. In Consumer Lending with growth in Europe's units. And Drive, and I've said repeatedly in other presentations that Drive is a business that -- where it has very low cost, but it is very intensive in provisions. And the Santander branch network is also growing in provisions. But I have to add something to this, because part of this increase is a bit misleading, because it occurs, because in the first quarter of 2007 it was a very good quarter in terms of recovery. So, the network made no specific provisions. In fact, it released some provisions. And this is why if we compare to 2007 it looks there's a big difference. And lastly, lower provisions at Abbey, whose credit quality remains excellent.

And lastly, the last point of this summary of our results, is the high strength of our balance sheet. If we start by the credit quality, as we have been anticipating in previous quarters there is an increase in NPLs in practically all markets. Nevertheless, I remind you, it's important to remind you of this, that in many markets, and particularly in the Spanish case, NPLs are at historical minimum levels. And in this context, although it is clear that the Group has shown an increase in NPLs, nevertheless it has excellent quality standards.

The NPL ratio is 1.16% and coverage is 133%. If we compare with international standards of European banks, this group is 2.5% in NPL and hasn't reached -- and coverage of less than 80%. Our higher coverage is partly due to a large volume of generic funds, which at the end of March amounted to EUR6.077b. As you saw in the chart, we continue to build up generic provisions quarter to quarter. The situation is also very positive by geographic areas. In Spain the NPL ratio is 0.84%, much better than the sector, and the coverage is 202%. In the U.K. Abbey also had credit quality ratios clearly better than its main competitors and in Latin America we are among the best in all markets.

When we talk about strength we need to talk about liquidity and solvency. At this point in time, we know that our business model calls for less liquidity and less capital. In terms of liquidity we're comfortable, very comfortable, and this is for three reasons. First, because of our retail banking nature we're more liquid than many of our competitors and this is precisely due to the fact that we have a larger relative share of customer deposits.

Also, our financing structure is appropriate for our needs. We have a high residual maturity period of over four years. And, this is very important we have access to liquidity markets, which is ample in the short and in the medium and long term. We -- as you know, we've had to the tune of some EUR4b. That's a reopening of the Spanish market with two senior debt issues. And also, when we talk about capital and we talk about solvency, we have to say that we're doing very well. Now that we see that many international banks are currently affected by the loss of value of their assets, they have to go to capital markets seeking further income. Well, we, in historical terms, are doing extremely well. We are very efficient in terms of managing our capital and we have a core capital ratio which is in excess of 6%.

And this is, ladies and gentlemen, the end of the first portion, the first summary of our presentation. And I'm going to give the floor to Jose Antonio Alvares, who will take the floor and talk a little bit about our performance, our business area performance. Thank you.

(Interpreted). Yes, good morning. As the CEO has just said, I am, in fact, going to make some comments regarding the business units. We aspire to have questions and answers afterwards. So, some of the information that we used to read out in the past will not be read out on this occasion, but is available to you in the documentation that's been distributed. So, let's talk about the business areas. But first I'd like to make a reference to three specific subjects, which have been discussed recently by the CEO and which allow us to understand our performance.

So, first and foremost, we need to make a reference to the impact of the dollar, the depreciation of the dollar and the sterling. We know that that impacted by some EUR190m negative. And this will be offset, if you will, by the Corporate Center with our hedge, and we'll be seeing the details there in the future. We see that that's a positive EUR210m. So, it's fair to say that one against the other all things are made up for.

It's very important we have to make a reference to the year on year fall in the profits of Global Wholesale Banking. If we take a look at those numbers we'll see that numbers have been good. Look at the chart and you're seeing how, if we compare with previous quarters, results have been good. The first one is 2007 was exceptional and we'll see the whys and wherefores. We see the negative comparison with the quarter one '08. So, we're talking with year on year and these are the numbers.

And finally, finally the ABN issue has been discussed. I'm not going to focus on this at this point in time, but it's as yet not incorporated into the operating areas.

Let's now take a look, if only briefly, and let's summarize. The generation of results, this pie chart, which has been talked about a number, what we see is that the commercial units in the euro zone represent 41% for Retail. The rest of Europe contributes 8%. I think that here we see the evolution of Global Wholesale Banking, the U.K. 12%. Latin America, we split into two. We have ex. Real. That's 29%. Banco Real, in other words, represents 10%. And this I think allows us to understand pretty clearly where results are being generated. I'm talking about the geographical areas.

So, let's begin by taking a look at Continental Europe. Santander, Banesto, Consumer Financing and Portugal are growing at 12%. And this compared with the fourth quarter, that was with 15%. The rest of Europe, I talked about the fact that it reflected Global Banking and Markets, that divides into two. Latin America, growing very healthily. And Europe, basically the operations allow for the business that all of us have endured. We're talking about loans, we're talking about parts of the equity, which are doing a little bit less. We see a significant loss of 51%.

And in the U.K. Abbey is performing very nicely indeed. We're talking about 17% if we compare with the previous quarter (sic - see presentation). And let's look at Latin America. Latin America is growing at 22%. That's how they're doing. If we compare it with the fourth quarter, we're doing about that.

So, let's look a little bit more at the different units. The European unit, we see double-digit growth. We're talking about income and we're talking about operating income and profit. So, we're seeing 13% growth operating income and we are seeing 12% in profits.

Let's look at the Spanish networks, Santander's branches and Banesto. That's a nice combination I think. We heard our CEO make a reference to the jaws. We're talking about 15% roughly. Those are the results of the Bank in Spain. Consumer Finance, or SCF, is growing very nicely, 16%. Remember that there has been that loss in 2007. However, we're seeing, as I say, healthy growth. However, we do need to remember that there are start ups and costs are high. So, we know that they will be growing, but a little bit more weakly perhaps than the underlying elements. So finally Portugal, Portugal's profit grew by 20%, that's Retail Banking. And we're looking forward to seeing one-off. We're looking at release of provisions and that's going to be I think the competitive element there. But as I said before, Retail Banking's profits are growing at a very healthy 20%.

Now, I want to see if I can summarize this. You have this information. I said at the beginning we have Santander growing 9% and profits 14%. We see that improvement in the net interest income, and we can say the same for the Consumer Finance and Portugal. In general there's a slowdown of loans, with some exceptions. Portugal is doing nicely. The cooling down affects Spain perhaps more and in the (inaudible) and Banesto and Consumer Finance, we would be talking about other countries such as Germany and so on, where rates are even improving. So to summarize, when we look at the volumes, we're talking about adapting. So, we're talking about an improvement in our net interest income, if we compare with ATMs in all of the commercial units in Europe.

Let's look a little bit now at profits per unit. On the one hand we've got the Santander network. We're doing 14% there. We made a reference before to the net interest income, before that was 20%. Fees also are doing very nicely. Provisions, as I mentioned, we've got that comparison, because of that freeing up that was 2007, and if we compare with numbers in the past. Banesto, we said that there's a nice cost control and nice income if we compare with that growth of [0.5%].

And then Consumer Finance, nice performance. In Europe, there's an improvement in the commercial revenues. That's 4% over the fourth quarter. Because of Germany, because of cross-selling fees we see that there's an improvement there. And in Europe in the past quarter we've seen 5% over the fourth quarter. In terms of Drive, that's Santander Consumer U.S.A., that's good management there. In the past two months we saw an increase, because of the prices of second hand automobiles. This has been turned around. And, in general, it's fair to say that this is performing better in the States, better quality. So we do not foresee major changes, at least not so far. It's also, I think, known by all that we have agreed with GE for an exchange operation with GE, and the same with Royal Bank of Scotland. Basically that's the cards. That I think segues nicely into our commission. That's going to represent an increase of 20% of the Santander Consumer Finance portfolio and probably will be generating higher synergies in cost. Portugal now we have an excellent rate. Commercial revenues doing very nicely, 4% -- 9% (sic - see presentation) over fourth quarter, and profits before tax at a positive [20%] over the fourth quarter.

Now let's go to the U.K. I think it's fair to say that performance is excellent if we compare with the competition and if we look inside. We're talking about the results in general. So really we are at a distance from our competitors. We see a gross operating income of 9%, in the upper part of our target range, 5% to 10%. We're up there at 9%. Excellent, excellent cost control, 1%. And our net operating income and profits are growing to the tune of some 17% in pounds. And quarter-on-quarter, when we look at the growth, we see that we are doing very nicely in terms of net operating income.

Now let's look at the spreads. We see that loans are growing at 10%, last year 8%, deposits 5% in comparison with 1%. The absolute numbers, I think, are not twice what they were one year ago, this is true. But however, because market activities have shrunk, our net lending, our net lending I repeat, has grown. And what's grown more are the spreads with 76 basis points, 76. This I think talks about better capacity, it talks about more magnetism. And we would see the very healthy trend we're doing at 47%, that's our efficiency. And the quality is excellent, very stable. Our provisions also are stable. So I think we can say that Abbey has performed very nicely. We're talking about cost control. We're talking about a very, very nice series of numbers in the U.K.

Let's go to Latin America now. In Latin America again growth is very healthy. If we see the net operating income, we can talk about 40%, 50% growth. If we look at the attributable profits, that's done very healthily, very brisk growth, with profits which are of some $1.092b, that's 22% higher than the first quarter of 2007. I'm referring to the attributable profit.

If we look at the information country by country, they're all doing over 30%. That's an increase of the gross operating income by more than 30% in dollars. All of them open their jaws. In the case of Chile it's 34% (sic -- see presentation). In the rest of the area, very nice. We see Brazil's growing at 33%, Mexico 41% before discounted operations. Chile doing better at 16%, 25% before discontinued operations. And other countries' growth, well there's two impacts. One is provision and this is basically Chile, and another impact for contingencies in Venezuela, other income Venezuela. Private banking is growing at a pace of approximately 20% in profits. That's been our tradition in the past few months. And we're averaging, as you see, that 20% growth.

Let's look at the units now. Exactly what we did in Europe, let's do it in Latin America. We see all countries are doing very nicely in terms of loans, but with some footnotes. Brazil, 30% (sic - see presentation) Retail 28%, Wholesale one digit. In terms of deposits we're doing growth of 32% In Mexico we're doing 19% with our loans. And we're talking about 20%, 30% in the Retail portion. In terms of, let's see of deposits in Mexico, 20% growth. So we know that we need to continue to attract monies. Then in Chile we're also doing double-digits. So I think it's fair to say that performance was good. Not surprising, because some of these countries are growing to the tune of some 4% or 5% GDP. So if we compare with the scenario, this is the kind of growth we've seen. We believe that it is sustainable if things continue as they are.

If we look at the spreads, the focus on spreads, yes, in fact there has been improvement in Retail Banking in Chile and Mexico for different reasons, in Mexico because of loans, in Chile it's deposits. And in Brazil there's been a reduction of 110 basis points with a fall of 150 basis points which -- that's in the [seller grade]. And this can be explained by the fact that quarter-on-quarter there's some erosion as our convergence is [swapped] towards more sustainable levels.

Let's now take a closer look at the main Latin American units, at profits specifically. In Brazil we see that revenues are backed by excellent fee performance and smaller rise in costs. 12% rise in fees over fourth quarter and we're talking about inflation levels in costs. And that, I think, is what we're looking for, for the rest of the year. Risk premium in line with the fourth quarter '07 with NPL ratios rising and thus more provisions. However growth, I think, continues to be healthy and profitable. Net operating income, excluding gains on financial transactions and net of provisions was 11% higher than in the fourth quarter. So we're talking about profitable business despite the downward turn of that 15 points in the risk premium. So as I say we're doing fine.

In Mexico the trend is what we had in the past in commercial revenue, costs down and stable provisions. Retail Banking is growing nicely. The net operating income, 15%. And cards, that's doubled our risk premium. We're making a reference to that, although the NPL ratio is still good. So that risk premium, as I say, has doubled in just one year. This is due to that cards impact. And the NPL ratio, I repeat, is good, it's 1.3%. That I think is a very telling number.

Chile now, lower growth because of our focus on spreads. And we see that growth in healthy. Again we see that net operating income is 21% (sic - see presentation) higher than in the fourth quarter. I think that this is a very telling snapshot of things in Latin America.

Financial management and equity stakes, a major change in the first quarter of 2007, those EUR495m, that difference which is due to two factors. First the contribution of ABN-Real, as the CEO said, EUR151m, not 100% exactly, EUR151m net. And the second impact, which I made a reference to before, is the hedge of results which is EUR210m. I think that this offsets that EUR190m negative impact of exchange rates which was the result of the business activities, as I mentioned at the beginning of my presentation.

Let's look at other business segments now, the secondary segments. We will talk about Retail Banking which is doing as it was in the past. Our profits before taxes are doing nicely, 28% and 24% in the U.K. and Latin America, and if we see what the impact is of the rate of exchange.

If we look at Global Wholesale Banking, I'm going to stop and focus on this a little bit more specifically because this was particularly good. If you see profit before taxes on the left hand we're talking about EUR882m, that's in the first quarter, and EUR592m first quarter 2008. However that first quarter of 2008 is a very healthy one. If we look at the margin, the gross operating revenue, it continues to be healthy. There are three elements to take into account. If we compare the first quarter 2008 and the first quarter 2007, we have a distortion. You'll remember the very important operations in Spain, large operations in Spain, which were one-off. Second, the high trading revenues which you see were reduced from EUR272m to EUR149m. So things are not that bright. And finally in first quarter 2007 the generic provisions, that's an impact. We see that EUR51m were released and it's been EUR25m in the same period.

So if we focus on Global Wholesale Banking now, let's look at the different geographies. There's two separate universes here. You have Latin America and you have Europe. On the right-hand side we see a per product interpretation. We see corporate banking, your classical elements if you will, doing 37% growth rates. Rates, that business, basically Santander's Global Connect which we launched in Spain years ago, we've grown -- we're into Portugal. We're now going into Latin America which is doing growth of 25%. And we see the three businesses which are most linked to investment banking. We would see those credits, we're talking about debts falling. Investment banking and operations doing interesting numbers at the beginning of 2007. And variable income which is multifaceted. You have, on the one hand, a loss of 50% of activities, and at the same time, we see a growing demand of derivatives. We see that that is growing very healthily. And the net was a fall of 10%.

So our vision, our interpretation, is that it's good performance at this point in time. And we believe that we will continue to see this kind of performance in the second and third and fourth quarters. We believe that our platform is good and we'll be able to make the objectives that we seek.

Finally Asset Management and Insurance. Profits before taxes increased 4%. On the one hand we have insurance, the insurance business that grows quarter after quarter, the bancassurance business, particularly in Spain and Latin America. In the asset management world we also have two parts to it. We have the Spanish part where the assets managed have gone down significantly and therefore we have less revenues from fees and commissions. But in Latin America it is rising at about the [60%] -- 14% sorry. So the impact of Spain in mutual funds is a positive impact of mutual funds in Latin America. In bancassurance we are growing very well and we think that this is sustainable because we are introducing the bancassurance concept in the new unit.

And now I give the floor once again to our CEO who will go over the last two points of our presentation.

(Interpreted). I'm going to talk about the next two points, the situation of the ABN Amro deal. And then I'll give you some final conclusions on the quarter.

With regards to the ABN Amro operation, as is well known because this is public information, you know that we have signed a principle of agreement, a preliminary agreement with General Electric to sell it Interbanca, and receive in return the Consumer Finance business, GE Money in Germany, in Finland and in Austria, as well as the cards and auto finance units in the U.K. In other words we are exchanging a non-core asset for core assets that reinforces our Consumer Finance business in Europe and that also allows high potential synergies with our current units.

Plus we also acquired the asset management business of Fortis in Brazil for EUR209m. We did this for very clear reasons. This ensures the management a distribution of a core product for Banco Real's customers, particularly retail ones, and the generation of synergies with the integration of the business in our Global Asset Management unit.

So these two operations fit like a glove within our strategic and financial criteria and make the total investment in the ABN operation of about EUR10.8b. In the appendices you will find further details on both deals.

Lastly, as regards the process of segregating assets, we have received the no-objection from the Dutch Central Bank to the global separation plans. And we are working on obtaining authorization for each specific plan. We believe that the main dividing up of the assets with our partners will be completed during the third quarter when we will assume management of our units which are now going to be part of Santander.

Although on a day-to-day basis we are still not managing Banco Real, we believe it is necessary to provide some information on its performance during the first quarter, which I can tell you already was very positive. These are our proforma figures. This is a first approximation of the accounts following the Spanish criteria. And as you can see the Banco Real is performing quite well, basically supported on the strength of its revenue which increased more than costs, clearly. In other words, the jaws are widening. And this allows us to absorb provisions which are also rising. So the profits before taxes increase in dollars by more 40%, four, zero. So this is a good snapshot. But as I say, it's just an approximation to Spain's criteria. It probably won't coincide with the figures published locally nor with those of ABN Amro because of accounting and perimeter differences.

There are also some figures that summarize Banco Real's activity and management ratios which are similar to those of the appendices on any of our units. Banco Real is growing briskly in loans, higher than the market, with a particular focus on SMEs. And it is doing so with no erosion of its good credit quality ratios. We can also see the improvement of its efficiency. It has a very good cost to income, of course still far from the Group's standards, which is good news because that means that we have lots of synergies to achieve, a lot of potential there. And I'm sure that we will be able to bring out these synergies in our integration plan.

As you know in October there's going to be a presentation dedicated to the Banco Real. We will have this meeting at the end of October in Brazil. And we will present our three-year plan for analysts and investors. And there you will see what our outlook is for this Bank, just as we did when we acquired Abbey. We made a presentation on the Abbey business for investors and analysts, as we will do this time in Brazil for Banco Real.

So, conclusions. The first quarter saw active management of the key elements of business. In the first quarterly earnings presentation I talked about the priorities or the keys to managing this year. And if we go over how we have made progress along these priorities, the truth is at the end of the first quarter we can say that we have obtained very good results in spreads, which was one of the most important management drivers for the first quarter. We have been able to increase all our spreads, asset spreads in all units. There's just a slight decrease because of course this is a mixture of all markets, all products, but in the relevant businesses the improvement of spreads has been quite significant.

When it comes to managing costs, we are slowing down the costs. We are bringing down our costs. And therefore we're going to keep those wide open jaws this year. Provisions are increasing in line with our forecasts and are absorbed by the growth in revenues. In terms of deposits, which was another one of our priorities, we are growing at the two-digit rate, faster than the rise in lending. In quality of service we have a large customer base which we are close to in order to respond quickly to clients' needs. The name of the game today is not to have as a priority to increase our customer base, but to work in order to log these customers in, the customers we already have. Our core capital is strong, more than 6%. And we are actively managing our portfolio of businesses investing in businesses in countries we know well and where we can obtain all sorts of synergies and also meeting our financial criteria.

All of this can be summarized as a very good quarter. We're very satisfied by this quarter. We have reached a new quarterly record in profits. And our growth in earnings per share is among the best, if not the best, because our earnings per share has increased by 14.7%. The profits are based on the most recurrent revenues and on management of the jaws, as we like to call them, which encourages us to continue along these lines because these are recurrent profits. Moreover Banco Real has improved the EPS right from the start. All units are growing and growing well. All of them are improving over the last quarter. And the balance sheet remains solid and solvent. And all this in a very complex environment for banks where our relative advantage over our competitors is becoming clearer and clearer.

And this is why we have an outlook, very optimistic outlook for the future. We think we have excellent diversification and combination which is excellent between mature and emerging markets. We have prudent risk management. We have a starting point when it comes to risk probably which is very healthy. We don't have 'toxic' products. We have historically low NPL ratios, very high coverage levels. Our mortgage portfolio has very good quality. All of this allows us to continue this year to enjoy a very comfortable position. And together with that we also have a very comfortable liquidity position. This is why we can maintain our vision for the next few quarters along the lines of the objectives announced in the investors day in September. So very few banks in the world can say today that we can maintain the growth forecast that we made seven months ago. This is a clear reflection of the potential and soundness of Santander's portfolio and business model.

That is all. Thank you very much. And we of course are at your disposal to answer your questions.

(Interpreted). (OPERATOR INSTRUCTIONS).

(Interpreted). Yes thank you. As I said earlier, first of all we're going to take questions from the Web. And when we're through with this round of questions, we'll take questions over the phone. So the first question is from Antonio Ramirez from Keefe. Now that lending is slowing down in Spain but it's not slowing down as much as in other places, is this going to be noticed on your market share?

And what segments do you feel most comfortable to grow in? And what lending growth expectations do you have for this year?

(Interpreted). I started by saying that the figures perhaps might give us less slowing down of lending than our competitors. But what I want to say very clearly is that we are not managing lending right now with volume criteria. We're managing it with spread criteria, as I said during my presentation on several occasions and as we mentioned in the earnings presentation that we did in February.

Lending, yes, is slowing down for the whole industry, also for us. And most probably the only explanation that I can find to explain why it's slowing down less for us than for others is because our Bank, the Santander Group in Spain, traditionally has a very strong position among corporations and SMEs. So our starting point is very strong. Plus our experience is very good. And this industry is still growing in terms of lending, reasonably so.

If I'm asked, as I seem to tell from your questions, in what segments do we feel most comfortable to grow in, well we feel more comfortable in the traditional segments that we know well and where we have experience in, where we are well positioned. And one of these segments is the companies segment when it comes to SMEs, but also large corporations.

Now, expectations. The ideas we have, and in fact that's how we have it in our budget, we believe that lending in 2008 is not going to grow more than 8% to 10%. That is our forecast. And for the time being we still believe in that forecast.

(Interpreted). Ignacio Cerezo from JP Morgan has several questions. The first of these is can you break down the margins in Spain?

How sustainable is this increase in margins?

And are you going to keep your policy of not competing for deposits?

Can you break down the fee and commissions performance in the domestic network, and what are the forecasts for the year?

Also the maintenance and sustainability of the risk premium in Spain right now, at what specific levels do you think that you can start to use the generic provisions?

And lastly, why is there an increase in provisions in Santander Consumer and why have they gone down in Brazil?

(Interpreted). The margins in Spain, the spreads we think are sustainable, the increase in margins. In any case, when it comes to interpreting things, and this is something that you have to do more in detail, we have to look at the volume effect, we have to look at the spread effect and also the TTI effect, in other words internal transfer rate, which has had very strong movements in this quarter because of the difference between the basis rate and the swap, or the inter-banking rates in the different markets. But of course we will have to go into further detail and break it down even further. But the truth is that we do believe that this expansion of spreads will be sustainable for reasons that I'm not going to go into right now, but they're quite obvious. And I think we all know what we're talking about.

Commissions and fees, well yes, the aesthetics, the way it looks at least, well it doesn't look very good. Fees and commissions in Santander are not growing very much, apparently 3.5%. But let us not forget that fees and commissions, we have fees and commissions from mutual funds. And fees from mutual funds represent a third of all fees and commissions. So when the volume of mutual funds goes down, and when the industry is focusing more on deposits, this brings down the fees and commissions, but that is offset, more or less, depending on the case, by an increase in spreads from deposits.

So if we look at the fall, or the figure, the apparent fall of fees and commissions excluding this drop in mutual funds, we see that fees and commissions are behaving normally with growth rates equivalent to the growth rate of the business turnover. There's nothing else to add there.

Now from what level on does the net provision come into play? Well, it's difficult to tell. But it looks, or we believe, that generic provisions -- because today the cost of risk in Spain is 0.30%, 30, 31 basis points. And until it reaches 50 basis points, in other words until there's almost double from 31 to 50, well until we don't reach the 50 position, you don't have to make use of the generic provisions.

Why this increase of provisions in Santander Consumer? Well the normal impairment of lending that we see everywhere, so nothing special there.

And lastly what is the lending portfolio, why is it going down in Brazil? I don't know. I guess it's because there's less activity in financial markets in Brazil. But I can't be much more specific than that.

(Interpreted). Ignacio from JP also has a question, can we talk about shares in Royal and Fortis? And what are our plans in that field?

(Interpreted). What's what, our plans? No plans actually. It's position, trading, financials, the amount I think has been spelt out for you in the documentation. And to put it bluntly, well we don't have specific plans. I mean, trading in general we will decide on the basis of the vision.

(Interpreted). Antonio Ramirez from Keefe has a question about the possible need to recapitalize [sovereign], what would Santander do? Perhaps the subscription of more than 25%, would we talk about an IPO? What would happen?

(Interpreted). Well we'll cross that bridge when we make it to the shores of that river.

(Interpreted). The second question from Antonio after the takeover one, is reserves from the [AFS] available for sale? [AFS] down [EUR1.2m]. What's the impact? And also the difference in exchange rates, a negative [2.3]. And hedge is positive [758].

And can you give us some update regarding coverage and so on? Can you talk a little bit about results?

(Interpreted). Well this question is going to be taken by Jose Antonio Alvares who has an answer which I unfortunately do not have.

(Interpreted). We're talking about adjustment, we're talking about a number of different elements. Basically the first one is the one that has to do with exchange rates. As you know the hedge policy that we have is we cover our book value. But there's also the element which is deducted from the core capital, that's goodwill. So it doesn't impact on capital. But when we talk about exchange rate variations, there would be a variation there too. So I'm not sure whether it would be 60%, 70% which is the direct result of exchange rates.

The second effect comes from the sale of shares. If there has been a sale, this will also result in a difference along these lines. So basically these are the elements that would explain the numbers. It depends on the period of time we're looking at, one or another will have more of a relevant weight.

When we talk about fixed income, yes there might have been some variation in those portfolios, but nothing that leaps out at us. So those are basically goodwill and sales of shares.

(Interpreted). Javier Bernat from Caja Madrid has the same question.

(Interpreted). Well if you want we can give you more specific details at the end of our conference call because there seems to be many questions.

(Interpreted). [Emmanuel Lopez] from Credit Suisse has two questions. One the NPL portfolio has grown by EUR1b in the quarter. Could we perhaps know why in Spain, Banco Real, Abbey -- not Banco Real of course -- could you give us a little bit more of detail regarding loss of core capital in the quarter, if those risks analysis have actually shrunk in the first [one]?

(Interpreted). The growth in NPL that's true it's practically EUR1b. Yes, EUR600m in Spain, EUR133m in the rest of Europe and EUR186m in Latin America. So that's the way we see the growth of NPLs. Of the EUR600m odd in Europe, Santander has grown by EUR130m. And actually I made a reference to that in my presentation. And the reason well, it has very much to do with the fact that in the first quarter of 2007 there was a freeing up. So that's the comparison. I think that we need to remember that.

Banesto grows by EUR110m. Yes, we saw that too when Banesto took the floor. Consumer Spain, that's EUR52m. And then we have another one, that's UCI, that's something we share with [BNP], that's mortgages, that's EUR100m growth. So that explains the Spanish number. In the rest of Europe I think it's EUR50m something that's Portugal and EUR50m something Germany. That's something that continues. So again nothing that's especially noteworthy there.

And in Latin America I think that I went into the numbers there when we talked about provisions, EUR50m Brazil, EUR50m Chile and EUR38m Puerto Rico. And then there's a little bit of Mexico, that's EUR20m. And everything that I said I think does fit into those EUR900m odd that we've seen in the growth of our NPLs in the past quarter.

As to the drop in core capital, to the best of my recollection it would be the dividend issue -- dividend which was agreed upon although not paid out but yes agreed upon. That is actually subtracted from the capital which is 34 base points. So that's what happens when you subtract. I think that that explains very nicely the reduction in core capital December March.

(Interpreted). (inaudible) from Deutsche Bank has another question. Real in Brazil, that's been taken, and he has a follow-up question. He wonders whether we could talk a little bit about the drop in the spread in Spain to 382 from (inaudible).

(Interpreted). Yes, this drop can be explained but we need to talk not about the assets. I talked about that. I said that those are growing and will continue to grow. They will definitely consolidate as we've seen. And this effect which is referred to in the question is due to the reduction in spreads in deposits. It is true that there has been a reduction and it's due also to the [TTI] effect that I made a reference to before. In the fourth quarter of 2007, it was a very relevant effect definitely and that affected the spread. That would be the internal profit transfer. That is something that we need to take into account when we look at this number specifically.

(Interpreted). Marco Troiano from S&P wonders whether we could perhaps elucidate further on those EUR338m which have come in because he seems to think that it's more than it was in the fourth quarter.

(Interpreted). No, what's most important when we talk about the equity method is ABN -- those results that we saw in ABN because the cost is in financial cost. EUR252m ABN, 56m (inaudible) and that's practically it. EUR18min Sovereign and Attijari, our bank in Morocco and much, much smaller areas. But the more important ones are ABN and (inaudible).

(Interpreted). Antonio Ramirez from Keefe would like to know about ROCs in Brazil and Mexico. He'd like to know what the portfolios are, what the impacts are.

And he also makes a reference to Visa and we talk about contingencies. What are the provisions? He doesn't talk about the areas specifically. I imagine he's referring to Latin America, Brazil.

(Interpreted). Well to the best of my recollection in Latin America there have been some sales in Mexico. I think that that was about $50m. In any case in Mexico the results had always been negative for practically every quarter last year. That was the case. So the basic effect is going from negative to positive, minus 20 to -- I don't know -- plus 20, plus 30, plus 40. That would perhaps be the more significant effect. Brazil, frankly I don't really remember anything exceptional or noteworthy happening there.

As to the second question, the Visa IPO, yes we're talking about some 50m. 20, 20 something Mexico, 13, 12, 14 Brazil and the rest is Chile and Puerto Rico basically. That would be the impact. So nothing in Spain and Portugal because Visa does not include Visa Europe. In other words, it's all Visa Latin America.

(Interpreted). And then another question, when you talk about provisions you're talking about the corporate provisions, I imagine.

(Interpreted). I think that we're talking about other results there, a minor amount, a lesser amount which would basically be contingencies, which can then eventually be passed on to the different areas.

(Interpreted). I think he might be referring to Brazil?

(Interpreted). In other results? Well in the case of Brazil, I think that it's (inaudible) that we (inaudible) everything that we do away with quarter one 2007. If you look at the other quarters, look at the results, whatever the contingency might be (inaudible) is what they refer to. We're talking about a significant amount. In the first quarter 2007 I don't know why we didn't get that information. But if we look at quarters two, three and four that was in fact the same number. So there's really no major change to refer to.

(Interpreted). [Sergio Gomez] from Merrill Lynch has a question regarding the difference in behavior in the quarterly growth in NPL between Banesto and the Santander network in Spain, 12, 22 quarter-on-quarter. What is it due to? Could we perhaps give nuanced information?

(Interpreted). Well, no there's no difference. There's no major difference. Practically it's a zero difference. It's just hundreds if we look at the NPLs in Santander and Banesto Retail banking. What happens is that in arithmetical terms the numbers do not match because in the denominator what we're doing is we're introducing different concepts. In other words Banesto introduces all of its credit. In other words Wholesale and Retail where Santander only includes Retail. It doesn't include wholesale. If the Santander network were to include everything there would be a plummet in its NPL ratio because of course there is no NPL in Wholesale. So that's how it is.

If I then introduce in the element there a huge chunk of credit where there is no NPL, well, that's going to really change my numbers. But that's the difference. Banesto is a legal entity and includes everything, everything. When it calculates its NPL ratio that's why the numbers are very different if we compare with Santander because Global Banking and Markets that take that information on board. So if we were to play the game along those rules, the difference as I say is now in hundreds. There's no difference between Banesto and Santander if we look at NPL. Because I repeat it's basically the same criteria. There's a certain loss in consumption and mortgages. There's a marginal worsening in corporate and there's no change if we look at the key customers -- what we call Global Banking and Markets, Santander what they call Corporate banking.

(Interpreted). Marco Troiano from S&P would like to know about the impact, the positive tax impact in the quarter. Could we perhaps provide further details?

(Interpreted). Jose, can you take this one? You're the expert.

(Interpreted). Well, there's a number of effects. First it's well known Germany brought down its corporate tax levels. And this is the first year we see the results there. And in Spain this happened also perhaps a little bit more gradually. So I think that this year we see a reduction in a further two points. Also Mexico has sold off its NPL. They sold it to a third party and this is reflected not impacting recoveries, but, yes, it does have a tax impact. And finally the profits of the Banco Real EUR240m -- EUR250m of the equity method in ABN, well then they're there also. So we're not talking about generating anything, which explains why the Group's number is actually less.

(Interpreted). Javier Bernat from Caja Madrid makes a reference to the increase in consumer finance in North America with this growing trend. Could we interpret how this might evolve in the coming quarters?

(Interpreted). Well, the risk premium has grown, yes obviously. And this is as a result of the general vogue in this business in the markets that we have a presence in and then I think that that's the vision. I think it would be fair to say that this is how we see the markets. We see a slight increase in our NPLs and in some markets more visibly than in others. But remember also that SCF has practically 40% of its business activities underway in Spain. So this explains the results in Spain. But in other markets NPLs are doing better, in Germany, Northern Europe. But the mix if we see the relative weight, we talk about Hispamer, that's the SCF in Spain now. Well, I think that up to a certain point, yes, that's how things stand.

And there is another effect. We've talked about this on a number of occasions and sometimes even we ourselves forget to take it into account. But it's the Drive. Drive is a business which really adds NPL to the numbers in SCF because although it is true that there is margin, there is income and the cost to income is low. But it does bring on NPL. Why? Because that's how it is because of the way the numbers work. I think we need to grasp this in order to understand the variations in the NPL in SCF.

(Interpreted). Fidelity, the operant from Fidelity would like to know what we think regarding capital ratios under Basel II, although the model at this point hasn't been fully approved by the Bank of Spain?

And can we confirm whether Abbey is bringing the numbers from headquarters to reposition in some of the recent securitizations and how much?

(Interpreted). Well when we talk about capital -- I'm going to give the floor now to Jose Antonio Alvarez because he really has all this information at the tip of his tongue. But what I can say is that we have been debating whether we introduce the numbers according to Basel II or whether we do things as always. And we took the decision at the end of the day to not go down the Basel II path for a very simple, straightforward reason. Which is that since we as yet do not have the instructions from the Bank of Spain regarding implementation of Basel II guidelines, it seemed to us that it might be misleading. And we might have to eventually undertake all kinds of corrections and require tweaks. So we believe it's better to wait for the Bank of Spain to come up with clear instructions. And this is I repeat the reason why we've not gone down the Basel II path. But as I said before I'm going to give the floor to my colleague.

(Interpreted). Yes, as the CEO said, the model has not yet been approved. We've always said and we said it during the investor's day and we've been repeating this ever since that we believe that ratios will improve based on our assumptions. But we cannot say much more.

Now the second question was regarding Abbey and its liquidity. Abbey, despite the fact that the net lending figure, the net lending market share which is much higher than it was before, 15.9, all of this at the end is translated into a growth of the portfolio of about 3b. Deposits grow by GBP1b. We're talking about the funding requirements of 2b plus maturities which might be 2b or 3b in the quarter. You know that Abbey has a business that we call short term markets, which was very large. And we have reduced this by 6b or 7b during this quarter. And this has given us net liquidity of 6b or 7b. That's more than enough to finance the growth and the financing needs of Abbey.

Now why do we securitize? Well, that's part of the policy of having a more liquid balance. We are discounting this. We have about 16b or 17b and we're not discounting anything. In the Company we have lots of assets that are eligible for discount. Why in Abbey? Because it's the most homogenous portfolio in terms of being efficient in generating more liquidity on the asset side of the balance sheet. But there is no further explanation.

(Interpreted). Diego Garcia from Fox Pitt asks whether we can confirm this 15% of the growth target for (inaudible) is excluding ABN Amro as you communicated last year. And he talks about the profits of Banco Real 1b which is greater than the estimate of 890m that you gave a year ago. What growth of [BPA] can we expect including ABN and Real?

(Interpreted). That was not our estimate. That was the market consensus if I remember correctly. When we did the presentation of the ABN Amro deal we mentioned market consensus. What we're giving now are real, the actual figures. We didn't have an estimate. That was the market consensus as we said. And that's why we have that.

(Interpreted). We have (inaudible) from Goldman Sachs. Is there going to be an impact in the Tier 1 when we consolidate ABN, Real with regards to the current equity methods? He says that provisions increased by 5% quarter-to-quarter, but if we exclude the impact of others it grew 9, why those others have grown?

(Interpreted). I think we already answered this in part.

(Interpreted). And he asks whether we think that the current environment offers strategic opportunities for Santander, additional opportunities for Santander compared to previous crises?

(Interpreted). I'm going to let Jose Antonio answer the first question. The current crisis environment is a crisis environment and then it is a crisis environment for everyone. For those who do well in a crisis as well as for those who don't do that well in a crisis. So we need to be prudent and that is applicable to all cases. We've always said and we repeat it once again that we have ahead of us important organic growth particularly in Brazil where we have to do a lot of integration work and try to obtain synergies, very significant synergies. And therefore right now we don't need any opportunities to grow. We have growth opportunities in our own geometry, in our own perimeter.

With regards to the capital question, I didn't write down the question so I'm going to pass it over to our CFO.

(Interpreted). Yes, the question was about the exchange of the real, what impact has it had. 15 basis points is the impact it's had into integrating the real assets into our assets. But with regards to the core capital, this is a quarter as was said earlier where the May dividend is the dividend which is more than double the other dividends. The Bank in the current growth scenario, the generation of free capital is quite high. Therefore what we can expect the normal conditions is for the core ratio measured according to Basel I will grow in the next few quarters.

(Interpreted). Arturo de Frias from Dresdner asks can we talk about the liquidity of wholesale markets and the securitization markets, if we're thinking about doing an issue of this kind soon. And he refers once again whether we have touched the liquidity lines with the European Central Bank.

(Interpreted). Well the market situation you know as well as I do did extraordinarily well in the short term. Short term funding is very good. That's less than a year, short term. That has better prices than what we had in the market before the summer of last year. And as soon as we cross that border of a year, funding becomes much more expensive and much more volatile, volatile in the sense that it depends on the latest market news. Although in the past three weeks the spreads have improved significantly. I don't know whether this is going to last for long or not. But from the low levels in May, since then the situation has improved significantly.

Issues, we've made two issues in April both in senior unsecured in euros. We think that it is good to have a market discipline. But we also want higher spreads and we think we are going to continue to issue in the market if circumstances allow for it. Our objective is not closing lending to customers who offer the right collateral, the right guarantees. If they do that we will continue to lend.

(Interpreted). Two more questions from Arturo de Frias from Dresdner. One of them has already been answered I think, which is about NPL. By how much can the risk premiums increase particularly in Latin America?

What market shares are you achieving in new mortgages in England? And do you expect stability in these market shares for the rest of the year?

(Interpreted). Yes, market share in mortgages. I won't say new mortgages because in the U.K. most of the mortgages are re-mortgages. First mortgages, well there are only a few of them. So yes we are growing significantly in this part of the market, 15% or more market share. It's probably more than our natural market share in the U.K. due to the market conditions. The market has selected a lot, the supply that is. There's been a re-approaching of supply and also of the spreads.

All of this has changed the competitive conditions and the players who are stronger, who are best prepared, who have a more comfortable liquidity, who have greater market strengths and a more solid market position are gaining market share. The market is resorting to them more than to them before. This is good news. And it's good news because it is allowing us to do two very important things in Abbey. On the one hand to be more selective when it comes to credit quality. Abbey in the past few months has ceased to have business clients that we could call quality of less than prime. The buy-to-let, the self-certified, these are the sort of mortgages that have never -- we have never been too active. We had a smaller share there. So we're selecting more and that's important. And we will see that in terms of P&L.

100% of Abbey's mortgages -- there's a classification in the U.K. that I don't remember right now, but I think they call it standard or something of the sort. I have it written somewhere. And if I find it right now, yes, here it is standard. They divide them into standard, buy-to-let, self-certified, and light-to-severe adverse. So zero light-to-severe adverse, zero self certified, practically 1% buy-to-let and 99% standard. This is what I mean when I say that we have a better credit quality, better selection. Am I doing right, Antonio, am I right? Okay.

And the second thing, well, that we're also being very selective in the distribution networks. We have office branches and we have intermediaries. There are better intermediaries and worse intermediaries and Abbey is choosing the best intermediaries. And that's our second thing. And then the third thing we're also very selective in margins.

So is this sustainable? We hope so. We hope it's sustainable on a very long term. I think that as the market goes back to shape, some of these effects will continue, perhaps with less intensity. But other effects for example, the growth of spreads, that will be more moderate.

(Interpreted). (inaudible) from Fortis. Most of the questions have already been answered. The only one we haven't touched upon is that Santander costs are growing at high rates, 6%. For the year how much will they grow? Can you give us a guidance, a growth guidance for the future?

And what management capacity do we have on revenues in the future? All of this refers to the Santander branch.

(Interpreted). Yes the Santander branch network has 3% cost growth. And I think I said this during my presentation that although growth is greater, we will be converging towards an environment of 3% to 4% which is the arrival point. That's for the budget, the arrival point would be a bit lower. That's regarding 2008. In 2009, well the truth is that we don't know because costs are very much associated to projects, to changes in the commercial infrastructure, to the new opening up of branch offices. So these are decisions that have not been made yet for 2008. So we can't tell by how much costs will grow in 2009.

So I don't think it would be serious to talk about the increase of costs in Santander in 2009 because I don't know. But if market circumstances continue as they are now, in other words not too much growth of lending, 8% to 10% -- in other words the less growth of activity in general, then we will have to make sure our costs don't grow as much as inflation does. And if it's less than inflation, well, even better.

(Interpreted). (inaudible) from Citi. These are all questions related to Brazil which have already been answered with the exception of one on Banco Real. It says that the net contribution of EUR150m in the first quarter including financial costs, how does that compare to the recurrent growth of the EUR70m more or less of the fourth Q '07, of the last quarter '07? So can you comment on the operational trends in terms of volume and the comparison between Banco Real and Banco Santander Brazil?

Then we have the trading gains of Brazil and Mexico, that's already been answered.

And that domestic interest income in Brazil in local currency has fallen quarter to quarter, why?

The volume we already discussed. So two questions really that have not yet been answered.

(Interpreted). Well, I don't want to talk much about Banco Real because as I said Banco Real is not yet within our control. We're not managing it yet. So I can't say much about it yet. But I can say two things that the figures that are presented are now homogenous with the other figures of the Group because of the different accounting systems and criteria. And Banco Real is at an excellent growth rate. Probably the comparison of the first quarter with the fourth quarter of last year, we're comparing a three months quarter with a quarter which lasts less than three months, because we then consolidate up to three months.

So in any case all the issues or the questions of the Banco Real I know that they give rise to a lot of interest. And we ourselves have to draw up a detailed plan and a committed plan with the markets. So we decided to have a presentation on Banco Real in October in Brazil which would be equivalent to the one we did in London for Abbey after 10 or 12 months after we acquired it. We will do the same for Banco Real. We'll talk about the rates of integration of the banks, expected profit levels etc. But now we can't really answer seriously any questions about Banco Real.

(Interpreted). Diego Garcia from Fox. If the results of ABN Real include the results of the Visa deal and then another question on the transition to capital requirements. I think that was already answered though.

(Interpreted). Well, I guess Sovereign includes Visa. I say I guess because I don't know it very well, if it includes the Visa thing. Yes, 27m I've been told. Yes, the Santander account includes what Jose Antonio mentioned earlier.

(Interpreted). So two more analysts. [Mario Lovos] from (inaudible) Securities would like to know about other results, that includes 208 negative for other contingencies. Could you give us more details on that?

You talk about the net interest income on average total assets which goes more than other in other banks. And then is it time for the depreciation of your portfolio new spreads or is it due to a better mix?

(Interpreted). Yes, in other results, other earnings, this is the comparison effect with Brazil for the -- but all the other quarters have basically that figure. There's something from Venezuela too. When you see the accounts from Venezuela you see that the operating, that the net operating income is more contingent. These are the two things that have an impact on that line of results that you were asking about.

(Interpreted). And lastly, [Giovanni Carreja] from Execution, some more questions. Consumer finance, he talks about the -- that the operational costs are still growing at a high rate at 11% as well as NPLs. He has two questions. What can we expect from the cost evolution?

And strategically speaking do we think it's a good idea to put our stakes on this business at this moment of the cycle.

(Interpreted). Well, the budget, the cost budget is quite lower. The thing is that they still dragging the rates of 2007. But the level of costs we will see how it goes down quarter after quarter to converge at levels that I think are of 6% by the end of the year. So this is a variable which is being re-driven. It's -- they're going to go down as I said quarter to quarter.

Now NPLs we already mentioned. This is a business where a slowdown -- an economic slowdown has an impact on the side of production and on the side of the NPLs. But this is part of the normal cycle of a Retail banking business. And the same thing can be said about credit cards or consumer loans distributed by other procedures. We continue to believe that strategically speaking it's a very interesting business, where the Group has very clear capabilities, where we also have a size that will allow us to deal with much more efficient business models than our competitors. And therefore we continue to believe, although of course we're going through a cycle where 2008 and 2009 are not going to be the best years in history. But nevertheless strategically speaking we do think it's a very powerful business.

And then there's another effect which has an influence in this business which is interest rate movements because it lends at fixed interest rates basically with average -- relatively short terms as an average, which gives us an exposure to movements in interest rates. When interest rates go up, the margins tighten. When they go down the margins widen. So recently the market has not really been in our advantage in the past few years. But it has had a positive impact on the American market. All of these things are the problems related to Santander Consumer Finance.

But when it comes to strategy for Santander given our position we have the right teams. We have the systems, risk [estimation] systems that are well tested. We have the critical mass. We have everything to make this business profitable. We have all the components for a profitable business. And therefore for us we do think it's a very good business, which doesn't mean that it's good for everyone. It's good for us.

(Interpreted). There's a question on Sovereign, are you going to do an amortization, additional amortization for goodwill if our share price continues to go down and what type of information are we missing to make a decision.

(Interpreted). We're not going to make any adjustments. We haven't thought of it and it's not a matter of information linked to decisions.

(Interpreted). And to finish on Latin America there are two questions, one on the results in Brazil. In Brazil Real is a much better retail banking. What happened on the Wholesale banking side in Brazil, where the profits aren't that good?

And in Chile do you have any remarks on the provisions? What about the provisions for the rest of the year? We can send you the details on Chile, and do we want to make any comments on Retail and Wholesale banking in Chile?

There was a question before about the financial margin and about the net interest revenue and I think we already answered it.

Well, that's all for our Internet questions. I think there's one or two questions over the phone. I would ask you for new questions because we've already answered quite a few. So new questions, please.

(inaudible) from Merrill Lynch, please go ahead with your question.

Yes, good morning gentlemen. Most of my questions have been answered already. I just wanted to clarify what you said on the tax rate. Should we assume the current level of tax rate will be sustainable for the rest of the year? Or were you suggesting there were some one offs in the tax rate?

(Interpreted). Yes, we think that the tax rate will be stable throughout the year. It will vary a little bit of course when we consolidate at the end of the year to integrate the Real because then all the profits will come distributed before taxes, after taxes and net profit.

Thank you very much.

The next question comes from Mr. Carlo Digrandi from HSBC. Please go ahead with your question.

Yes, good morning everyone. We have seen very good results from RBE and the Latin American local currency. I was wondering given the fact that in euro terms it was much lower than what we have seen and clearly the pound and the dollar are depreciated against the euro, I was wondering if the hedging policy that you have put in place was partial or you considered some of that or you have a different view at the beginning of the year. Thank you very much.

(Interpreted). Yes, it's about the hedge policy because of the difference in the growth in euros, pounds and dollars.

And I also left out a question before which I'm going to answer now. Our hedge policy continues to be stable. Basically what we have are hedges, the book -- what we have in our books in local currencies. Therefore we have a hedge that protects the Bank's capital and that's what we saw in the different portfolio valuations. When we saw the 700m that somebody asked about, that comes from that hedging of the book value and therefore of the Bank's capital.

And then we have a second hedge based on results. You will have seen the results. We have a short term position in pounds and dollars which tries to hedge for the profit expectations we have in the other countries. We're not changing that policy significantly and haven't done so in the past few months.

I don't think there are any further questions. Thank you so much to everyone.

Portions of this transcript that are noted "interpreted" were interpreted on the conference call by an interpreter present on the live call. The interpreter was provided by the Company sponsoring this Event.