Banco Santander SA (SAN) 2008 Q3 法說會逐字稿

Good morning. We're going to begin our earnings announcement of the third quarter of 2008. But before we go into the presentation per se, I'd like to start by saying that this quarter has also been a quarter with excellent results, every way you look at it. Excellent from the point of view of the amount and even more excellent I would say if we take into account what is happening in our environment, in the international Banks of our environment. International Banks that we consider to be our peers.

So, we're extremely satisfied and extremely proud of the results that we are achieving, which only confirm what we have been saying quarter after quarter; which is as despite the turmoil and despite the problems being faced by markets, and despite the crisis of the financial system, the business model, the working model, the banking model that Santander has in all the markets and geographies where it operates, with a history that takes into account the circumstances of economic slowdown.

Nevertheless, our model continues to be very consistent, very recurrent, does not give rise to surprises. And it is one of the models which is achieving a solid result throughout the cycle in good times and bad times, as we will see in a minute, for reasons that can be explained.

So, this I wanted to say as an introduction, because I think that the results of Santander clearly make the difference between a Bank of this nature, an animal of this nature and other Banks and animals, which call themselves Banks too, but which nevertheless have nothing to do in their mythology with the structure and difference model of the Santander Bank.

So, as usual I'm going to divide my presentation into three parts. I will look at the main developments of the Group to start with. The accounts for the first nine months, particularly the third quarter and then Mr. Jose Antonio Alvarez, who is the CFO for the Group, will comment in greater detail on the performance of the business areas in the three quarters, particularly the third one.

And then I will end the presentation with some conclusions on the year, and also with some ideas of how we see the next quarter, and how we see the market and the environment as a whole.

So, starting with the first idea what I want to convey with this idea and underscore, is that this quarter has been extremely good for the Group, particularly taking into account this very complex environment in which we have had to carry out our activity. We have obtained profits of EUR2.205 billion attributable profit. And as you can see in the left hand side graph that you have on screen, at the beginning of 2007 we went into the league of EUR2 billion in quarterly results. And we have raised that this last quarter.

And all operating areas are performing well in this environment. The profits have improved over those of the second quarter. But in the third quarter we haven't had that good result basically, because of three things. First of all, the seasonal impact which always occurs in our accounts of a fall in dividends collected, and this always increases the results in the second quarter. But this is seasonal, as I say.

And a second effect is that of losses in the dollar euro exchange rate position compared to profits in previous quarters, the third quarter -- well, you notice it in the third quarter; and because of the Sovereign accounted for by the equity method. So, we have used the equity method in Sovereign and that has had a negative impact.

Apart from less trading gains -- later on as we look at this in detail you'll see how trading gains have not contributed as much to this last quarter as in previous quarters. But in the operating areas these have performed quite well, better than in the second quarter. And you will see this when Jose Antonio Alvarez, our CFO, explains in further detail the effect of the business areas and different business lines.

And in the first nine months our results have been almost EUR7 billion, which means an increase of almost 16% more than the same period in 2007. Here we're comparing nine month ordinary profits. In 2007 and 2008, excluding the extraordinary items, because you know that in 2008 in this period very recently and we've had extraordinary profit from the financial city of EUR586 million, which have been generated, but have not been included in these accounts.

Therefore, the growth -- I repeat, if we compare ordinary profits 2007 and 2008 the first nine months, the increase is of 16% reaching almost EUR7 billion.

Earnings per share have also in the first nine months of the year reached EUR1.04 per share; in other words, a growth of 8% over our figures in 2007. This is the reason why, in summary, I have given you that introduction, because these results are quite extraordinary in the context in which we were in, particularly if we compare them to our peers, which is a closed list of international banks that we use for comparison purposes, because these are banks that have a similar business to ours.

So I was saying earlier that these results are based on the good performance of operating areas. And the operating areas here in this graph are divided into three blocks, Europe, the UK and Latin America. Here we don't include Banco Real, because it has not yet been consolidated. This will happen the next quarter, in the fourth quarter of the year. It's not included in Latin America.

And here we see what Continental Europe, the UK and Latin America without Banco Real. And you see how these three geographical areas have grown in terms of attributable profits consistently. This might give rise to a question. You will wonder why Continental Europe grows less than the UK 20% or Latin America 20%. Well, the reason is that in Continental Europe there is a unit out of the four, which are included in this graph, which are Santander Banesto Portugal and Santander Consumer Finance.

Well this last one, Santander Consumer Finance the profits are growing less and I think you can imagine why. In a situation of economic slowdown, logically this would be the business which would be most affected, because it's focused on consumer loans, loans for buying cars, etc., and this has been most affected. Perhaps this will change in the short-term if there is a fall of interest rates, because falls in the interest rate are very good for this business.

But this -- in the situation of economic slowdown, of course, where this can be most noticeable is in this part of the business, in Consumer Finance. But in the other parts of the business, as we will see later, well, these have grown by two digits.

I think I should also mention the UK, because I would like just to go over it very quickly. I'd like to say a few words on that, because the growth of 20% in pound sterling I think is excellent. And I proved once again what I said at the beginning; that our business model in the UK based in retail business, and based in strict control of our cost has given us very positive results.

And as I said there at the bottom of the slide, the profits of Banco Real EUR725 million on the first nine months, which as I said have not been included in the operating areas there in the corporate sector.

Another idea, which I think is important for me to mention in this context, is how we are doing compared to our competitors. And in the first quarter we saw -- or the first half of the year we saw that we had a considerable difference. And probably, although we still don't have the results of all our peer banks, but we think that with these results that we have obtained we are going to increase the difference with our peers. We're widening the gap here, because from what we know from our peers so far, we are the Bank that has attained most profit in this quarter, in absolute terms as well as in earnings per share. So, from that viewpoint we still have a 5 percentage point difference, which is our objective with our peers.

Another idea, which I think is significant in this presentation, is to talk about the capital, because the generation of profit is linked to sound capital ratios. We have closed the year with a Tier 1 core capital of 6.31%.

In this capital ratio we include the impact of the lower value of equity stakes. I say this before you ask the question. And how do we see that this core capital remains at more than 6%? But I'd like to compare that with the asset that this capital supports, because our business model is what it is. It is a business model whose assets don't have any toxic element. Therefore, they are healthy assets. They're retail assets. Well, diversified assets from the geographical and product point of view, and I think that's very important.

There is another additional idea also related to the capital that we shouldn't forget, which is that in our system we have EUR6.3 billion in reserves of generic funds, which in our system are not computed as capital. And it's a good thing that the Bank of Spain should have that rule, but we shouldn't lose sight of that either. They are there. And they are there precisely as an additional element of solvency, vis-a-vis losses of assets of the Santander Group. So those generic reserves are there for a purpose.

And that allows us to say that the next interim dividend, which we've already announced, and that will be paid in November, is going to go up by 10%. This is also very important, particularly if we look at the international context and how dividends of similar banks are performing.

And this capital ratio makes us feel very comfortable. It's solid, it's good and we think that in the next few months or quarters, the Group is going to grow very little in the risk asset, because there is no demand for loans. So we haven't -- we're not going to continue to grow at that rate. And that means that our organic generation of capital quarter-to-quarter is positive, about 0.15 -- or from 0.15 to 0.20 basis points per quarter. And that is going to be something that we're going to experience very clearly in the next few months, because we don't think that we're going to have a lot of growth of assets at risk of more than a digit.

And we shouldn't forget either that we have announced, particularly with regards to the acquisitions of Alliance & Leicester and Bradford & Bingley and Sovereign that we have a program in these banks. Well, I shouldn't say in these banks, I should say in all the UK banks, not only ours but Abbey as well. Well, for these banks we are going to see a reduction of assets at risk, which is only natural. So, we're going to have GBP20 billion to GBP30 billion in reduction. We were going to do that in three years and we're going to do it now by the end of 2009, if conditions are favorable.

The same thing can be said about Sovereign, because this bank allows us to reduce risk assets by GBP10 billion, apart from other divestments that we are studying, that we are considering.

So all in all, I wanted to insist on is that at this time where capital is scarce, and capital is something that is very visible right now, we have very good capital ratios. We have enough capital. Plus, we have our de-leveraging program that has already been decided.

Of course, all of this has to be seen in the current environment, because we would be losing our perspective of the results. We have to understand these results in the environment in which we are right now; in an environment of economic slowdown -- strong economic slowdown, in all the markets we are operating and in the world in general, problems in the financial markets, which is already having an impact on our trading gains and our P&L. Also, we have to remember that we are in environment of a higher cost of liquidity and scarcity of liquidity and, where we're seeing important banking crisis, including nationalizations or pseudo-nationalizations of banks.

So in this environment that we have always taken into account when we look at our results and activities, the Group -- the Santander Group, within its business model, which hasn't been changed and we're not going to change it, nevertheless we are adjusting it.

It's like when a camera focuses on an objective, and if you go backwards or forwards, you have to refocus the image once again. Well, this refocusing of the image is a refocusing of our business model, which is basically giving priority to those things that we should give our priority to in this new environment; focusing more on our relations with customers, focusing more on the deposits, because right now deposits have a greater value than what they've had historically; so more emphasis and more importance given to deposits; thirdly, taking care of our spreads, because they reflect the cost or the price of risk; and as these are reflected in higher spreads, which are offsetting the loss in volume.

Number four a new focus on efficiency, the Santander Group has always focused on efficiency, on cost to income and we always like to show off our cost to income ratio. Well, if that has been true in these past few years, now we have to make it even truer, because in times of market difficulties and difficulties in generating revenue, we have to be very strict on how we manage our costs. So, the fourth priority or adjustment of model is focusing more on costs.

And lastly, to focus more on our solvency and risk management; well, this is like going back to basics -- going back to the basics of banking. And this is what the Bank has always done, but we're doing that even more so now because of the environment. And this can be summarized in these four ideas, which are the four strengths that we believe the Santander Group has right now.

First of all, very strong in its revenue line; it's consistent. Our revenues are consistent and growing despite the lower volumes of activity. It's well balanced growth; more growth in deposits as compared to loans with a diversification, which offsets emerging and mature portfolios. And if we add to that the increase in spread in most of the asset business and some fees, that means that the revenue remains at a high level, despite the reduction in the volume.

And then greater emphasis on cost; later on we'll look at this in further detail with some figures. Then maximum caution in balance sheet management; strong balance sheet; good risk quality; strong capital; and lastly, an increase in our retail capacity, because despite all of this, we are growing in installed capacity in those markets which we consider to be strategic for us.

And following these lines, we see how in volume, we're not growing that much in. And any way we're growing at 18%, in the nine months of 2007, 13%; and nine months of 2008, 8%. And we'll end the year -- probably when we look at the December graph, we will be below that figure, 5% or 6% higher in emerging markets, but in mature markets, below 5%.

That's in loans. But in deposits, we see greater growth in deposits, which is going to accelerate even more in the last few months of the year. We saw this change as of June, and will continue.

Apart from all that, we've had the incorporation of Bradford & Bingley, which has -- with which we have gained more branch offices and deposits. So in Spain, for example, in Santander and Banesto, the two networks, in these months have generated EUR8 billion more in deposits than in loans. And that's very important in this moment, where we have -- there are liquidity problems in the market. And so, we are growing more in deposits than in loans -- by loan amounts.

So the first idea is an increase in deposits; reduction in volumes in the credit side; then increase in spreads and, therefore, improvement of the return on assets. You have this information there.

The spread of deposits is improving as well as that on loans, and that is increasing our profitability. And we will see it go up even further in the fourth quarter, because this impact, particularly in the retail networks, the effect of the improvement of the spread. Then it's very slow when it's implemented, but we see this month to month and we will see this even more clearly in the last quarter of the year.

And this means that the volumes for spreads -- the product volumes for spreads is giving us a -- is growing revenue and it seems to be counterintuitive in an environment of less growth. Why is our revenue going up; because the two variables, spreads and volume, gives us a positive result?

Fees and commissions, they don't look very good. They are growing for the Group at 3%, but we have to look deeper and see what is in the fees to see what's inside. So, we see how on the one hand, the fees that come from mutual fund activities in this change of policy, of course, go down. We are focusing more on deposits than on mutual funds.

And the same thing -- well, in this environment, the securities market, that activity has gone down. But, nevertheless, the normal activities -- a typical banking activity of our retail bank, in other words insurance and banking services, in general, those fees are performing very well, 22% and 15%. So this is what gives us a solid business, despite the economic slowdown. We have a lot of consistency in terms of generating income, and this gives us the series.

If you look at the series from 2005, even 2006, 2007 and 2008, we see how quarter-after-quarter, quarter-after-quarter, the revenues, and by that I mean fees and net interest revenue, some are doing better than others, of course, because of market reasons. But nevertheless, these are revenues that grow consistently, 6.5% in previous quarters, 6.7%; series of this year, 6.3%, 6.5%, 6.7%. Or the previous ones, wherever you look at it, you see a sound consistency in the revenue line.

And if we look at it by areas, we can say the same thing. Europe and United Kingdom and Latin America, we also see this consistency. This I think is extremely significant in our P&L; this and the costs, but this is basic.

Cost management; well, we've seen changes here as well. A change in the emphasis, because it is true that last year, our revenue was growing at 20%, and costs we made them grow at 10%. We had more investment projects, infrastructure projects. We invested much more in many things, because our job allowed us to operate that way, because we had a 10 point difference and we could do that, because costs were going up 10%, but the revenue up 20%.

Now, things have changed a little bit. Revenues are growing by that 13% and, therefore, we have to adjust the cost to the new growth of revenue. So right now, the costs are based at 3.5% on the left hand side graph. On a quarterly basis they're growing at 1.5%, which means that the costs are slowing down we could say.

We were growing at 3.5% last quarter and now 1.5%, which means that we will end the year with an increase in costs of about 2% some. But we at cruising speed, which is important. So I can tell you that we're going to have a cruising speed of 1.5% or even less than that, because next year, we want to maintain our costs flat. So this gives us jaws of about 10 points and to improve our costs to income ratio as compared to our competitors.

With provisions now, these are the seller points of these exercises. We see that there's been an increase by 67%. Why? Well, basically all of the markets where we have a presence, all of them are in a worse macro environment.

This is also true, the fact that in some environments we've seen, for instance, in Latin America, we see growth in lending to the tune of about 20%. So, provisions here cannot be attributed to that worsening environment. We can also attribute it in some parts of the world, specifically in Latin America, to growth in lending apart from inter annual effects, which are always visible. Last year, things that happened that I'm not going into now, but which do have very much to do with this.

However, we continue to see that our total amount is more, not only specific, but there's even a slight increase in generics too. So, we see that we are there to the tune of EUR6.3 billion at the end of the third quarter.

Now, this [see] the origins, the sources; it's what we have discussed. It's the same as in the previous quarters in Europe, basically Santander Consumer and in America, basically Brazil, and Mexico. Why? For the same reasons basically, the generics. It's true that last year in nine months, we improved by EUR300 million. This year, we've only improved it by EUR53 million. But there is no doubt that, as you can see, we, as yet, do not need to reach out to generics, very good.

And thus, our NPL ratios and coverage ratios per group and per area are percentages that we could define as low, low, 163% at a Group level and 150% for Spain, coverage over 100% basically in Spain and in Latin America.

The UK is a little bit special because, as you know, in the UK, coverage in this type of business activity is to the tune of 10%. And we basically are talking about mortgages. So we are doing very well. And this talks to us about a very good quality of risk for the Group, a total and per area. As I say, it's better. It compares very well with our competitors.

A little bit more information, we're comparing with our peers and we're looking in geographical terms, Spain, the UK and Latin America. Whatever angle we look at it from, our NPL ratios are better than those in the market, very clearly better.

Definitely in Spain, we are clearly performing better in terms of NPLs. We really are outdistancing the rest of the sectors, banks and banks and savings banks. And I believe that when banks and savings banks continue -- will complete, rather their accounting we'll see how the difference is even greater with the sector.

We said also that we have a commercial model. Our retail model has been strengthened, reinforced and improved upon in a systematic way. So, we're not going to stop any bad things commercially just because our performance is good. We are going to bringing on board further networks and branches. And actually, we're the largest owner in international terms, if we don't include China.

And here we have included our new components Wells Fargo, BNP and even so we continue to have the best possible retail network. And whilst our diversification is very broad, actually it's better. And this is the end of my brief presentation. I'm going to give the floor to my colleague, Mr. Alvarez, who will talk to us about these issues.

Good morning. As our CEO has just said, I'm going to look in more detail at the business units, so as to have time for question, which I'm sure is the reason why we're all here today.

So let's take a quick look at our business units. And as always as you see, we begin to look at profits. There is no change from one term to another. We see that Santander, Banesto, SCF and Portugal generate 9%. Wholesale Banking and other minor (inaudible), such as (inaudible) generate 6%. The UK represents 13% and Latin America, ex.-Real roughly 30%, with Real approximately 40%. There are no major changes here. What we do see is that growth is systematic and constant in the four large retail units. We see that they are growing by 9% their profits, and rest of Europe, 6%.

As to Wholesale Banking, that's rest of Europe, basically Wholesale Banking we've seen quarter-by-quarter what the comparisons are. We compare with 2007, which was exceptional. Perhaps that is what would explain why that comparison continues to give a negative. When we're seeing global marketing and records, we'll see that the trends are actually good.

If we look now at the basic Continental Europe main units, if we were to look at the performance, what we would say is that it's been systematic and constant. We continue to see a double digit growth. The average is 13%. Costs are under control, which explains that net operating income of 18%. Provisions, as our CEO said, yes, there has been an increase. So the numbers are double digit in terms of generation of attributable profit. If we go down in that column what do we see? We see good performance parallel with growing over 10%. Income is over 10%. And costs are under control.

Consumer Finance is probably more complex. If we look at all of Continental Europe, we see that the growth is good in terms generation of income. Costs are the result of different projects undertaken recently, are growing (inaudible) basis. However, the net operating income is in excess of 20%. And, yes, there is a strong impact of provisions. What we see here is a very different behavior. If we look at Germany and the Scandinavian countries they're doing over 20%. Drive in the US is growing 11%. Italy flat; and Spain is the worst, negative 38%, because of the provisions and because, of course, the market is weak as we all not only suspect but actually know.

Portugal basically is flat and in commercial terms it's growing by 8%. Although what we've seen in Portugal is that the GBM markets, which accompanies us, we see, as we say, that it's growing by 8% and it is true that margins are shrinking. Why? Well, because of regulatory issues, yields which have affected the margins.

As to global businesses, we saw a decline in previous quarters; very sharp decline. That's going to be a little more moderate, and we'll take about the difference of global parts -- global banking and markets, but the trend is good.

You have received a document, which gives you information about [our] spread and so on. And here I'm just going to go over this very briefly. Our CEO talked a little bit about liquidity. He talked about growth. We see in Spain 2%, 3%. That's very moderate. The profits are growing double-digit, roughly 20%. The margins are good. So, we see that the trend is picking up. Month-by-month we see improved spreads, specifically in assets, but also in liabilities. It's good.

In Santander Consumer Finance, SCF, it's doing well; the scenario that we've seen so far. Margins have been much flatter. It is true that it's a new cycle. We see shrinking rates. Probably this unit will be rewarded, just as it has been chastised so far.

Portugal is doing nicely also in terms of business and in terms of their net interest revenue, not the commercial spreads however. I said that, yes, they have improved, but this year has been tough, because of the regulatory changes in Portugal. We've seen what the results have been in the recent quarters. We've seen how the Portuguese banking sector has reflected these changes.

If we look now at net operating income, we see that the margins after provisions is -- this is roughly 10%; Banesto 12%; Consumer, even in these very difficult scenario, it was growth; and Portugal the same trend. Not because of the provisions in Portugal, because that's stable, but perhaps because of the revenues, which are weaker because of the spreads. Yes, the trend is good but also, yes, those regulatory changes have affected the results in Portugal.

Let's look at the UK now. It is true that the numbers are excellent in absolute terms and in relative terms, so we compare with our peers in the UK. We saw the incorporation of Bradford & Bingley, the B&B, in September, so no impact on profits there. The A&L operation was also completed in October, so the numbers are not included here.

The quarter has been good. We have seen a growth by 13%. We see on the right hand of our slide how the net operating income grows systematically. Costs are subject to control. So our net operating income is of roughly 20%.

Let's see the drivers, first there's volume. We see both mortgages, that's [10.6] in the previous year, growth of deposits prior to B&B was [6], 50% more than in the previous year. And at the same time we see a systematic increase of spreads. We see that from the fourth quarter 2007 systematically that's making 5, 6, 7 base points. That's the spread, and this together with good cost control.

And if there is no increase in provisions, because our quality is good, our NPL ratio is stable, which explains that this net operating income will go directly to the bottom, and we'll see growth to the tune of that 20% for Abbey. So, I repeat excellent performance and trends, which actually cast a very positive light on upcoming quarters.

What I am trying to do here with this slide is talk a little a bit about what it is that we are referring to when we talk about A&L and B&B operations. Basically these acquisitions will time two our activity. Our market share has risen notably. We've seen a growth by 10%, a little bit more in mortgages, but we're around that 10%. And we see now that the structure of the Bank is very excellent quality.

Deposits and excellent capitalization, so the joint operation of A&L and B&B and Abbey really guarantees an outstanding platform; we will continue to see growth in the UK and we will continue to make headwind. Yes, it's true that perhaps there will be a little bit of a slowing down, but we have that competitive edge. So, we will be able to capitalize on that.

Let's look at Latin America, now please. I want to look at Latin America without Banco Real. Without Banco Real I repeat. The trends are very similar to what we see in the previous quarters. We see growth in excess of 30%. I'm talking about dollars. Again, cost growth, of course; our net operating income 40% [without] increasing provisions. And those profits are absolutely a record result with EUR1.1 billion. That's the third -- after our third quarter profit.

Now the drivers are the same, we're seeing how there are more and more customers. We see bank penetration. We see that the fee generating businesses are on the up-swing. And here we see that there's lower growth in lending and greater asset deposit deposits. That's very important.

Now let's look at the big countries. Again, we have information regarding income. There is no major difference there between 30% and 40%. The net operating income is the same. And as we see how it flows into attributable profit, it's to the tune of 20% with the exception of Chile, because of the interruptions last year, discontinued operations at 17% before discontinued operations.

And the same for SPB, Private Banking in the region, that market scenario was tough, very tough for Private Banking, but it continues to generate results around the 20% mark. So the performance is good. Performance is good without major changes, vis-à-vis what we've seen in the previous [months].

Now let's look at business models, with the exception perhaps of deposits in Mexico, which focuses on mutual funds. In other countries funds are performing as they have performed in Europe. So we see that slight difference in Mexico, so high volume in Brazil, Mexico and Chile and a healthy evolution of our net interest revenues. So, this is a trend which we have seen in Continental Europe.

If we look at net operating income after provisions, we see Brazil growth of 24%, Mexico weaker. Why? Because of income; in the third quarter there was that EUR820 million, which is in excess of the typical amount. And then there has been also a reduction, the credit cards. That business is definitely, definitely excepting the numbers.

In the case of Chile, we see a quarter-by-quarter improvement after provisions. Before -- also, we see how they are in excess of 20%. I'm not going to go into the details of Banco Real, but I would like to give you two pieces of information.

The recurrent is growing to a tune of 25%. We see that 30% deposits, so the quality -- credit quality is good. We'll talk in detail about Banco Real and Brazil -- on the 31st in Sao Paulo we'll be talking about Brazil this week.

I do want to talk a little bit about financial management and equity stakes, because if we compare with previous numbers we see how telling it is. We saw EUR354 million in the previous quarter. That was last quarter. And it was EUR1 million negative now.

Our CEO said that this is Sovereign. This is the impact, minus EUR176 million. That's the main impact. And losses in the exchange rate position. We know that we need to cover results. That's been minus EUR123 million. You know that it's point by point, September 30 is the date. So the impact, as I said, is not in the results but in the negative, yes. It's on September 30 and the rest is EUR56 million dividends. So, this is a snapshot of the quarter.

If we look at the year-on-year it's different, but for two reasons. Why; because there's an improvement, the EUR206 million, because of Banco Real. Banco Real explains this, with the exception Sao Paulo capital gains, which we sold last year, and that is a total impact on profit, that positive EUR206 million, despite the fact that the quarter has been notably worse.

Now if we look at the global area, I want to talk a little bit about Wholesale Banking. I want to be skipping the Retail Banking portion. We're going to be talking about Global Wholesale banking, which has enjoyed a good quarter.

We see two years which have been different. 2007 had losses quarter after quarter. I've said that there was that fall quarter by quarter this year. It's going to be very different; between EUR350 million and EUR600 million per quarter. We see that growth is to the tune of 21%. Trading is a little bit more volatile. It's been weaker than in the past. There's been fewer results. And finally, obviously our operating expenses are seeing a tightening of the belts. So evolution is good.

Evolution is very good. If we compare with the rest of the market, a good cost control; good generation of results, quarter after quarter beginning with negative numbers in the first quarter, end up in a convergence with a (inaudible). And so we can talk about good evolution here.

And as to Asset Management and Insurance, well, we saw that before, when our CEO talked about fees. We talked about funds and a drop with those assets being managed. And there's that evolution, which is very positive. You can see that not in results, but look rather at the right hand part of the slide. You see growth to the tune of 22%; that's in Insurance. And income for Asset Management is minus 18%, because there are fewer assets being managed.

Now we're generating profits and this, of course, has an impact profits before taxes. That's Insurance plus Asset Management. The number's EUR120 million, which is different from what we had in the third quarter of 2007.

I'm now going to give the floor to our CEO who's going to conclude.

Very briefly now in my conclusion, I'll just summarize the more important issues, which have surfaced here.

To sum up, despite the fact that life is very complicated the Santander Group once again proves its mettle. It's got strong and excellent results. We can see that EUR2.2 billion in the third quarter, ordinary profit. And I repeat ordinary is EUR6.935 million in the past nine months. That's 15.8% more than in the same period in 2007. EPS is EUR1.04. That's 8% higher than last year.

We also announced the payment of a second interim dividend, which is 10% higher than its equivalent in the previous year 2007.

Our capital gains from the sale of Santander Financial City of EUR586 million which, as yet, have not been included and have had no impact on the earnings for the first nine months. And our credit quality standards have surpassed those of our peers. Our levels of solvency are very healthy, very solid.

So, if we look at the future, it's obvious that our management is going to be organized around a number of important issues, two, basically; first, our levers, and, second, our integration.

So, the first block, which is our drivers, or our levers, we've said it once and again throughout the presentation but, obviously, these will look at boosting commercial revenues; and this by managing spreads and capturing deposits. That's our priority. Focusing even more on cost management in order to keep jaws of anywhere between 10 -- 9 points, as we've done in the past years; continue to be very proactive in managing risks and recoveries; and finally, being very firm in terms of the use of capital, and also in terms of the use of liquidity. I think that these are, basically, the levers, the drivers for every day use.

And apart from that, we also know that there are priorities with the second chapter. And this chapter has to do with integration in Brazil, and we'll be presenting that on Friday this week. We'll be in Sao Paulo. We'll be also integrating in the UK A&L and B&B, and then another small integration in Germany of RBS activities, Royal Bank of Scotland. So, these are three forward integrations.

They're not complex. They are in market. In other words, we are availing ourselves of the best platforms, teams, market familiarity. We're not talking about anything complex. It is not like Abbey in 2004. We have local teams. We will be working with local teams. We have the experience. We've got a track record. We've got mature technology, which will allow us to benefit from these integrations.

And, of course, the Group has experience -- much more experience than, remember Santander Consumer Europe, and remember Abbey. So, despite what we see in the papers, we're not talking about risk. Execution is going to be low risk.

So, in a nutshell, Santander is here, facing a new scenario, after the crisis. We feel strong, robust, solid. Our core capital is higher than 6%, with a quality balance sheet, with over EUR6 billion in generic funds, and we can continue to improve our capital ratios, thanks to our activity. So, basically, from the point of view of capital, we don't have anything toxic in the house, so we can only talk about top quality activities.

Also, we have a diversification. It's not only geographical diversification. It's also in our activities.

And, finally, our potential, because of the result of our new activities, we can really generate synergies. Our latest acquisitions will allow us to be fairly optimistic regarding future results. We can be optimistic. Really, the -- bringing on board of the different banks, all of these elements, all of these realities, we'll see how together we achieve very important results.

So, I think, clearly, we are a Bank with a winning model. We are a Bank that can be assured that in the upcoming fiscal years we'll be successful vis-a-vis our peers, and we will be successful in terms of our recurrent profit.

So, thank you very much, and now we have time for questions.

(Operator Instructions).

Well, thank you very much. We now are going to pose the questions that we have been receiving -- the questions that we are receiving via web, and then we will be taking calls from the phone.

There is a question from Antonio Ramirez. On the recapitalization and funding processes to save bad banks, does that reduce the relative advantage for the other banks when it comes to making acquisitions, or to gain significant market shares? And if, in our opinion, the UK has profited from this situation, and if this is going to make the competitive advantage disappear?

Well, we'll have to see what happens in these competitive markets. We are aware of -- that there is concern by part of the governments and the Brussels authorities; concern that, particularly, the recapitalization processes but also the funding processes. Well, there's concern that they might break the level playing field. It will break the market equilibrium between the different players. We'll see what happens.

[Ramon Garcia]. And there are quite a lot of questions about this; about the capital issue. With regards to capital, we agree that in Spain there is no need for greater capital, but in other countries, such as Greece, there is a new plan by part of the government.

What are the levels of capital that we have today? What are we going to have in the future? Are there possible sales? Well, lots of questions on capital. Well, on capital, my opinion, and the opinion of the Bank and of the Group, we gave that opinion in the presentation. We have 6.3% right now. If we include the Banco Real and the other assets that we have to conclude, we will continue to have more than 6%. Even if we include Sovereign in the first quarter of next year, at the end of first quarter, we will continue to have more than 6%. So, that's a fact.

Second element; and this is a judgment, 6% -- 6.3% -- 6.2%, of Core Tier 1, in our business, and for our business, and for our assets is more than enough. It's a very comfortable level of capital. This is a fact. Now, 6.3% in Santander has nothing to do with 7% of whatever other bank or other banks that we can all think of with a completely different business, with toxic assets, etc. It has nothing to do. So, we should have enough criteria so as not to judge 6%. We have to judge it in its context. For Santander, it's good enough.

Now, in the next quarters, it is true that we have to include some assets, but it's also true that we have the capacity to generate capital internally. Our payout of 50% means that we currently, quarter after quarter, generate capital 0.10, 0.15, depending on the growth of our assets at risk, which is small by the way, because the circumstances are what they are, and we don't think we're going to continue to grow as we have in the past.

And lastly, we have several capacities that, for example, we can reduce asset at risk. We have announced some of these. We presented, when we presented A&L, a plan to reduce these assets. In fact, we cannot be more specific, but we know that we can reduce the -- with Alliance & Leicester and Abbey, we can reduce financial assets, securities, all sorts of paper, as well as loans. So, we can reduce the leverage significantly.

We've already said how we're going to do it and where, like in Sovereign, and we can also sell some assets. The selling of Venezuela will give us capital. The capital gains of the Santander City also gave us more core capital, so -- and other divestments too. So, we don't think that capital is going to be an issue for the Santander Group, taking into account everything I just mentioned.

Antonio Ramirez asks a question, but there are several questions on this subject. He asks about devaluation adjustments in equity; EUR3.7 billion, almost EUR3.8 billion. What is the breakdown of it? How much is Fortis and Royal Bank, if we're going to take these losses to the P&L or not? And different questions also around the subject of exchange rate differences.

With regards to adjustments for valuation, the figure that Antonio mentioned is EUR3.6 billion, basically, there are three components. The first component, the most important one, is that which stems from the exchange rate effect in the goodwill, which is, I think, EUR2.2 billion. That is the most important one, which does not affect capital because, on the other hand -- and on the other side, reduces the goodwill.

And then the second effect in adjustments for valuation are the available portfolio for sale, including industrial stakes, which have an impact of about EUR1 billion. And the third is fixed income; the ALCO portfolio, basically, of the ALCOs that are available for sale. This is what gives us that EUR3.7 billion in valuation adjustments, which are reduced from the equity.

Antonio is asking about the updating of the selling -- updates on the selling of the Venezuelan bank, and the sale of our Puerto book.

Yes. In Venezuela things are happening. We hope that in November we can give more information and report on the fact that it's been concluded, because things are well ahead, and we hope to end this process very soon.

And Puerto Group, the execution is going to be a bit slow and long. It's going to take a few months. And this -- well, the truth is that I didn't mention this, but it does add an additional deleverage, because it is an asset of almost GBP2 billion some, I think it is. In any case, the details, it's too soon to tell because, as I said, it still needs a certain period for its execution, so this will take time.

Diego Barron from Fortis is asking about a guidance of core capital that you already mentioned. But he asked whether we could reduce the dividend, or if we could pay part of the dividend in shares.

The answer is, clearly, no; a clear no there.

Can we confirm the guidance of the Bank for the 8s and 9s, and if you're thinking about a strong capital restructuring or pre-retirements?

No. We're not thinking of doing any strong restructuring of personnel. We don't have that in mind. We don't have any need to do that. And we're not thinking of any pre-retirement plan either or restructuring beyond what is normal. Every year we do a few pre-retirements, but that is part of the normal cycle of a bank; nothing special there.

And about the guidance?

At this time, I think what we already said about the guidance of earnings for 2008, we still think we can reach those figures. It's possible. If next quarter we can get the same results as this quarter then, with the extraordinary items we would reach that figure that we had planned. So, right now, there's nothing new to add there.

Antonio Ramirez and Santiago Lopez from Keefe and Credit Suisse, they ask about the acquisition of real estate assets. And there's another question about this; how much have you brought? What is your current exposure by types of asset? What is the relationship between the price and the debt, and if we can add more acquisitions during the fourth quarter or not?

Well, when it comes to real estate assets, we have explained this already. And we don't have to make many more acquisitions, but the basic rationale under this -- for this operation is the same always; to better protect our credit assets. So far, what we have acquired is EUR2.7 billion. More than 70% is residential homes, or finished, or about to be concluded or commercial property. In terms of land, it's less than 30%, and land under management it's about 5%.

With regards to loan to value, this is acquired below the appraisal value. So, the developer participates in the potential profits of these deals. So, the loan to value, if it follows the market rationale that would be the -- prices would be equal to the cost.

Santiago has two more questions. How would the capital affect the fall in the portfolios of fixed income in Latin America given the strong depreciations of currency and a fall of value of Sovereign bonds?

And the other question is, given the strong fall of the exchanges, are you going to execute some of the [old flows] that you have, and what will be the exposure?

With regards to fixed income portfolios or our Sovereign bonds, basically, Mexico and Brazil, just to have an exchange rate effect, these Sovereign bonds in local currency, financial local currency, therefore, there is no exchange rate effect.

What we see in the fluctuation fund available portfolio available for sale would be the mark-to-market. These are, well, the greatest portfolios out of Mexico, which covers, what we call, the core deposits. We buy bonds at a fixed rate, at an average of two for two-and-a-half years, more or less, that's the average, to cover for potential falls of the interest rate. Even so, the balance sheet is short. But it is true that the mark-to-market of the portfolio is having an impact. I mentioned that the bonds are Sovereign, Sovereign bonds in Mexico as well as in Brazil. The portfolios are slightly smaller in Brazil, but the effect is the same.

Something about LBOs he asks? The position of LBOs of the Group, it's EUR1.2 billion to EUR1.3 billion in several operations. There is nothing special there to mention.

Antonio is also asking, as well as other analysts, of the updating of the coverage policies of the hedging policy for our P&L capital. How are we doing in dollars? What hedging do we have there?

We haven't changed our policy. We have hedge results in local currency against the dollar and then the dollar/euro position. There are hedges in Brazil -- Mexico and Brazil versus Mexico and Chile to hedge for changes in the exchange rate.

In capital, we have coverages through tunnels, almost 100%, in Mexico, Chile, Brazil and the UK. These are coverage by tunnels, tunnels of options, where there is a first loss that we take on and as from that moment on, we are hedged. We are protected and that's the policy that we have been forming in the last few years.

[Carlos Soto] what are the levels of NPLs we can have in Spain or that we have in Spain and how far can that go? What are our expectations? And in that regard, there are several questions too about the use of generic funds. The -- if we're starting to use the generic provisions and when do we think we can start using these?

Well, the difficulties are in forecasting these things. We believe that in Spain this year and at December 31, we won't have to touch that -- we won't have more than 2% NPL rate. 1.9% is what it's going to be more or less. We don't think it's going to reach 2% the NPL ratio.

And somebody will ask me what about 2009? Well, we'll talk about it when we get there, because it's very difficult to tell right now, because we're driving with a lot of fog and the headlights can only go so far.

So next year, there can be an increase in the NPL ratio, but perhaps even less than what we are experiencing right now, but we'll cross that bridge when we get to it. But, for this year, I would say 1.89%; 1.90%; 1.90% something; I don't think it's going to reach 2%, that's my impression.

What was the other question please?

The use of generic provisions.

Well in our vision, we don't think that we need to use the generic provisions, this year certainly not. We don't think we're going to have use them next year. These generic provisions protect us and it is possible that at the beginning of 2010 we won't need to touch that either.

Carlos is asking about the level of provisions or risk expectations in Brazil, Mexico and LatAm, there are several questions on this.

Well, Brazil and Mexico, the conditions are the ones we see right now. We've had an increase in NPL, a high increase in NPL because of credit cards, which is more or less contained now. And in Brazil, because of the change in the mix, we -- it's more noticeable in Brazil, because apart from the NPL levels in the country as a whole, we've had a strong change in the mix, where we're giving more weight to the business lines that have to do with consumer and with individual customers, credit card, personal loans and so on, and this is why the nominal NPL rates are going up.

We don't see any clear reason that would lead us to think that these figures will get worse next year.

David Fernandez from La Caixa. Why has the credit or the lending portfolio go down in the network Santander in Spain?

I don't see any reason, apparent reason. I guess it has quite a lot to do with loans to large corporations which vary a lot, but lending activities, even if the rate of growth has gone down, has been quite normal. I don't -- I can't think of any other reason but the change due to our large corporations.

Also a question about Consumer Finance has increased.

Yes, Consumer Finance is a division, which has a very strong international component and Germany is going very well on consumer loans. They're selling a lot of cars, new cars and second hand cars.

Italy is also growing, I think, at 14%, I don't remember by heart. 14% or 15% in Germany and Italy; also in the UK this activity is growing. Then we have the impact of the assets of the Royal Bank of Scotland, their inclusion, and that's a change in the perimeter and also has an impact.

Spain, growth is going down. Spain is the only unit of Santander Consumer Finance whose growth in lending in 2008 has been negative, minus 20% more or less, because of the general slowdown. But Santander Consumer as a whole, it's in Germany where activities are strong there. Half of the Santander Consumer Finance, which is in Germany, in fact, and then we're also very strong in Italy, the UK; Drive in the US, which is also growing. So all in all, we do see growth, but Santander Consumer is not that strong in Spain. We are a third part of a business, Spain, but in the other markets, like Germany, etc., we're growing.

We also have some questions that have already been answered, stakes in Fortis or RBS; and what about the destination of the capital gains of the financial city, what are you going to do with that money?

Well, we haven't made any decision right now. In future presentations, we will comment on this.

[Daragh Quinn] from [Nomura]. Two questions that have already been answered and the third question is what is the outlook for credit quality in England?

In view of the recession, what are your assumptions on the performance of the quality?

Well, the performance of risk quality in England is very good, and this is not an issue. This is not a problem, at least not for us, for Abbey. And the main reason is we have been mentioning this in fact on other occasions on other earnings announcements, because this point already came up in the earnings of the second and third quarter.

In the UK, Abbey is trying out a policy where on the one hand, it is growing reasonably well in volume, not very much, it's improving its market share, but it's not growing very much in terms of volume, because the demand for mortgages is low in the UK.

It's carrying out a margins policy and it's selecting the risk quality very carefully. In fact, in Abbey in the new production, since June of next year, there is less than 1% of new production of loan to value of more than 80%. And there is nothing of buy to let, and there is nothing of sub classified mortgages, which are low quality mortgages.

So the selection policy, which is very rigorous and which is favored by the market conditions, so what we're putting into our portfolio is of increasingly greater quality, relative quality. So the risk quality is being reserved.

If there is a small increase in the NPL rate, it actually comes from the severity or the low valuation or less lower valuation of the property which is being mortgaged. So if the property is worth less and less and that gives rise to an increase in the NPL rate, but we have no special concern on this product and there is no indication that in England the risk quality over assets will get worse, much to the contrary.

[Matthew Maraminges] from UBS has several questions. One of them is on variations of different items. Is the balance sheet that I think we can answer later on more in detail, if you agree? Then we have the contraction of the book in Spain; that has already been answered.

And then a quality -- a question on quality in Mexico. Is there a one-off there?

These are the credit cards that we're talking about in other presentations?

Antonio Ramirez has another question. Wait a second, [answering]. I'm being told Jose Antonio and Pepe [de Juan] are telling me that I didn't express myself clearly.

Generic provisions; generic provisions, what I meant to say because a question is when are we going to start to use the generic provision? So what I wanted to say -- I don't know what I said, I don't remember. But what I meant to say was that so far we have not used generic provisions in Spain.

We'll probably start to use them before the end of the year. That we have a possibility of making use of them and I don't think we will spend them until the end of next year, or beginning of 2010, but obviously we will have to resort to these throughout 2008 -- during the rest of 2008. I mustn't have said this well. I think that was a misunderstanding.

Antonio Ramirez on the UK, a question on Sovereign; is there any cost where if the transaction is not completed by any of the two parties?

No, there is no possibility of that happening.

Inigo Vega; three questions. The first one has already been answered and the follow up lending in Santander.

Then there's another one about the reduction of assets at risk in Abbey in the UK. Can you elaborate a bit more what assets do you think you're going to reduce?

And then the third one is on the breaking down of the generic provisions?

No, I already talked about that. And the UK, I talked about risk there. Actually I talked about it in detail when we presented the Alliance & Leicester deal. Basically, it's going to be securities, but other things too. Right now, we're working on that. But since we haven't taken control yet over Alliance & Leicester, we haven't been able to work detail on these issues. We can probably more specific in the future but certainly securities, there we can make lots of reductions.

Mario Lodos from Iber Securities; a question on Banif. What is the impact, the exposure of customers to the structured funds, amount, etc.?

Well today, we reported to the CNMV on Banif. And there -- and we told them what we can say so far, which is that this decision was made by Banif. It's a Banif decision and therefore, its scope has been reduced, and they will be included in the P&L of Banif.

Number two, this is an exceptional decision, which certainly does not acknowledge that bad products have been sold, but because of commercial reasons, this decision was made to support customers in a situation that Banif believes has been extraordinary. And the cost will be paid by Banif and that is still being analyzed, and Banif will report on it when it has valued the amounts.

[Ivan Landers] from Morgan Stanley has several questions that have already been answered but there's one that hasn't been answered. The low tax rate in Mexico, which already happened in the second quarter, could you elaborate a bit more on that?

The others have been answered already.

Yes, in Mexico, there's tax advantages, although volatility on the tax rate stems from the fact that in Mexico certain provisions are not deductible from taxes, but when you sell the portfolio, so you can do something. So depending on whether there have been sales of portfolio or not, the tax rate might vary, because provisions when they're executed are not tax deductible and this is why we see the fluctuation of the tax rate in Mexico.

Ignacio Cerezo from JP Morgan also refers to the capital, although we more or less answered this, but he asks about the increase of provisions and credit quality at Abbey for the third quarter and the cost of risk.

I don't think there's anything else to add to that. We already answered that.

Javier Bernat from Caja Madrid asks if in view of the fact that we're not talking about capital increases but are we thinking about issuing preferential shares or convertibles apart from the ones that already exist.

And he has a follow up question regarding the networks, Santander and Banesto. Santander has grown. Banesto has shrunk. Is there any kind of an exchange of activities?

And then another question about immigrants, referring to the quality of our assets in Spain; are we perceiving any loss in quality?

The answer to that is we are not going to be issuing convertibles. We're going to continue with our business as usual policy.

As to the network for our branches, actually that's part of the activities in any given year. I mean if you have thousands of branches, when you close 20, you open 30, that's not news.

To the best of my knowledge, when Banesto doesn't have any plan to close branches, maybe they've had to adjust, but that's exactly the same as for Santander. So we're not talking about corporate policy if you will. We're not talking about a plan, a program, no, nothing like that. It's just part of our standard operating procedure. We do this every year. There's openings and closings every year.

And then there was -- what was the other one? I'm sorry, please refresh my memory.

It's about immigrants.

Well, the Group is not especially exposed, perhaps with the exception of Santander Consumer in Spain, but the Group does not have a very relevant position among the immigrants. Santander, Banesto and Banif, of course, are units or business units or banks whose average customer is middle, middle/upper middle class. So immigrants represent a very small slice of our pie.

So I really don't think that this issue would affect the Santander Group. Perhaps a little bit more in Santander Consumer, the former (inaudible) network, yes, in fact, we did have money for consumption for [cargos] and so on, but not even there, not even there are we particularly relevant.

It is true that apparently NPLs in this part of the population is a little bit more than in other segments, but we really haven't observed anything that really sets that off. We're talking about products, products as such, not segments necessarily.

Giovanni Carriere has a question. Actually he has a whole number of them, but let's just pose the ones that as yet haven't been answered.

He talks about the impact on the -- because of liquidity, that's because of the acquisition of B&B. He talks about exposure to builders, constructors, developers. There's a specific question which is what would the impact be of a faster decrease of rates?

And secondly, can we quantify or can we elaborate on the size of the portfolio of mortgages in foreign currencies in Spain?

Well, those mortgages and foreign currencies, I think it's zero. I don't know. I don't think that we have any in Spain. I think we just have euros.

As to the loss in rates, I think that's euro zone. Well here, what we would see is that we're -- Santander Consumer Finance is benefiting from that and then we have the commercial areas where in the short-term, this reduction is favorable and in the long term, well that will depend on the hedges in place, have we hedged or have we not hedged for ALM.

So in the short-term for Santander Consumer Finance, this is beneficial. For SCF in the short-term and long-term it's detrimental because of the spread. Those core deposits which in the Group in Spain are EUR20 [trillion] and this depends on the hedges. We have some hedges which have foreign (inaudible) and that's to cover that position specifically.

Arturo de Frias, Dresdner has a question regarding the cost of capital in generics. I think that's already been answered, but he's talking about those 50 basis points, 55 basis points. He talked about that cost of credit is at 45, and that's why our CEO made a reference to the upcoming use of generic provision.

Javier Bernat from Caja Madrid again has a question, and this has to do with maturity for 2009 of Wholesale debt. Again, the reduction is going to, perhaps, be the reason we are going to be issuing less. So, what are our forecasts for the upcoming few years?

At a Group level, we would be at about EUR20 billion. That's wholesale, mid and long-term.

Now, linking up these assets with liquidity is not always necessarily the best idea. We could see some changes, but not always, because on balance, you would have to remember that there are other elements involved. We have seen, in our presentation, that if we're talking about those 20 trillion, the dynamic is credits and deposits, or loan to deposits. Well, that calls for less wholesale funding, and if we look at the current scenario, well, what we see is that, right now, it's not liquidity that's the issue. It's the capacity to issue in the long-term at a cost that the market will find acceptable in the long term also.

As you know, at this point, we have come to a screeching halt. Some governments are attempting to guarantee some omissions in the upcoming three to five years. And this is going to affect the market, but we're not really sure exactly how. Yes, there's going to be liquidity pumped in, and investors will be thinking about buying, but we don't know when they'll be thinking of buying, or what they'll be thinking of buying. In any case, liquidity right now is -- is and has been very comfortable, and we continue to feel that there's a comfortable fit. We have short-term liquidity in the market.

[Ismar Paribo] from [Arrow], and a person from Goldman have a very similar question, this one regarding dividends. Do we have any plans to pay out dividends, perhaps not cash or buy back? And are we thinking about a payout policy in view of the fact that our results have not grown that much?

Well, to the first group of questions, the answer is no, and to the last question is yes. Yes, we are going to be upholding that payout policy, but I don't agree with that footnote, with those shrinking results. If you think that 16% growth is a shrinking result, well, alright, fine, but it's not, though, not really.

[Ismar] has a question regarding the capital ratio at Abbey, after the recent injection of capital, of liquidity this adds those points that we talked about before to those two different levels.

(inaudible) and [Marco Troiano] from Standard and Poor's have a question regarding the exchange rate impact on the results, and they are talking, of course, about Latin America, but they're also talking about the world in general.

Well, in the quarter, and I think I said this before, yes, there is an impact, and it's a negative one, because that's the exchange rate, which is mark-to-market on a daily basis, the results are averaged monthly. So, in this term, in this quarter, it's negative because this one-off appreciation of the dollar vis-a-vis the euro.

And if we look to the future, that's going to depend, I think, on different changes and evolutions, not only exchange rate but also interest rates, because we need to bear in mind that those are the two sides of the coin. But when we talk about managing these risks, well, no, we do not foresee great changes.

The final group of questions are more technical. I will pose one, [Marco Troiano] talks about stress tests for real estate assets. We have impact in Santander and Banesto to the tune of EUR1 billion and EUR5 billion, the worst case scenario, but you know about these stress tests.

[Christian] (inaudible) has a question about liabilities, which are left from B&B, which are around [20 million], it's a positive (inaudible). We had calculated a 20% attrition, but it's positive there at this point.

Alberto Cordara from RBS wonders about the third quarter. That's the Sovereign. Our CEO talked about that. It's the equity method that he's referring to.

And I think that the rest of the questions, basically, have been answered. There are some, which are perhaps more specific, we could talk about those, Alfredo, if you want afterward. They basically have to do with Europe. I don't know whether any questions have been posed by phone?

: Yes, (inaudible) I have a comment, and I'm harking back to a question that you just referred to now. We have addressed it. When we acquired Bradford & Bingley, we talked about that, and we said that our forecast was that we would lose up to 20% of the deposits.

Excuse me? Am I being heard?

Yes, yes.

: I said that when Bradford & Bingley was bought Antonio (inaudible) said that we considered the possibility of losing up to 22% of our deposits, so there would be minor losses in the first few days. That's true, but now we have more deposits. Not only have we not lose, we've actually gained. I think it's very important. I think this is very important.

I think we have one question on the conference call. The others, I think, have all been answered. So please, can we have that question?

Good day. This is from (inaudible). Good day. I have a couple of questions. First, why do generics in the UK shrink?

And [a total adjustment], you talked about evolution in the first nine months. I'd like to know the variation of that in the first, second, and third quarters. Could you break that down, please? Thank you.

The first question, about generics in the UK, you might remember that, yes, there is a generic provision, which was in place when we talked about those unsecured personal loans, those UPLs. We're availing ourselves of that generic.

As to the adjustments between the quarters, I think the difference is EUR700 million, and that's due to those three elements that I referred to before. I talked about the exchange rate, so there is an effect in the quarter.

I talked about the portfolio, the equity portfolio, which again, has evolved in the quarter and that (inaudible). And I talked about that fixed the outcome I mentioned, Mexico and Chile specifically, because in Europe it's been positive. That's net, because some portfolios have evolved positively, others negatively in mark-to-market. These are hedges. And these three are the same components that continue to explain the evolution quarter-by-quarter.

Well, thank you very much, I think that we have come to the end of this presentation, and we'll see you again next time.

Statements in English on this transcript were spoken by an interpreter present on the live call. The interpreter was provided by the Company sponsoring this Event.