Banco Santander SA (SAN) 2010 Q1 法說會逐字稿

Good morning. We're going to start the 2010 results. I am going to start with my script for this first slide. I'm going to present the first chapter, so I am going to make reference to the main highlights of the management and Group results for this quarter. Then Jose Antonio Alvarez will then give a review of the different business areas, and then lastly, I will end with some conclusions on our outlook for the rest of 2010.

Well, the first idea is to put across that Santander enjoyed yet another good quarter. The following table sums up the Group's performance and their management throughout this quarter. And I have divided into two large sections; the first one, which is the Group's capacity to keep on generating very high recurrent results; and the second one, which was the second great focus of this quarter, was the strengthening of the Group's balance sheet and sovereignty.

With regard to the first group, the Group's capacity to keep on generating high recurrent results, I would like to say that the soundness of our business model, the good management, and especially the advantages of our diversification, enable us to make the most of the momentum of the countries in which we operate, and these are reflected in profits of EUR2,215 million, which represent 6% more than in the first quarter of 2009.

This amount is equivalent to earnings per share of EUR0.26 per euro, i.e., 3% more than in the first quarter of 2009. The difference is due to the capital increases for Sovereign, and also for the scrip dividend.

This income statement shows our management of the different drivers in revenues and in costs. Also, it reflects a notably slower pace of the growth in provisions. This is partly due to the insipient economic recovery in some of the countries, and partly to the results of policies and management of non-performing loans and recoveries, which we have been carrying out the last couple of years.

As I've already said, the second focus in the quarter was the strengthening of the Group's balance and solvency, which is reflected in three main aspects. On the one hand, we maintained limited credit and market risks. Our credit quality is starting to show signs of improvement, and it remains always better than that of our competitors.

We also maintain high levels of coverage of these non-performing loans, and also, we are actively managing hedging of interest rates and exchange rates in order to protect both our results and capital.

We have also improved our structural liquidity position. On the one hand due to the environment of deleveraging, which required fewer liquidity needs. And on the other hand, this is due to the effort being made by the Group to -- we're remaining very active in the issuance market, as well as in capturing deposits.

We've also improved our solvency. The core capital ratio increased by 18 basic points in the quarter to reach 8.79%. And in Tier 1, it still remains above 10%.

And now, I'm going to comment in greater detail on each one of these points.

Well, in the first quarter, we had profit of EUR2,215 million, which is like 5.7% higher than the first quarter of last year, and this has enabled us to improve the trend over the 1% growth with which we ended the year 2009. As I've already said, the first quarter profit is equivalent to earnings per share of EUR0.26 per euro in the first quarter, which represents a growth of 3.3% when compared to the first period, or the same period last year.

This profit is supported by all our operating areas. And the first point that should be highlighted is our degree of diversification. The Santander branch network in Spain and Banesto represent 24% of our profits, Brazil 21% of our profits, and the UK 16%. The rest of the Retail Bank in Europe -- Global Europe and Latin America, not including Brazil, is around -- between 80 -- 11% and 14%. And lastly, Sovereign is now starting to appear in this graph as it contributes 2% of the operating area results.

This diversification is, without any doubt, one of our greatest strengths, and reinforces the Group's capacity to withstand this cycle. This is the first point to be highlighted, the information we're providing.

The second point is that, apart from the Retail Banking units in Europe, mainly Spain and Portugal, which are the most affected by the current environment, the rest show excellent growth in their contribution in euros to the Group's profit, and this means that the operating areas have -- their attributable profit has increased 14% over the first quarter of 2009.

This growth was partly favored in the case of the UK, Brazil and the rest of Latin America, due to the appreciation of their respective currency against the euro. This positive impact on our business was partially offset, however, by the negative effect of hedging of exchange rates in the corporate activities.

However, if we look -- as we said, we look at this in euros -- excuse me. Instead of looking at assets in euros, which was what we've seen in the first slide, if now we look at it, let's say, looking at the evolution after eliminating the impact of exchange rates, in order to provide a better analysis of the management, we can see that the Retail Europe -- units of Continental Europe maintained results that were basically flat over the first quarter of 2009, and with a high increase over the fourth quarter of 2009 due to improvement in net interest income. Fee income and costs and provisions virtually unchanged. And we have a good performance of Global Wholesale Banking within a very rigorous management of risk, liquidity and capital.

The UK continued to register a double-digit growth, both year-on-year and compared to the fourth quarter last year. Brazil increased 14% over the first quarter of 2009, and logically, with a greater impact of minority interests, but the profit before these minority interests was 32% higher. Latin America, not including Brazil, on a like-for-like basis, excluding the impact of Venezuela increased by 10%.

And lastly, I would like to stress the good performance of Sovereign. Its profits of $95 million was very much in line with our goals and objectives for the year 2010.

Well, on the slide, we can see the income statement, and as we've done in previous quarters, the first column is the accounting one. And it reflects therefore the effects of the perimeter, although in this quarter, obviously, it's very small compared to last year, but there is a small perimeter effect. And we also have the exchange rate.

As always, we have included a second column without their impact, neither the perimeter or exchange rate, in order to facilitate a better analysis of the evolution of the underlying business.

So this income statement shows Santander's management priorities. The first being a very active management of spreads within the possibilities of each market, as well as an evolution of volumes varied by products and markets. But all this reflects in the solid growth in the most basic revenues. Net interest income rose 8%, and the trend in fees, all their -- almost flat, their trend is improving somewhat when compared to previous quarters.

The second idea, or our second priority, is that we've got a very strong disciplined costs, which are flat in the Group. We have increases close to zero or negative in all of our units.

The third idea is the active management of risks and recoveries, and this is reflected in the income statement, and they are flat provisions compared to the first quarter of 2009. And for the first time ever, they are not growing. And in short, the profits remain solid, although with a different contribution of the business drivers.

This different contribution can be clearly seen if we compare these variations with those that were seen in previous quarters. For example, basic revenues increased slightly less, which is logical, taking into account the low -- the environment of low growth and low interest rates, which are at minimum levels in all developed markets; so obviously, this is basically obvious.

Also the costs are maintained almost at basically zero in nominal terms, and also which means that in real terms they have gone down. And as a -- and we have had an improvement in the efficiency ratio of 50 -- 1.5 points, which is 42%. And we will look at this in greater detail later on.

Provisions continued on the downward trend which we had been observing since the second half of the year 2009. In short, we arrive at the same results; i.e., the net operating income after provisions for loan losses registered strong growth, although this time by a different route due to the market conditions.

While with regard to the strength of our most commercial revenues, i.e., net income -- interest income without dividends, fee income, revenues from insurance, and they have shown a quarterly performance which was very consistent.

If we look at the performance of the areas, the bottom part on the left shows how even in a scenario of strong stress, such as that we've seen in the last quarter, the UK and America are still maintaining a very good trend, and Europe is quite stable.

Net interest income is more solid backed by spreads management and deposit growth, because on the other hand, lending is slightly decelerating.

Fee incomes were more affected in some of the lines of business, sometimes due to environment, or sometimes due to the strategy followed by the Bank to captured funds, which mainly affected those related to securities and mutual funds.

In the fourth quarter, I suggested that the most likely outcome was that this trend eased off; i.e., lower growth in net interest income and a better evolution of fee income. And we're now starting to see this in the first quarter, and we think that this will continue to be observed over the next quarters. We think this trend will be repeated; i.e., at the beginning of 2009, the commissions went down 8%. Now it's at zero growth rate, thanks to the recovery of pension funds, securities and insurance.

Well, that was regarded to the revenue. With regard to costs, if we deduct the perimeter and exchange rate impact, the cost of controls remained flat for the whole Group, and produced a further gain in efficiency in all the countries where we operate. So this evolution underscores a good performance of all our units, which have almost zero growth, or slightly negative, which is the case of the retail networks in Spain, Portugal, the UK and Mexico. Other networks, such as Brazil, remain unchanged, because they have an inflation rate at around 5%.

And this means that on the one hand, the control over the business as usual is being carried out. And on the other hand, we have the attention of synergies in integrations, which enable for us to invest and to spend more money in other business; for example, GBM, in order to consolidate our presence, but without affecting the Group's global growth in cost. So with regard to cost, we've got an excellent management in all our areas and units.

The third point is provisions. In this quarter, we have noted both significant slower rise in the year-on-year growth, which was 10% in the first quarter which, excluding the exchange rate and perimeter impact, it's only 0.3%. To a certain extent, this is the reason why we are talking about a slowdown -- a significant slowdown with the year-on-year comparison.

Provisions have been quite stable in the last few quarters and they were 7% lower in the period than in the fourth quarter of 2009. After discounting the impact of the -- in that quarter, the provisions made for substantial loans, to which is added the significant one-off operation. And we said this was below the fourth quarter last year and the first quarter this year.

Well, the balance sheet strength; as I said at the beginning of this presentation, the second major focus has been to strengthen the balance sheet in a very demanding environment, and in order to do so, the Group is implementing very prudent risk management, which is enabling us to get through these difficult times better than some of our competitors.

So this good management rests on four ideas or four pillars, four columns. The first one is the strict attention to credit risk and recoveries. The second one is protecting our income statement and our capital from movements in interest rates and exchange rates. The third pillar is the capturing of fund deposits, both in wholesale markets which enables the Group to cover so far this year all the needs we have for the year. And lastly, we continue to strengthen our already high capital ratios.

Now I'm going to talk about each one of these four pillars. With regard to credit risk, I would like to highlight that our management is reflected in a moderate rise in the NPL ratios which are going up, which have been seen considerably, [this makes] -- and a stable coverage over the last few quarters. So we compare well compared to the situation of our competitors.

Positive aspects to highlight include the evolution of net NPL entries, which, as we can see, reached their peak at the end of 2008 and the beginning of 2009. And since then, they have been declining consistently, because of the double positive impact of reduced gross entries and higher recoveries.

Also, what we call risk premium, which is defined as a change in the balance of NPLs plus write-offs less written off assets recovered divided by the lending, and this shows an improvement in the credit quality over the last quarters, so in the future, this should result in lower demand for provisions.

So this improvement in the risk premium over the last quarters is occurring, as we can see on the chart in all the Group's large units. And I would like to particularly mention Santander Consumer Finance.

This better evolution of the NPL indicator is also comparable with the effort the Bank constantly makes related to provisions. And this is reflected in a further rise in the first quarter in provisions on the balance sheet, which are now almost EUR19,000 million, of which EUR6,679 million are generic funds for loan losses. And of the EUR6,679 million, EUR2,340 million went to the generic provisions for Spain.

In this quarter we've used EUR401 million of the provisions in the quarter for ordinary consumption. We have to also add EUR40 million due to lower lending and a better risk profile. In other words, this release is not due to deterioration of the credit quality; I would like to say almost the opposite. In addition, little more than EUR100 million were used partly for substandard provisions and partly as a result of applying our rigorous internal criteria for risks.

Well, another basic aspect of the quarter was staying within -- with this focus on financing, the funding. Since the start of the year we've been very active. The Group's various units have been very active in capturing funds, taking advantage of the opportunities in retail and wholesale markets.

In this quarter the Group increased customer deposits in the first quarter by EUR30 billion, and we have launched EUR15 billion of medium and long-term issues for EUR15 billion. This volume exceeded medium and long-term maturities for the entire year 2010. So we have got EUR29 billion, which will -- maturing, which will enable us to make voluntary repurchase of EUR2.9 billion. And we're able to face not just this year, but also the year 2011 on a very comfortable footing.

This active strategy, carried out both in deposits and issues, does not only allow us to improve the Group's structural liquidity position, but it also allows us to extend the maturity of liabilities on the balance sheet. In order to do this there's been campaigns for deposits, which have established linkage conditions. And the issues were made with an average maturity higher than that of the stock of senior debt, and also covered bonds.

And as a result, the Group's liquidity ratios are improving notably, which can be seen on the lower right side of the slide. The deposits and medium and long-term financing of a percentage of loans increased to 110%, which was better than in previous quarters.

Well, to end this chapter I will now look at solvency, which is another area where we continue to improve, as I said, as a result of our organic generation of capital. At the end of March we had core capital at 8.8% and Tier 1 at 10.3%. In both cases this represents 130 basic points higher than a year ago; in one ratio or in the other. The core capital was 18 basic points above the core -- by the end of -- now this increase was due to the evolution profits as well as control of risk assets which, in an environment like the current one, they remain flat.

And in the top end of the forecast, which we said at the beginning of the year, we said that during the year we would increase free capital between 40 and 60 basis points in 2010.

Well now, after going over these basic aspects related to management, I would now like to give the floor to Jose Antonio Alvarez, which -- our CFO. So he will now be able to comment in more detail in the business areas.

Good morning. As we do every quarter after the presentation by the CEO, I will now look in detail at the different business units, and this quarter I'll be focusing on the geography. All the usual information we provide you with will be found in the annexes.

So we'll start with Continental Europe. The first quarter was clearly better, considering the economic environment. Of course, the environment is characterized by slower growth increases and very low interest rates, which has an impact on our revenues. However, our revenues have increased by 3% in this quarter, and thanks to a sound cost control we have an attributable profit of EUR1.36 billion.

One note was the good contribution of GBM and Santander Consumer Finance, which already points to a better business momentum. And also commercial networks have proven to be very resistant in the face of such a difficult environment.

So we'll start with the Santander Branch Network. We see some weakness in credit demand, which is weak. This is something that we expected in a process of deleveraging that the Spanish economy is experiencing.

Regarding deposits, the behavior has been excellent, we are increasing strongly in this aspect. This campaign was launched on March 20, so the effects are still very limited. Deposits are growing very well, [site] deposits including --.

Regarding spreads, we still see the same trends; in the assets there's a tendency to expansion. And with very low interest rates, of course, spreads have compressed.

We do have some good news regarding fee incomes. Fee incomes have slightly decreased by 1%. Expenses -- or rather declined slightly 1% without the need to adjust structures.

And regarding costs, costs or expenses declined by 1%.

Provisions, we have some good news regarding provisions. An ongoing decrease in net entries due to good recoveries and fewer gross entries, especially in the private sector or private customers. Therefore, we should have fewer allowances in the next quarters.

As regarding Banesto, the trends are very similar to those identified in the Santander Branch Network. I have underlined the importance of investment funds in this case, but all of these areas show the same trends.

Management of the spreads is very similar. Expenses and provisions are flat and we have a strong balance sheet, as we heard before, after allocating the extraordinary capital gains from the lease back operation of branches.

Before I continue to describe the situation in other business units, I'd like to refer to the evolution of credit quality in Spain, an interesting issue today. First, the rise in the Group's NPL ratio in Spain has slowed down, and also in the Group Santander Network and Banesto, Wholesale Banking, GBM, the Private Banking business of Banif and SCF; I mean the whole Group. At the end of March it was 3.59%; 18 basis points more than at the end of 2009, and the smallest quarterly rise in the last two years.

So NPL is slowing down. This ratio compares very well, once again, with the rest of the sector, and coverage has remained stable at around 70% in the last four quarters, so these are three basic ideas. And the Group's NPL ratio in Spain has slowed down and this ratio compares very well with this sector, and coverage has remained stable.

This improvement in trend reflects our sound management practices. We see a market improvement of gross entries. This improvement is beginning to reflect the measures taken in previous quarters; anticipation and monitoring; greater focus on recoveries, which led to a notable improvement in gross NPL entries which, combined with a greater weight of recoveries, resulted in net entries returning to the levels of two years ago. Recoveries have three components; cash 69%, goods 17% and refinancing 14%.

If we now look at credit quality, in line with a report issued by Bank of Spain on financial stability I will copy, or follow, the methodology followed by the Bank of Spain in that report. They described in that report the so-called potentially problematic assets in the real estate and building sector.

The Group compares very well with the rest of the sector, both in weight and coverage. What is our exposure to this sector? EUR41.4 -- EUR4,100 million (sic - see presentation), 18.7% less than the previous year and EUR10 billion in the building sector. This is all I can say about the Group in Spain.

NPL ratios in the sector is EUR3.2 billion, which is a 6.7% NPL ratio, what the Bank of Spain describes as substandard risks. Let me remind you that substandard risks refer to debts which are not NPLs, but are included by the Bank of Spain in this category, because the debt belongs to specific segments of geography where a greater risk has been perceived.

So based on this official policy, we have to track these accounts very, very closely and anticipate allowances of up to 10% to 12%. So NPLs amount to EUR3.2 billion, as I said before, a 6.7% ratio, and substandard risks associated EUR4.1 billion.

The Group also has a portfolio of acquired properties derived from its policy of anticipation made in 2008. This portfolio is 33% covered at the end of March, and the net amount is EUR2.8 billion.

And we have EUR2.4 billion with a 28% coverage in assets, we had to take hold of for NPLs. So as part of our usual banking practice of execution of payments, or in lieu of payment, the Group has in Spain a portfolio of foreclosed assets with a coverage of 28% and a net amount of EUR1.7 billion. Entries in the first quarter of 2010 were lower than in 2009.

The total substandard risks for Spain are around EUR7 billion in Spain so the idea -- the basic idea, is that most of this risk is concentrated in the building and real estate sectors. Comparing our figures with those published by the Regulator for the sector, we can see 71%.

Regarding Santander Consumer Finance, this area has evolved very well in recent quarters, although with different evolutions and different geographies, which reflect different policies linked to the public subsidies to the car manufacturing sectors.

Credits have grown by 3% following an irregular evolution. We see that margins have improved. We have almost flat costs. So this together with the credit improvement, we have lower demand for loan loss provisions due to improvements in credit quality, and the good evolution of recoveries. And all of this is reflected in results of the first quarter better than those in the last seven quarters.

And the improved trend in results is even better if we look at risks. Coverage is 108%; it has improved consistently. The demand of allowances as a percentage of the net margin is decreasing. And the lower part of the slide shows very clearly net entries in NPL. 50% of what they were last year. And risk premiums are decreasing significantly quarter after quarter.

So the outlook is significantly better for the next few quarters, based on the behavior of margins and risks.

In the case of Portugal, the market is very demanding, volume increase is very, very low for assets. We do see, however, a rise in deposits, a 9% rise, and a strong growth in investment funds. Intermediation margins are tremendously important, there's an increase in the spread in assets which does not offset a decrease in liabilities.

Fee incomes have improved since investment funds tend to recover. And also, thanks to the activity of global banking, costs are under control with a 2% decrease. And provisions are higher than in the first quarter of 2009 and lower than in the other quarters, thanks to reduced NPL entries as we can see in the lower part of this slide, where we see NPL entries which are significantly lower than last year.

In the United Kingdom the quarter has been good. In line with what we had anticipated, our gross operating income -- the net operating income is close to 16% and the net operating income after provisions have grown by 18%. Good cost control. NPL is under control. The credit quality is good and underlying trends are very, very good in the case of the UK.

So the results are based on moderate growth and growth in credit, mortgages are growing by 5% and the core business has grown by 11%, and deposits have grown by 13%. We still see an increase of asset spreads. Liability spreads are compressed. And as a consequence of good management of spreads and loans, we've reached levels of best in class. The jaws remained at 10 points and the margin is four times higher than the provisions made. Therefore, we see a strong capability to keep on generating recurring results in the business.

We had continued to reduce our activities in different segments, the portfolio of [UPLs] now we have EUR7.7 billion, whereas in the past we had EUR15 billion. So the portfolios in run down. UPLs have been reduced significantly.

Regarding credit quality, standards are still very good; NPLs in mortgage almost 1 point better; higher coverage, both in mortgages as well as in UPLs; scant presence in products of greater risk, and a slower share of properties in possession over total mortgages ensured a very good evolution in the UK, and a still favorable outlook for the next few quarters.

In Latin America on the other hand, attributable profit in dollars amounts to EUR1,409 million (sic - see presentation), with a 12% increase in local currency. I'm not including here exchange rates and perimeter.

Incomes -- income has increased by 8%. Costs are almost flat. And we see a 12% increase in attributable profit.

On the right-hand side of the slide we can see the continued good trend in the evolution in business. The quarter has been weaker in Wholesale Banking, as compared to the first quarter of 2009, which was a record quarter.

And we also have to take into account two perimeter changes; the contribution of Venezuela in the first quarter of 2009, and the sale up 15% in Brazil, which is reflected on this part of the slide, the change in the relative weight of minority interests.

In Brazil the profile is similar to that of the other region. We have an attributable profit of $833 million, 47% higher, with a positive impact of exchange rates. In local currency we see a 14% rise, after absorbing the increase in minority interests from last October's IPO. Excluding this, profit would be 30% higher.

Net interest income rose [11%] and fee income hasn't grown that much. We see an impact here of the classification into this line of the tax on services, which was previously recorded in the tax on profit line. Excluding this impact, fee income would increase 8.4%.

Net operating income increased 8%. Provisions although higher than in the first quarter of 2009, and I'll give you more details later about the trends of the credit portfolio. As I was saying before, provisions maintain the trend of the peak reached in the third quarter.

And in the quarterly evolution, we can see, in part, on the right of the slide, we see strong net operating income, both in Retail Banking, and in GBM, and this fed through to net profits, which are on an upward path, although more contained because of reduced gains on financial transactions.

So, more details about Brazil, and the trends there. We see that there is a great difference between individuals and companies. Growth is well, and individuals, but not so good in companies or corporations. So, in the first quarter credit grew by 2% in March, and April credit is growing by 15% at an annual rate. So we do believe that this trend will take us to a 20% levels, or slightly above 20% for the rest of the year.

Liabilities reflect the Bank's policy much better. And investment funds and [site] deposits were growing very well.

We see an increase in margins, as I was saying before, which is a result of volume growth, and also a result of that mix.

Secondly, costs are flat. In Brazil the inflation rate is 4% to 5%, therefore, costs are 4% or 5% below inflation. And we have a good management of risks, with provisions falling since the third quarter of 2009, even though the mix has changed at the expense of corporations, because growth is better in individuals.

NPLs in Brazil -- the NPL ratio in Brazil was lower than in the fourth quarter, and coverage rose to 100%. Net operating income maintained a high capacity to absorb loan loss provisions. NPL entries under the risk premium remained stable, which should result in reduced pressure on provisions. Therefore, the message from Brazil is that we have seen a strong increase in growth in the last few months. We believe that [we'll] be growing at a rate exceeding 20%, and there's a slight trend to improve quality or credit quality.

In Mexico results have a lot to do with the credit card business. The credit card business volume has decreased by 38%. In the slide you'll see consumption -- consumer loans plus credit cards. What's really important for the P&L is the credit card business in Mexico. So we see we see weak lending from the fall, and lower demand in GBM.

We've remained aggressive in costs and risks, we've kept measures launched in the middle of 2008 to reduce customers' card indebtedness.

We do see a significant improvement in risks. 80% of provisions in Mexico had to do with our credit card business. Many different measures have been implemented. We have closed down external channels. We are only offering credit cards through our offices, and, therefore, we have had a significant improvement in the need for provisions. And this lower need for provisions has been consistent quarter after quarter. So we have growth as high as 24% in dollars in the first quarter of 2009, thanks to a lower need to make provisions.

And if we look at the NPL level, we see very levels, with very high coverage. Provisions as a percentage of the net margin used to be as high as 58%, now it's only 35% (sic - see presentation). And risk premiums continue to decrease in a consistent fashion. So, we don't see that much growth.

In the upper part of the slide we see slightly more growth in the next few quarters. The credit line will start growing throughout the year, and we see less pressure on provisions.

Regarding Chile, the first quarter was [mud] -- was influenced by the earthquake, which apparently will have some impact on the GDP, estimated at around 10% to 15%. However, in this country the level of debt is very low and, therefore, the impact will be manageable.

In this environment Santander Chile did not stop providing services in its branch network. The earthquake happened on a Friday and our branches opened the following Monday. It was the only Bank that could do this, thanks to its strong IT platform.

If we look at the key drivers; the impact of the earthquake is a short-term impact, and the earthquake will postpone an increase in interest rates. In the mid-term we believe that credit growth will accelerate. We are estimating double-digit growth rates. Based on the trends we've identified, we see a slightly increase in credit, 7%/8% increase. In global marketing we've seen some decreases. The market is extremely competitive in spreads, and we're not competing with prices.

We have a positive outlook for the rest of the year in credit improvement, and we'll also be generating results with a double-digit growth rate.

I want to give you details about the rest.

(Spoken in Spanish).

The same in deposits, we see deposits continue to increase, and the share in core deposits has grown by 9% over March 2009.

In Corporate Activities we see larger losses than in the first quarter of 2009, mainly due to gains on financial transactions in the first quarter, which were EUR169 million lower than in the first quarter of 2009. This is because of the negative impact of hedging of exchange rates from the appreciation of most currencies against the euro. Also in the first quarter of 2009 this area registered larger net results from the hedging of interest rates, so we have this minus EUR169 million.

And if we look at the secondary segments, Retail Banking was the sustainability of it. Of note in Retail Banking was the sustainability of its results, 14% more than the first quarter of 2009.

Wholesale Banking had a good quarter. Profits grew by 15%. We see growth especially in the equities market; an 82% growth and a good quarter for income from trading; very controlled costs and business as usual, and lower needs for provisions.

And lastly, in Asset Management and Insurance, we have some EUR900 million. In Asset Management where we see an increase in managed volumes, and, therefore, we are in a position to say that the next few quarters will be better.

Now I'm going to hand it over to the CEO.

Well, very briefly I will now sum up our presentation this morning.

As you can see, the first quarter of 2010 has still got a very complex environment, and we have managed to have a profit of EUR2,215 million -- an attributable profit, which is almost 6% higher than the first quarter of 2009. And we've got growth, based on solid revenues from net interest income and fees, based on well managed costs, flat costs, and more stable provisions, as they absorb around 40% of the Group's net operating income.

Also, we have managed to maintain a better credit quality than that of our competitors in the industry, and a lower NPL ratio, with a generic provision that surpassed EUR6,600 million.

In addition, we have further strengthened the Group's structural liquidity thanks to the intense activity both in medium and long-term issuance, and also by capturing deposits, which helped us to improve our basic liquidity ratios.

And also we have increased, in an organic manner, our capital ratios by internal generation of results, by retaining these earnings. And there's been a strong control of risk weighted assets. So this keeps us at a core capital of almost 9%. So, today, Santander is a very solid Bank with a capacity to keep on generating profit.

Well, if we look to the remaining quarter of the year, the first idea is that we have to manage complicated environments with greater differences between the markets, and the different countries or geographies.

On the one hand we have mature markets, where it will be more difficult to accelerate our revenue growth, because the environments still have weak macronic scenarios. They've got strong deleveraging. They've got -- interest rates are very low.

And, as we say, the mature markets are common factors in these markets. As I say, we can define them as mature markets, because on the other hand we have emerging markets. We had a very slow 2009. We are now starting to get growth at levels which are almost pre-crisis growth rate.

If we take Latin America as a reference, clearly, we can say they have a greater macro economic stability, and their low leverage will be key factors behind the boost of these business volumes. We expect that Brazil will be the leader in this growth.

Also we will be able to benefit in the emerging markets from higher interest rates, which we expect to return to pre-crisis levels, before those in the mature economies.

However, apart from all that, in taking into account our scenario, we will also have to contend with the new macro environment, which is related to the new regulatory environment, which is still under debate, but which, without a doubt at all, will mean higher liquidity and capital requirements.

Well, taking this scenario into account, the Santander Group is in a very solid position. I think we have shown this position throughout the presentation this morning, and so I am not going to offer any more details about that.

But what I do want to do is to highlight that our business model remains the same. It has got a quality balance sheet, which has got good provisions, and it has no capital or liquidity restrictions in order to continue to grow, and in order to continue to generate value.

We have three focal points, and I think they're going to be the same as we have been performing over the last few months.

Firstly, to consolidate the evolution of volume that started at the beginning of 2009 in markets, where this is possible, with a very clear recovery of loans in most units, especially Brazil. And, also, with a strong emphasis on attracting deposits and issues, which is one of our clear targets, to gain market share in Retail Banking. So this is our priority for revenue, which it always has been, and this, as I say -- this will be, well, for the remaining quarters this year.

Secondly, we want to maintain the pressure on costs and we want to ensure that the synergies attained, enable us to attract all the value of the integrations in Brazil, UK and Sovereign.

And thirdly, which I think is very basic, we want to maintain and manage risks and recoveries. So we hope that his can be converted into less pressure on provisions, as the recovery of the macro economic environment consolidates in the different economies.

Well, these management drivers have to be applied with a different intensity, and adjustments to each specific market and country, according to the competitive situation in each market, and this will contribute to a better evolution of units, which have been a strong development, which is the case with Brazil, Santander Consumer, and, also, the UK among other markets.

And all this makes me feel confident about the Group's future performance for the next quarter. And I'm sure it's going to be very positive, taking into account that we are in a difficult environment.

And that is what I wanted to say. Thank you very much.

Good morning, we are now going to start the Q&A sessions. First of all, we will get the questions through the web cast, and, if we have time, we will then have the questions from the floor, from the people here.

We're going to get the questions according to different subjects. And the first group of questions, we will refer to strategy and the outlook for the year 2010.

The first question is from Antonio Ramirez. The question is, if we believe there is risk in the fact that the depression is going to get worse in Spain, due to the impact of the increase of Sovereign debt risks, taking into account what the Government said, or the general -- or the economy in general, are we seeing signs of recovery in the Spanish market?

Well, I'm sure this question is in line with the rating that was reduced yesterday, and the analysis and evaluations on the situation of the Spanish economy at the moment and the capacity of the Spanish economy to recover, shall we say, the growth path?

Well, the first thing I'd like to say is that it was bad news what we heard yesterday afternoon; that's obvious. But it's also true to say that reasons why the rating agency that have been working on this rating and to a certain extent these were always included in a February report. The Secretary of State for the Economy analyzes this very well in an article that was published this morning and I would like to recommend you all to read it, because I think to a certain extent it concentrates on this issue and it concentrates on the real situation, the realities of the Spanish economy at the moment.

I think I would like to -- we could base this on five issues and it analyzes each one of these five issues. So I really don't think we could just answer those questions saying if the outlook is good or bad, I think it's a much more complex issue and it needs to be analyzed. So if you read the analysis of Jose Manuel Campa, I think this article is very revealing and I think it's a good analysis of the situation.

And firstly, Standard & Poor's has reduced the Spanish rating and it questions the recovery ability especially due to the level of private indebtedness. It is true to say if we look, a quick snapshot, but if we look in a dynamic situation it's less true.

As we can see this process of the indebted level didn't -- as we said didn't start today or yesterday, it started months ago. And this means that the savings rate is increasing, it's up 11% from last year and it's now at 20% this first quarter. So this is a clear sign that with regard to this specific argument it means that the Spanish economy is on -- back on the road to recovery.

This is a real situation that exists and to a certain extent it weakens the prospects related to whether we have a very high level of private indebtedness.

The second idea that the Secretary of State mentioned -- sorry, that the qualification agency -- the rating agency talks about, they have this argument that can be debated, i.e. exports are doing well.

The weight of the exports on the GDP in Spain was similar to that of other similar economies and also the behavior is doing well. Spain and Germany are the only two countries that are maintaining the export percentage on the GDP. So this argument can be debatable whether we have a low export capacity.

So in Spain I think the economy related to this is improving in real terms and we hope that the economy continues to show slight recovery over the next few months. That's the second argument; that if we look at it dynamically it seems that you can argue that we are, as we say, on the road to recovery.

Thirdly, the third argument of the rating agency is the quantification of the measures or the tax cost of the support for the financial system. The famous FROB, etc.. This is a -- probably a bit too premature to define the quality of the assets and the cost of these, and how this FROB is going to take part in these restructuring ideas. And I really don't think we can anticipate what will happen regarding to that.

And fourthly, the fourth Standard & Poor's analysis is related to the fiscal adjustment and there's a subject here that is possibly the most important question mark we have, which is how the Government is going to consider the fiscal or the tax adjustments. There is a big difference here for growth scenarios between the Government agencies and the agencies' outlooks and this is a very important question. And then we're talking about the non-flexible labor market here in Spain.

What we can say here and what we should here is that, firstly, this acceptance of these issues by the Secretary of State imply that they are aware that these matters have been accepted and that the Government is -- decided to face all these problems in a positive manner.

And I would like to add here and I would like to say that I think it would be very important for these measures to be adopted as quickly as possible, like straight away now, in an urgent manner because -- especially in the issues that we've mentioned these are -- this is very important. That the Secretary of State, which says in this article that the Government is totally convinced that they're going to face up to these problems and that they are working on them to actually achieve their objectives for stable and balanced economy.

While taking this framework into account I think it seems that it would be very negative and pessimistic view to say that the outlooks for the Spanish economy will deteriorate. I think we can say that the outlook seemed to point towards some sort of improvement.

Another question related to the strategic prospects related to the savings banks in Spain. The question (inaudible) -- and the question is if we see that the savings bank has started to lose their market share taking into account the competition in the deposit prices and the liabilities? And if there is some sort of risk, because the price or the cost of these deposits will maintain an upward trend, which is linked to the fact that they will be able to delay or not perform some of the restructuring that has been envisaged for this sector?

Well, it's very soon to talk -- it's too soon to talk about this issue. When we're talking about the intensity of people, who are now trying to capture everyone's deposits that have been carried out by the banks and savings banks, this took place the second half of March. So we don't have any relevant information about these deposits and the impact that these campaigns are having on market share etc.

That's my first idea and the second one is that probably the effect should also be seen over a longer period, because we always have improvements and we have the campaigns to capture deposits. Well, sometimes affects the stability of the institutions, but this has to be looked into correctly.

And I think that probably until after the summer, maybe even later on during the year it will be very difficult to talk about market share and how these campaigns have affected the Bank's market share or the savings bank's market share. We're very content and happy, I'm not going to offer you any figures, because I think it's far too soon, but we are very satisfied and happy with the campaign and we are happy to have decided to carry out this campaign to capture deposits.

But as I said, don't ask me about the figures, because I'm not going to give you them. But our growth in deposits over the first quarter have been like business as usual, because I said the campaign started in the second half of March, so of course it's not been reflected in our figures.

And if this is going to represent in general a growth in the cost -- well, obviously it will have a growth in the cost of these deposits, but I really don't think it's going to end this month or the following month. So I think it would be a bit too frivolous to talk about that. But we do think it will have an effect on the system throughout the year.

The third question related to the UK, from Marco Troiano from Standard & Poor's. The question is if we can update the integration of the UK businesses. And this is a second part, that if we're contemplating some sort of acquisition related to RBS and there's a process that's open?

And I said that obviously we can't necessarily make any of the declarations here, because it's confidential issues.

Well the integration of the Santander UK business, specifically the integration of Bradford & Bingley and Alliance & Leicester, well, the first one has been completely finalized, it is totally integrated. So Bradford & Bingley are totally integrated into our structure, their products, their services. As we said, all their products at the branches it's exactly the same as the Santander, there's no difference between the Santander offers and Bradford & Bingley.

And we are also in an integration of the Alliance & Leicester acquisition. I'm sure you know -- I'm sure the person who asked the question knows fully well that it is pending a process that's going to be started almost immediately, which is going to be [patch] seven, which is a legal process, which means we have to communicate to the clients what is going on. So obviously the possibility of these clients if they want to can change bank. But obviously there are obviously a lot more complex issues that I can't mention here.

But this is issue is being set up I think between now and the next month. And we hope to have totally integrated Alliance & Leicester into two different scenarios; we have a base scenario, which is to have Alliance & Leicester totally integrated at the end of August, which is a basic scenario, as I should say.

And then we also have another scenario, which is a bit more complex, because obviously certain problems may arise, when we're talking about the integration process. Also due to the legal aspects, which may mean there could be a delay of one or two months to this integration, i.e. so it would be integrated in September or October.

But we do feel in a very comfortable area and we would like to say that the Alliance & Leicester integration process will happen at the second part of -- the first -- in the second semester, sorry, this year. Everything has been done well and we do not envisage any difficulties beyond normal difficulties that arise, minor ones, which normally take place in these complex processes like this type of integration between banks.

Another question from Matteo [Ramenghi] from UBS, which refers to the UK, but I think you've actually just answered that, related to the integration and the non-disclosure policy.

But he also asks about the fact the aggregated profit of Latin America and the UK for once is more than just the Continental Europe, and do you think this trend is going to continue like that? And how do we think there will be the behavior for these units that are giving increasing profits for this year or 2011?

Well, obviously this depends on what happens in the macro variables and so the evolution of different economies will be affected by the exchange rates. Take into account the current scenario and this is all -- take into account what we said this morning in the presentation.

What we said this morning it's pretty obvious; that the emerging market in normal situations is that they will show more growth than the mature markets. A bit more growth in everything, in volume -- sorry in results. Why? Because following this logic the relative weight of the Latin American units in Brazil and the other units we have in Latin America is still a growing trend if we maintain, say, with more moderate growth, slower growth in our mature markets, which is what I explained.

So following this logic this implies in specific scenarios the behavior of the different economies, so obviously the logic is that they will have more weight for the rest of the year than they have shown for the beginning of the year.

In the UK, well, I think the logics are different there. The logics are not because the British market is going to grow more than an emerging market or the modern market; no, because the British market grows like a mature market, i.e. very little. But the relative weight of the UK market, well obviously it's very strong, we are consolidating the market there, we're gaining market share. And in the performance of our Santander UK unit in relation to the competition in the UK it means that we are well over performing. So we have a super performance.

So we're doing a lot better than the other banks in the UK. So we think this unit is going to grow relatively well and it will have more weight for 2010 and 2011 in the Santander's results.

Well, talking to financial management and portfolios etc. there's quite a lot of questions related to this and I'm going to try and summarize these in four major points related to the down grade impact, downgrading of the rating. These come from analysts, Antonio Ramirez, Sergio Gamez, Ignacio Cerezo from JP, Carlos Peixoto from BPI, Marco Troiano from SNP, Britta Schmidt from Autonomous and Arturo Frias from Evolution.

So the first questions would be what is the impact in the downgrading of Sovereign? So in Spain and the spreads and the cost of the funding for Portugal and Spain and for the bonds that we have in these two areas, the cost of the funding that was expected for the year 2011/2012? That's one group of questions.

And then could we offer a breakdown of the expenditure that we have for the different debts, Spain, Portugal, Greece, Ireland and Italy, which I think are the main countries mentioned. So could you talk about our exposure?

And the third question where we have our ALCO portfolio, have we got [hedged] maturity or whatever, I think we've dealt with this in other occasions, but if you'd like to mention that a little bit further this morning?

And the fourth one -- fourth area, [notably about] the size of the ALCO portfolio and also the contribution to the financial results. So please, what is the impact of these movements that we've talked about? So I think Santiago Lopez also talks about the weight of this? Thank you very much.

Okay I will start with what [Angel] mentioned, the impact of the Sovereign downgrading or downgrade. We can see three different impacts, a direct impact on the valuation of portfolios that we have in our different balance sheets for the different Sovereign bonds, therefore the downgrade.

And as far if there's an increasing yield it will have an impact. The impact so far if you look at the yields of Sovereign debt, this morning Sovereign debt in Spain one to 10 years was at around 415. In the past six years it ranged from 380 to 390, so the yield hasn't changed significantly. In Germany yields have decreased, portfolios have not been hard hit by this.

However, there is another area where we do see an impact on funding and I can share my opinion with you. I don't have any hard data. If we look back in time, I mean in the past three months, if we were to compare a bank with our same rating operating -- if we were to compare our sales to a similar bank, carrying activities in a jurisdiction that is not considered to have a Sovereign spread. We're paying an extra spread from 10 to 30 basis points depending on the time. This is, indeed, a direct cost. We have issued EUR15 million so far this year. So this, of course, would entail a cost of EUR30 million per year in our issues before taxes -- funding costs.

And the third area where we see the greatest impact of the downgrade, the most relevant one, we're paying this in terms of share price. Our earnings per share are significantly lower than that of our competitors in Europe and a perception of a greater risk, of course, impacts the capital costs right away. And this is where we've seen the greatest impact so far, share price.

And as to the breakdown on our exposure in the presentation, in some of the slides we've shown there is a balance sheet showing portfolio available for sale. We have -- all of our portfolios are available for share -- for sale sorry. We have EUR77 billion for sale -- portfolios available for sale, for the whole Group EUR77 billion.

That portfolio has Spanish debt amounting to EUR24 billion. EUR5 million in debt are from other European Union countries; EUR3.3 million Portugal. It's page 51 I've just been told; EUR24 million Spain, EUR5 million rest of the European Union, EUR3.3 million Portugal, EUR0.6 mill UK, less than EUR200 million in Greece and that's all; the rest of the European Union EUR600 million.

We have foreign public debt amounting to EUR20 billion, EUR30 million in Brazil, EUR3 million Mexico, EUR1.8 million the US, EUR0.4 million Switzerland, EUR4 million Chile; marginal figures.

Additionally in this EUR77 billion we have the portfolio. I mentioned in my presentation A&L; EUR9 billion, GBP7.7 billion if I remember well. And additionally, we have the repurchase of asset backed bonds and our own paper. We don't have hedged maturity and all --

(Technical difficulties).

And the result of that portfolio have to do with the portfolio's yield compared to the official interest rate published or announced by the different central banks.

As to the size of the portfolio, I've already mentioned it. I have mentioned the instrument, the public -- the instruments, public debt and asset backed bonds and others. We have securitization rather.

The lowest portfolio is in the euro area, one, 1.5 years. I'm referring to our stake, 2.5 years in Brazil. Apparently -- more or less, each sovereign bond is purchased for the corresponding ALCO portfolio. We work through subsidiary companies and they're exposed to the sovereign.

As to the contribution to the financial margin or to the net interest revenue, in the euro area we're talking about some 150 basis points to 100 basis points. In Brazil 300 basis points over the volume of the portfolio, and in Mexico some 200 basis points.

And I believe I've answered all the questions, have I?

From the perspective of the net interest margin we have questions from Santiago Lopez Dias from Credit Suisse, Marco Troiano and Luis Pena from JB Capital, a question regarding the evolution of this margin.

What's the outlook for this margin? How is it possible that the margin continues to grow whilst the credit portfolio is more or less flat? Do we believe it will continue to grow in the future, this margin? What do we expect from volumes -- volume increase in the future?

And a question regarding the net interest margin, what will happen if we see an increase of 10 basis points?

I understand all of these questions refer to Spain?

Yes, I believe they're referring to Spain, although it's not mentioned. What's our outlook for the future?

The net interest margin; we all know what happened with our mortgage portfolio. It has been revalued. It is revalued or re-appreciated once every year, two months after the update of the official interest rate. If you look at the evolution of the interest rate in Spain in one year, you will see that the end of the re-appreciation will take place in May/June this year. The interest rate in Spain was very low in April/May last year, so we're reaching the last stage of our portfolio re-appreciation.

However, there is a margin increase in the business world. A significant increase in margins and this helps us to understand the evolution of the net interest margin. Of course, mortgages yield less and less money. In the business world re-appreciation margins are increasingly higher.

Then we have the world of deposits where margins have decreased and will continue to decrease. The CEO has mentioned the situation in our deposit market and we will see a further decrease in margins in deposits.

We see no credit increase in an economy that's becoming deleveraged. Very clearly, where savings rates are increase we do expect strong growth in deposits. However, this will have a limited impact, because spreads are falling, sensitivity to financial margins, interest rate increases. I'm both referring to European Central Bank rate increases or to a higher slope in the curve between the year and the day. Probably after the second quarter we will see significant improvements in the net interest revenue or margin.

I did mention an ALCO portfolio of some EUR20 million in bonds and we have many current accounts at zero and bonds in our portfolio, so an interest rate increase will automatically help the recovery of this margin.

From the perspective of funding, there's a question from [Anna Stephens] from [Insight]. What percentage of the funding has been completed throughout the year? I believe this was explained in the presentation when we talked about the generation of liquidity and liquidity needs and requirements.

There is a question about the short-term here. Do you have anything to say to us Antonio about short-term exposures? And then there are many questions regarding the cost of deposits, the new campaign; Britta Schmidt, Sergio Gamez from Merrill Lynch, Miguel Angel Alcala and Chandra from Barclays ask this question.

As I mentioned before, we won't be disclosing data about volumes and costs until later this year, so we don't have much to add to this question.

Do you have anything to say about the short-term?

Yes, the short-term, in what context?

Well, if I understand the question right, the only business which is rather significant, we have a repo and asset acquisition business, which is in the negotiation portfolio. It is a business with customers. We purchased assets temporarily and we transfer them in repos.

And then we have another business in the UK of GBP15 million/GBP20 million. They operate in the money markets from one day to three months in the UK market. The behavior has been good. Spreads are higher than historical spreads but there's nothing else to add. As far as I know, no significant changes have taken place in this market in the UK.

We have a general question from Antonio Ramirez from Keefe. What do we think about the competition -- the competitive environment in deposits? How will it evolve, especially in 2010 and in the mid-term?

I believe this question has already been answered. This dates back to 1.5 months ago. This was launched 45 days ago approximately and it will continue. We will have the chance to tackle this issue in the other meetings and presentations. It started out with a strong competition and the campaign will continue.

And some questions regarding capital, and Miguel Angel Alcala wants to have a question about the impact of Basel III, and this was specified when we presented the fourth quarter results. We have no new developments.

He mentions the impact on actual terms. We have no new developments in coverages. Perhaps Antonio you have something else to add?

Yes, what we've said so far, we have coverages in sterling pounds. We are in Chilean currency and in the Mexican currency. Both in book value and results. I did refer to the corporate center with derivatives with those coverages.

And there's a question from Antonio Ramirez from Keefe regarding the capital. What's the capital buffer that you considered you should have to be able to tackle acquisitions, or under which circumstances would we have to increase our capital to conduct an acquisition -- for an acquisition?

I believe we stated this very clearly. We have no intention to carry out a capital increase.

We have a question from Raoul Leonard from RBS. Why has the trading portfolio of the Group increased? This is what Jose Antonio explained and -- the different positions of Sovereign risks.

We have a question from Sergio Gamez. Could you break down those EUR331 million you have in other results, or negative results or provisions amounting to EUR331 million? Could you give us more details about that provision?

The portfolio is available for sale. As I've said before, we had increases in the last year and I did mention there's a repurchase of securitization bonds and reinvestments in Brazil. And we did a capital increase in Brazil in the short-term. These are the main reasons.

EUR331 million other results or other revenues, I believe that most of them correspond to Brazil and this is related to certain contingencies, which in turn are related to downsizing initiatives, which are a result of the integration. And therefore, contingencies are generated. During this quarter Brazil, in the line of other results, 80% to 90% of those other results correspond to Brazil downsizings due to possible future contingencies.

To financial management there's a question regarding the exposure, and we have already answered that question. And what about the idea of the size of our portfolio, will it increase, will it remain as it is, will it decrease? Irma Garrido asks the same questions regarding exposure and funding, and I believe these questions have been answered.

And Javier Bernat for Caja Madrid posed -- asked a question about the weight of minority funding on the balance sheet of Retail, and a question regarding the evolution of assets at risk? How do we think the growth will evolve, above 5% or less than 5%? What units will grow the most?

Okay portfolios, the situation is quite stable -- and the balance sheet -- I'm now referring to the balance sheet, durations or maturities are slightly negative in the euro zone.

The premise we use for core deposits is a 4.5 year maturity, so we are in a slightly negative area, with the exception Santander Consumer Finance, which usually has a positive duration. I'm referring to the value of the equity with a positive evolution for two years, and in other cases slightly negative. That has been our policy, relatively stable. So the portfolio size, based on the maturity of the portfolio, it's around three years, portfolios amounting to [half] the volume of current accounts, to simplify things.

Regarding assets at risk, beyond the changes stemming from default probabilities due to cyclic issues, I believe the CEO has mentioned that our growth will be based, hopefully, on emerging markets.

Our credit portfolios, EUR107 billion in the portfolio, only EUR100,000 come from Latin America. So we see a significant increase of 20% in Latin America, which is reflected on a 2% growth of the Group's total portfolio, 2% or 3% growth. If this were so in the rest of the Group, we see low growth rate. It is to be expected to see -- increase in assets at risk based on the hypothesis that in the emerging markets we will have increases of up to 20%.

Regarding Retail funding, we did present some figures in one of the slides. A ratio was mentioned; loan to deposits. I don't really like this ratio by the way, because I'd rather use assets, because you're funding assets and not loans.

But anyway, growth in deposits as we showed, we've grown by EUR30 billion and no growth in credit, so the ratio is increasing. Loan to deposit is -- the loan to deposit ratio is decreasing.

The Bank's policy has been very clear in the past two years. I do believe we mentioned this, and this has been reflected in our figures.

More questions regarding risks. We have a great amount of questions, which in my opinion were answered in the presentation. However, I'm going to read them; Britta Schmidt, Ignacio Cerezo from JPMorgan and Miguel Angel Alcala from BBVA ask about the coverage and the amount of substandard loans, recent movements, the amount of general or generic provisions in Spain, how much of it has been used, doubtful assets, substandard assets? All of these questions have been answered during the presentation in two slides.

And David Vaamonde from Fidentiis asked why general provisions have increased in Continental Europe?

It has really increased in the UK. We have a currency effect there and a bit of additional provisions, but we have to take into account the currency effect, which is very important in the first quarter of this year.

The result of real estate assets acquired or foreclosed, these questions in my opinion have been answered. 14.2% is the balance of loans to real estate developers, 8% is the NPL ratio in these loans.

And there's another question, the evolution of our NPL, what's our uptake on that? What's the outlook for the NPL ratio? What will happen in the future? Will there be differences between one territory or one region or another?

Well, this question is always an exciting question, to know what the situation of the NPL ratio was in December 31, 2010 and what will happen? The level is now 3.5% if I'm not mistaken, for the whole Group. In Spain 3.59% and in the whole Group 3.21%, I believe -- 3.20%-something; 3.34%. So probably -- but this is just guesswork of course, this 3.34% won't -- we do believe that we won't reach a 4% before the end of 2010 for the Group. And in Spain, where we have 3.59%, we will reach more or less a 4% level by the end of the year. So we do expect a slight growth, but moderate growth.

There's a question from David Vaamonde regarding growth entries -- NPL entries. Every quarter we have published information about this and we've been doing so since the first quarter of 2008.

Patrick [Leders] would like to, would like us to describe the one-off we had in NPL in Spain in the fourth quarter. It was a one-off and we did not really describe it specifically, because we don't provide -- we don't ever provide customer details.

Then we have three questions regarding intermediation margins, the network -- the branch network net interest revenue. If volumes have decreased why the parameters have increased? In spite of the war on deposits the net interest income has increased in Spain.

And there's another question from Barclays, why the net interest margin has increased -- no, the spread has decreased and the financial -- the net interest revenue of assets has increased. You did explain this in your presentation didn't you?

I did explain it. There's a drop in volumes; volumes have decreased and -- it increases, because in the denominator volumes have decreased and, therefore, the ratio increases.

The underlying trends are a significant improvement of this net interest margin in consumption and in the business world. There's a slight improvement in mortgages, but not so high. We've seen some improvements in spreads in the past two years of 150 basis points. We're close to spreads of 300 basis points. This is on the good side.

On the bad side we see a decrease in interest revenues in deposits. But let me remind you that the campaigns were launched on March 20, not that long ago. Some other banks have been very aggressive in their deposit campaigns, but we didn't do that, we didn't follow suit.

And regarding your question -- the ratio questions, volumes have decreased and therefore ratios change.

We only have five minutes left so I'll try to summarize. We have several questions regarding Brazil from analysts. So I have three groups of questions; one group of questions has to do with volumes.

We have that 20% -- we believe that volumes will increase by 20% in Brazil. Do these forecasts take into account interest rate increases or not? What are the basis for these forecasts?

Two, why have we seen an increase of a risk premium in Brazil during this quarter.

And third, tax rates which have been reduced in Brazil, why is it a lower tax rate. What can we expect for the future?

I believe with this I have summarized the 12 questions or more we have received regarding Brazil.

Regarding volumes I did mention this in my presentation. Our estimations are based on what we are seeing on observations, we have not observed any growth in February, we have seen a significant increase in March and April however. And looking forward we do see continued improvement. In March/April we've seen a 50% increase.

And regarding risk premiums, we have been growing at a significant rate with individuals -- with individual customers. However, we were losing rate with companies. Of course, individuals have a higher risk premium and this accounts for the stability of the risk premium. So it remained stable. But you're right, there's a change in the mix that contributes to explain this evolution.

As to the tax rate, I did mention the ISS which was not netted based on taxes and then since the third quarter, if I remember well, of 2009, the tax rate has remained more or less stable with the exception of those EUR150 million, which have not been accounted as commissions or fees or taxes. This is a write-off of a goodwill, which started on the second quarter of 2009.

So to conclude we have some questions from the UK. Are we considering a listing in the UK for UBS?

And could you give us more details about the competitive environment, why have we seen an increase in NPL ratios? What is the evolution of NPL ratios in the UK? And what's the competitive environment for assets and liabilities? Three questions from Jaime Becerril, Redburn, UBS and Andrew Lim from Matrix.

With, regarding to listing there's nothing specific to say about that. With regard to the growth of the NPLs it's not particularly significant, almost not noticeable when we see that the NPL rate -- we compare it to different products, with a slight mix, some related to companies which comes from Alliance & Leicester, which when you look into great detail -- well, [there's such] information.

But there's nothing underlying that entails a change in trends from what we've been noticing over the last few quarters. So I think the situation's pretty much the same. We're talking about quality, and as I say, we're just talking about the NPLs as we've already mentioned.

With regard to the competitive environment, well there's no big changes there. There's a little bit more activity in some of the big British banks as a result also of the improvement of their particular situation. There's been very aggressive advertising campaigns especially related to mortgages which over the last few years -- since 2007 we hadn't experienced these campaigns. And there's also been very important campaigns based on savings.

I think these are the -- well, by simplifying or summarizing, these are the two major issues that we are seeing, which is a change in the competitive environment and I think they're quite reasonable. I think the UK is recovering in an economic financial point of view and so, therefore, the banks are also recovering after their reorganization, the clean-up process. And as I say, we say that we think we'll be competitive in all the different market segments.

Well, I'm afraid there is no time for any further questions. I think we've managed to cover all the questions. But anyway, Investor Relations will deal with any further questions you may have. I can see there's been comments about revenue from Wholesale Banking but, as I say, Investor Relations department will cover these issues.

Well, thank you all very much for listening to our results for this first quarter. Thank you.

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.