Javier Marín Romano - Executive Director, Chairman of Public Policy Committee, Member of Executive Committee and Member of International Committee José Antonio Alvarez Alvarez - Executive Vice President of Financial Management & Investor Relations Division José Manuel Campa - Head of Investor Relations Javier Marín Romano: Hello, good morning, and welcome to the Third Quarter Results Presentation. Let me begin just with some highlights of the quarter. The group developed its business in the third quarter in an environment of a slower growth. We've been -- we've seen growth that is coming a little bit more sluggish in most of the economies where we have developed our -- where we developed our business. As a result, interest rates continued to trend down. We've seen a decrease in interest rates in the Eurozone, basically the EURIBOR, which are -- to which they have referred most of our credits in Poland, Mexico and Chile, and they remain at historic lows in most of the economies. In this environment, and as I commented last time, the group has been focused on 2 aspects: on one side, increased profits and profitability, implementing measures that enable us to gain market share in key markets and in key segments and products, and continue to improve efficiency and productivity; second, to maintain a solid, liquid and low-risk balance sheet. In this context, the main features in the third quarter were, on one side, attributable profits that continued its upward trend, absorbing the usual seasonal aspects of the third quarter in revenues and costs, the basic lines of the P&L consolidated trends of the last few quarters. Volumes reflect the group's strategy in segments, products and countries, rises -- we see a rise in lending in 8 out of our 10 core markets. And also, in funds, we maintained the focus on reducing the funding cost. In risks, the nonperforming loan ratio dropped for the third consecutive quarter, and the cost of credit continued to improve. We improved also the loan-to-deposit to 112%, maintaining a very comfortable position in liquidity, and we have an LCR of more than 100%. We also feel very comfortable in capital with our core equity Tier 1 of 11.44% and a total capital ratio of 12.6% following a sharp rise in the third quarter. In short, the balance sheet and capital, we feel they are very adequate for our business model, as the recent AQR and stress tests have shown. I will now develop each point. With respect to the profit, the third quarter attributable profit of -- we had of EUR 1.6 billion. This is the highest for the last 10 quarters, and it's increasing 10% over the previous quarter; profit for the first month -- 9 months of EUR 4.36 billion, up 32% year-on-year. Should we exclude the exchange rate effect, growth would have been higher at 45%. From a qualitative point of view, the profit is of great quality, fueled by net interest income and fee income, which represent 92% of our total gross income. The rise was nonrecurring as there were no capital gains in the third quarter from corporate operations, and those in the first half have no impacts on profit, as we showed on the previous presentations. In short, a quarter which signals another step towards profit normalization and the group's higher profitability. Gross income rose in the third quarter, the highest for our quarter in the last 2 years. Net interest income consolidated in the quarter, absorbing some of the macroeconomic slowdown in some countries and interest rate cuts that I mentioned before. We have a varied evolution by unit. The strongest growth was in Spain, U.K., Mexico and Argentina. On the other hand, we had a fall in Brazil, basically where the change of mix toward low risk products had an impact on net interest income, as José Antonio Álvarez will elaborate later; and in Chile, where we have reduced revenues due to our lower inflation. Fee income was unchanged in the quarter, which should be seen positively, as the third quarter tends to be the lowest due to seasonal factors in Europe and in wholesale activity and because regulatory effects continued to be absorbed in various unit, for example, the interchange fees in Spain or insurance in Chile. Lastly, trading gains rose strongly quarter-on-quarter, primarily because the third quarter is compared with a very low second quarter, some EUR 300 million less than the average of the 5 previous quarters, and furthermore, we've managed the portfolios of interest rates and exchange rates hedging, especially in Brazil, where we saw lots of volatility pre- and postelection. With respect to cost, we maintained a good trend in costs with a varied evolution by units. Our first block of countries, where costs rose in line with inflation or below it, of note were Spain and Brazil, with falls of 7% and 5% respectively, in real terms. In Brazil, we have, in this quarter, 2 impacts. One is the consolidation of GetNet that incorporates EUR 90 million of costs. So obviously, this change of perimeter brings EUR 90 million into the country. And on top of this, we have the review of the agreement with the trade unions with respect to salaries, with an increase of 9%. However, we still think that leaving aside GetNet, Brazil would be flat in terms of costs this year. United Kingdom, where we see it's combining investments in its business transformation plan with some efficiency -- with efficiency plan. Mexico and Argentina's costs increased because of the branch expansion and improvements in commercial activity -- in commercial capacity. We can include Chile here in the same line. And lastly, we have the U.S., where costs rose significantly due to the effort made in improving the franchise and adapting to the new -- to the regulatory requirements. We have USD 100 million of more costs in -- basically in new hirings, in the staffing our Santander Holding in the U.S. in order to enhance our governance and our enterprise-wide risk management. In the short run, in the U.S., as I mentioned, this means an increase in the number of employees as well as higher internal and some consultancy costs. Across the U.S., we hired more than 400 people, developing new IT platforms, which meant an increase, as I mentioned before, of USD 100 million. In short, I believe we have a very good performance at the costs at -- in costs at the group level, which are beginning to reflect the measures taken under the efficiency and productivity plan for 2014 through 2016, and we are surpassing the initial forecast. As I had anticipated in the last presentation, we are exceeding our targets for cost savings. The quick implementation of efficiency measures in the main units of the group enabled us to achieve, in the first 9 months, the figure for the whole 2014. This has led us to reevaluate the plan's impact and progress, which is reflected in new targets: increase the amount to EUR 1 billion for 2014 compared to the EUR 750 million initially envisaged, and to EUR 2 billion for the period 2014 through 2016 compared to the EUR 1.5 billion initially envisaged. In 2014, savings will come from, basically, EUR 220 million synergies from the mergers in Spain and Poland. Almost EUR 800 million remaining will come from local efficiency plans, mainly focused in the review of distribution models and intermediate and central structures. By units, savings are concentrated mainly in Brazil and Spain; to a lesser extent, in central services and the rest of the countries. With these plans, we aim to increase cost in the coming years below inflation while we have a bundle of savings, cost efficiency measures on running the bank at the same time we continue to invest in our franchise. We hope to maintain our differential advantage with the sector in terms of efficiency that is currently 17 percentage points, where cost-to-income ratio sits -- stands at 47% compared to our peers at 64%. Moving on to the quality of our credit. Provisions in the first 9 months were 10% lower year-on-year, excluding the foreign exchange impact, largely due to Spain, Brazil, the U.K. and Portugal. The rise in the third quarter came basically from Santander Consumer U.S. as provisions on the rest -- in the rest of the units of the group as a whole declined, especially in Spain and Portugal. Santander Consumer U.S. evolution reflects the higher new lending and the rise in the average portfolio, close to 30% over 2013 in a type of business with high income but high provisions. Moreover, coverage has been rising quarter-after-quarter to 296%. It was at 240% in December last year. The cost of credit dropped to 1.52% in 2014 from 1.89% in September 2013. Should we exclude Santander Consumer U.S., the cost of credit at the group level would be sitting now at 1.26%. In short, the income statement has performed well quarter-on-quarter and year-on-year. In the quarter, we see growth in profit backed by higher gross income. Year-on-year, and eliminating the exchange rate impact, we maintain a textbook income statement, where commercial revenues are growing at double that of costs, provisions are falling and profits increasing at high double-digit rates. Moreover, and as I said at the beginning, the profit for the first 9 months incorporates no impact of the capital gains that materialized in the first half as nonrecurring funds were established in the same period for restructuring costs, deterioration of intangibles and other provisions. It also does not include the capital gains that will be generated in the strategic agreements reached in Custody and Insurance of Consumer business in Europe, which we expect to materialize in the fourth quarter. Moving on to the balance sheet, and beginning by lending. The recovery since the beginning of the year kept up in the third quarter. In emerging markets, there was widespread increase, very notably in Brazil, where you should remember that first quarter trade was declining, second quarter was stable, and we see this quarter an increase of 4% in lending in Brazil. Loans to companies rose in the U.K. Poland reflects the success of the commercial campaigns and the launch of the new products. Santander Consumer Finance continues to gain market share and grow its book. We see a rise of 1% in the U.S. should -- excluding the sale of unproductive assets and some securitizations. And lastly, in Spain, we saw lending growing in the year, although there was a slight fall due to seasonal factors, and Portugal reflects a market that is basically deleveraging. With respect to on-balance and off-balance deposits on funds, all units performed very well, being the result of joint management of cost control and marketing of products tailored to each market. Poland, we had a big success of the campaign to increase the number of customers, especially on the affluent segment, improving market share and our liquidity ratios. More than 70,000 new customers were on-boarded in Poland due to this campaign with time deposits. In Portugal, we benefited from some flight [ph] quality with the events around the Banco Espirito Santo. In Chile, Mexico, the U.S. and Brazil, we also very grew very strongly in the quarter. And lastly, in Spain, we combine higher volumes with a sharp improvement in the cost of deposits, as José Antonio will later show. With regards to credit quality, the total nonperforming loan ratio is 5.28%. It dropped, for the third quarter running, 17 basis points in the quarter and 33 basis points in December. Of note was a further fall in the net nonperforming loan interest, which, in the first 9 months, were 54% lower than in the same period of 2013, especially in Spain, where new nonperforming loan entries gained 94% below the same period of 2013. Coverage increased to 68%. A high level for the mix of our credit portfolio, where around 60% of the loans have real warranties, warranties which will require lower coverage. And the units with the lowest level of real warranties, such as loans specializing in consumer credit, Brazil or Mexico, have coverage levels close or above 100%. If we take a look to the largest 4 units, we see that they all improved their nonperforming loan ratios in the third quarter. Spain fell a little for the second consecutive quarter. The U.K., U.S. and Brazil have ratios well below those in September 2013 after further improvements in the third quarter. The rest of units were stable or better throughout the year, particularly Poland. In short, we are seeing a good trend in all parameters related to credit quality, although there is still room for improvement especially in Spain. Liquidity and capital have also continued to improve in the third quarter. No news in liquidity, where we remain very comfortable, both in terms of loan-to-deposit ratio, as well as the LCR, which we easily met and very ahead of the schedule. We see a sharp rise in capital in core equity Tier 1, phase-in, to 11.44%, with a stable leveraging ratio -- leverage ratio of 4.5%. The rise of 52 basis points in the core equity Tier 1 in the third quarter was due equally to the organic generation of capital, on one side, and on the other, the issuance of additional Tier 2 -- Tier 1, sorry, in September. With respect to the fully loaded, our forecast is to end the year with a core equity Tier 1 of between 8.5% and 8.6%, a little below our initial projection, which you remember that we were expecting to close around 9% due to the materialization of some corporate operations, which, overall, took away around 30 basis points, mainly GetNet in Brazil, the global integration of Santander Consumer U.S. and the entry expected during the fourth quarter of GE Money in the Nordics. We are very comfortable with our levels of capital and our capacity of organic generation, as underscored by the performance of the last quarters and our capacity to withstand adverse scenarios, as reflected in the recent comprehensive assessment and stress test of the ECB and the EBA. Moving to this exercise. This -- it has been a very, very rigorous, exhaustive and demanding exercise, and was done basically in order to reestablish confidence in the banking sectors -- sector in creating transparency, control and providing more credibility to the financial institutions. It was obviously done as a prior step to the ECB assuming supervision of Eurozone banks that is taking place today. The group results basically reflect good management and balance sheet quality as well as the diversification benefits. In the AQR, the impact was 4 basis points, which reflect a very accurate evaluation of assets and adequate provisions. In the stress test baseline, the impact, we increased our capital 161 basis points, which shows and confirms our strong organic capital generation. On the adverse scenario, the impact was 143 basis points, which was basically the lowest capital destruction in an adverse scenario over our peers, which is definitely showing the benefits of our business model, very focus-oriented and very commercial, and the diversification of the group that is absolutely unique. Let me now look in more detail to our results of each of the exercises. The AQR was a comprehensive and detailed assessment of the credit and market exposures of banks in order to assess that the provisions and collateral evaluations are adequate. 16 of the group's portfolios in 7 countries were reviewed and in different segments: mortgages, companies, consumer, corporate, et cetera, which represented more than 50% of our risk-weighted assets. The adjustments identified in the group is the lowest among our international peers and has an impact of only 4 basis points on Grupo Santander core equity Tier 1 ratio, very far from the average 40 basis points for all the banks analyzed. In the case of our peers, it will be 23 basis points, 6x our adjustment. In absolute terms, the impact is also the lowest, EUR 200 million, of which EUR 50 million was due to portfolio reviews already provisioned in the first quarter and the rest due to extrapolation that does not need to be provisioned. Moreover, the methodology of the exercise did not allow us to consider excess collective provisions, which were around EUR 1.5 billion only in the analyzed portfolios. In short, this marginal impact on the group shows that we have correctly classified the risks, and coverage is adequate. In addition, in terms of Level 3 assets, we also have the lowest weight in our balance sheet, 0.13% of assets compared to other big European banks. This underscores the low complexity of our balance sheet, reflecting our commercial business model. With respect to the stress test, we also obtained very good results in the Basel stress tests to measure a hypothetical evolution of the institution, the baseline and adverse scenarios. We're among the entities generating the most capital in the baseline scenario and the one with the least negative effect in the adverse scenario. In the baseline scenario, the group increased its capital ratio by 160 basis points to 12%. In the adverse scenario, the impact on Santander is 140 basis points to 9%, which is 350 basis points above the minimum required. The impact is very far from the average one of the banks analyzed, which is 300 basis points, and on our peers' 260 basis points. In both the scenarios, Santander emerges strengthened and is one of the banks with the highest capital surplus in 2016. The baseline scenario, the surplus of capital over the 8% minimum requirement is about EUR 22 billion. In the adverse scenario, the group surpasses by almost EUR 20 billion their minimum requirements of 5.5%. These comments on the phase-in can be extrapolated in the evolution shown in the fully loaded. In the baseline scenario, the capital ratio increased 290 basis points, being one of the banks that generates the most capital in this exercise. In the adverse scenario, we are, by far, the bank with the least impact, 33 basis points versus a range of 100 to 400 basis points among our peers. In short, the low impact clearly improves our relative position and shows the greater capacity of our model to withstand adverse market situations due to our lower business -- low-risk business model and great business diversification. José Antonio, will you join me to explain the areas? José Antonio Alvarez Alvarez: Thank you, Javier. And let me do elaborate on the different units on the different geographies, as we do every quarter, and to focus in the main points. Starting with the -- where the profits come from, the distribution of the group profits by geographic area. We have 3 units, U.K., Brazil and Spain, that represent more than 50% of the profits. The U.S. generate 9% of the profits; and other 4 countries, Mexico, Chile, Poland and Germany, between 4% and 8% each. There is not that many changes that are in this -- high at this time, but the one that in Spain is recovering in some way in the group profits. Starting with Spain. When I focus on the activity side and while the third quarter is the lowest season in Spain, but having said that, we produce -- we underwrite new mortgages and create 2 companies, as the next slide will show. The focus -- the other focus on the liability side has been introduced in deposit costs. This has been a trend. You see the new time deposit cost is running at 0.55%, and it is fairly stable now. In terms of results, we have -- we continue to have good trends in net interest income, growing 1.5% quarter-on-quarter and 9% year-on-year, with a very good basic mainly, in the good evolution of deposit cost that we are starting to see some margin compression on the asset side, as expected with increased competition in the market. On the other side, the fee income, trading gains and dividends were affected by seasonal factors in wholesale activity, nothing to do with the retail business. That is performing, more or less, in line with the previous quarters. The cost fell as a result of the integration. We announced to you this. And the loan loss provisions continued to normalize, as we were expecting and we were communicating to you in previous quarters. Going to the volumes. Well, we are performing in the market in terms of lending. It stood out in the quarter. The lending fell EUR 1.6 billion in the quarter, but compared with December, we are one of the few entities that are growing, and we expect to finish the year growing in line with what we announced in the previous quarters. Corporate new lending, good growth strongly; SMEs under new lending, 34% up in the first 9 months backed by Santander Advance that we launched back in March, actually high new lending to large companies plus 23% in the 9 month 2013. In deposits, the demand, beside deposits, grew EUR 5.2 billion. Some mutual funds also rose. Loan-to-deposit improved to 85%. So generally speaking, good trends in activity. We are gaining market share on the asset side and in mutual funds, as you can see in the numbers. In relation with the credit quality, one of the main issues in Spain, no news here, but the one that the net of new entries were 94% lower than in the first 9 month of 2013. That is good news, mainly looking at the future loan loss provisions that we need to phase in, in coming quarters. When you see the growth centrally, you have the number, you have all the numbers heading in the right direction, companies with a real estate focus falling and mortgages continued to fall. And in consumer lending, the new entries continued to fall, so good news in this side. That would relate into the P&L in the coming quarters. Going to Portugal. Well, on the macroeconomic front, a little bit better profits. The GDP is growing again. Our bank in Portugal, as you know, is the healthiest one in the country with high solvency, better credit quality than the average and producing steady profits through the crisis. In relation with activity, we have a strong growth in deposits. This is due to flight to quality, due to the events that have happened in the quarter in the country. In a deleveraging environment, we are growing -- we are gaining market share in lending in the last 2 months, both in individual and in companies. In terms of profits, we have stable commercial revenues, the cost base well under control, some fall in provisions with improving credit quality, and we expect the provision -- the profits continue to normalize in the coming quarters. In Poland, 2 main points to highlight here. The first one is the strong growth in volumes in the quarter, both in loans and deposits. In deposits, we launched a campaign that produced this -- such a big -- I believe, in the deposits. The loan charges are growing nicely, 2% quarter-on-quarter, most notably in consumer credit, leasing and factoring [ph]. In results, probably, the numbers that -- are not showing the underlying trends because last year, we got significant trading gains. This year, the underlying revenues are growing. The commercial revenues are growing very nicely. The -- compared with the first -- the second quarter, you have some one-off dividends in the second quarter. With stable costs and provisions, the credit quality is good. And in short, the unit continues to post better quality results than those of the peers. We're outperforming the peers in an increasing difficult environment due to lower rates. Probably, the rates are the lowest we've seen in the country, and these affect the banks that are -- with a -- such a low loan-to-deposit, like at BZ WBK. Going to the Consumer Finance business. First point, the market car sales are growing in Europe, 5%. Our production is growing 13%. That means that we are gaining market share in a market that is growing. When we -- it comes to our results, we have -- we show higher gross income and net operating income after provisions in the main units. In the third quarter, the revenues were solid at a 3-year high, lower cost and higher provisions partly due to the sale of portfolios and contingencies at the sector level in relation with upfront fees in Germany. Well, there is significant operation is underway. Here, we bought the business in Nordic countries that will come this quarter and the agreement with PSA Finance that will -- we will be able to strengthen our position in this business next year, particularly in France, where we don't have presence. In relation with the runoff of real estate in Spain, I would say nothing new here, a steady decrease in volumes, 19% in the last 12 months; lending, 31% down. We have sold 8,000 units this year. We are focusing here in disposing in an ordinary way. We have not been particularly aggressive in prices in the disposal of those assets. In relation with the results, a little bit lower losses as compared with the previous year. In the U.K., well, I would say good news here. The economy is doing well. We are in the process of the transformation of the franchise, as we've shared with you in previous quarters, and this combination is producing very good results. With a small change in the way we are producing results, the spreads continue to be the main driver, but we have some growth both in mortgages and in companies. We have better means of deposits as a result of the 1|2|3 study. Well -- and this means that we are able to translate this into solid results, with a stable profit in the third quarter, in the first 9 months, growing 43% year-on-year. Net interest income growing; costs well under control; provisions at the minimum level, reflecting the underlying quality of the portfolio. Going to the Commercial side. This shows, clearly, the effort we are making in order to diversify the business and to transform the franchise. On one side, you have a client gathering through 1|2|3 customers. It's growing at a rate of 100,000 clients per month and GBP 1 million per month in current accounts, where the balance stands at close to EUR 38 billion, plus 54% year-on-year. While we have the bank -- the leading bank, the market leader in switchers. 25% of the switchers come to us. We continue to strengthen our relation with the companies. We are growing lending to companies 9% much faster than the market. And finally, well, we are investing in our franchise in order to [indiscernible] our position in this world, in the SME world; in short, good results, good business dynamics. And we still see some room to reduce the funding cost going forward. In the U.S., well, we have 2 focus here. One is the build in the commercial franchise, and the second one is to invest -- to continue to invest in regulatory developments in order to comply with the expectations of the regulators. On the activity side, some changes here, we are growing the loan volumes in the banks, 5%. At the same time, we are changing the mix more into C&I, commercial and industrial, and real estate, and we are increasing the quality of deposits, truly remarkable developments in the bank side. In the SCUSA, in the Consumer business in the U.S., well, on the back of declining operation, the new lending growth has been pretty strong, 7% more in the second quarter and 34% above 2013 due to crisis [ph]. It's true that the majority of these loans we sell back to the market, and our balance sheet has been relatively stable. In Puerto Rico, still deleverage mood in order to improve spreads and reducing some exposure that we don't like very much at this point of the cycle in the country. In terms of results, gross income developments are very good. We are growing 18% year-on-year in the first 9 months; net income, 13% up. Well, it's true that the cost -- the rise in cost is basically due -- as Javier stated, that the fact that we are working hard on enhancing the franchise and fulfilling regulatory requirement. This means an increase in structural cost in the short run. This is a part of multi-year plan and will enable us to improve the quality of our risk management models, our database, strengthening basic control functions and improving our business model. Well, for sure, at the end, we will have much better franchise and more integrated and with better information systems. [indiscernible] in provisions, the credit quality is -- in Santander Bank, the credit quality still grew. SCUSA, the business -- the Consumer business provision increased in the quarter and year-on-year mainly due to greater new lending. So when you compare year-on-year, the growth in the portfolio has been more than 40%. So -- and this explains the majority of the increase in provisions through that also depending on what we keep in the balance sheet between subprime, new prime and prime, this may change quarter-on-quarter. Going to Brazil. Well, first, let me -- to give you the numbers of the tender offer, the results of the tender offer that we did a voluntary share exchange [indiscernible] by 55% of the shareholders, our stake is now 88.3%, and we issued 3.09% of our capital to exchange for those shares. Having said that, this is the summary, a short summary of the tender offer. We are happy with the results. We stated clearly that we were happy to keep minority shareholders, at the same time we were offering them if they want to sell -- to sell their shares, and the aim was achieved. On the results, well, the macroeconomic developments in the country, the GDP is basically flat, growing very little; inflation, relatively high. And income rates are still -- they were raised 25 basis points a couple of days ago. In activity, a better trend than in previous quarters; lending accelerate, from 4% quarter-on-quarter and 6% year-on-year. The growth in customer funds is good, 13% in mutual funds, better in mutual funds, 13%; and in deposits, 4%; and we are growing faster in the amount of deposits. Results, the main development, well, year-on-year, is -- we have profit growth at the bottom line. That has not been the case in the previous 3 or 4 quarters. This was mainly due to lower provisions and very good cost control that rise only 1.5%, well below the inflation rate. While there is a change in perimeter in the quarter due to GetNet, excluding the impact of the GetNet entering the third quarter, the increase in cost was less than 1% when you compare this with the 6.8%, show how big [ph] has been, therefore, in keeping the cost well under control. If we look at the third quarter, profit was up 2% vis-à-vis for the second one. Gross income rose; commercial revenue flat; and higher trading gains. Remember they were very low in the previous quarter. So it's not outside what is -- should be normal in the bank. While the higher costs -- I mentioned the entry of GetNet also; the agreement with the unions that -- to increase the salaries in the country around 9%. There is more recent provisions in line with the lending growth. When we go to the -- in more details at the net interest income provisions, well, you have -- the first thing you have is net interest income reflect the change in mix. If you go at the bottom, we are saying that we are growing basically in large companies, 11%; and more it's 8% [ph] when you go to the most demanding side in terms of provisions and the higher spread -- relatively higher spreads for individuals and SME companies, we are not growing. We are basically flat on this side. In net terms, when we look at the net interest income after provisions, it was 14% higher than in the first 9 month of 2013. This is what explain the trend in the P&L. Credit quality is improving. Also, change in mix affects this. There is a downward trend in NPL ratio, 50% in the last -- 50 basis points over in the last 12 month. And we'll continue to see good evolution in the -- every areas over 90 days and between 15 and 90 days. In short, we'll continue to see underlying strength and potential growth in the country. Although we are in a cyclical phase of lower growth, the pressure on revenues from lower growth spread -- with [indiscernible] flat with evolution of risk and cost of credit that is falling, and while we are making significant efforts in improved efficiency and productivity on the country, as I -- as we said before, and our CEO show in our efficiency plan, in the uplift of our targets in the efficiency plan. Going to Mexico. Well, some improvements in the GDP trends. Although it's growing below what we were forecasting 1 year ago, it's 2.4% for 2013, while the forecast at the beginning of the year was more in line with 3%, 3.5%; interest rates at very low level. We are growing much faster than the market, gaining significant market share; so in lending, more than 100 points; and in demand deposits, more than 45 basis points, while partially due to our branch expansion plan that has 2 effects. We are gaining market share at the same time as our costs. Although stable compared with the previous quarters, we opened 134 branches and 22 in the third quarter, displaying why the costs are growing at 9.8% although, in the quarter, we're basically flat. In lending, we are growing mainly in SMEs and mortgages and less in consumer credit and cars. In gross income, good performance of the net interest income in the quarter, 3.3% quarter-on-quarter. Well, we have lower interest rates that I mentioned, stable cost in the last few quarters although in the year, we are growing at the rate we mentioned. And provision growth was less than the recent lending, and the increase in the third quarter were due to one-off and the dissolved 2 companies. In short, improved trends and results, which is not still reflected in profit with -- because the higher cost from the expansion plans and the higher tax rate. In Chile, well, the economy is growing below the average growth of the country in the last 15 years, only 2%; inflation, relatively high, 4.9%; and interest rate, relatively low at 3%. Our bank is performing pretty well in volumes and results. So you see volumes grow in loans and deposits, 8% and 12%. In funds, we are improving the structure and growing strongly in mutual funds. And in results, as we were mentioning before in the previous quarters, we have good profit from relatively high inflation. That translates into the P&L through the dual currency system of the country. In this quarter, the inflation was significantly lower than this kind of -- well, the comparison is a little bit the result of these 2 facts being relatively high in the first, second quarter and relatively low in the third quarter. That explains the difference in the results. When you look at the underlying profits, the terms are pretty good in the country. So on top of that, in fees, we have some strong regulatory pressure that has been there in the country for the last 2 [ph] years. Costs were in line with inflation; provisions, lower than in 2013, nothing to say there. In short, I would say excellent results in the first 9 months, with some positive impact coming from inflation in the first 2 quarters, that was negative in the third quarter. In other Latin American countries, very, very few words to say about this; Argentina, EUR 220 million profit, up 35% year-on-year; the gross income growing in a relatively high or high inflation area environment, 37%. Uruguay profits increased 11% and Peru 28%. And lastly, Colombia, where our new subsidiary, Santander de Negocios Colombia, began to operate in the quarter. When it comes to corporate activities, lower losses than in 2013, mainly due to the reduced provisions this year compared with 2013, where there was a chance for integration in Spain related we're applying the same criteria to the portfolios of Santander and Banesto, to the most conservative one at that time. The improved gross income comes from the lower cost of funding in the wholesale funding, reflected in the net interest income and higher trading gains in the third quarter largely due to 2 main factors, the foreign bank interest rate management and a significant impact of exchange rate with hedges here in the corporate center. I now hand back to the -- to Javier, the CEO, to wrap up this presentation. Javier Marín Romano: Let me now just sum up. As I said in previous presentations, Santander continues to improve the basic trends of its results. We've seen a solid dynamic of commercial revenues in a less favorable environment due to low interest rates and more slowdown in economies. We are moving ahead with growth in loans and funds, compatible with our reduction in the cost of deposits in most of our units. Also noteworthy is the good management of cost and structures, enabling 7 of our 10 core units to operate with the stable costs or lower ones in real terms. The efficiency and productivity plan is already bearing fruit. The goal for savings for the whole 2014 was reached in September, and we still see savings that can be made. So we have raised the goal by EUR 500 million in 2016 to EUR 2 billion. Lastly, the group continues on the path of normalizing its loan loss provision, with 7 of the 10 units showing stability or declines in the last few quarters. Areas such as Spain should continue to improve given the evolution of the credit quality. All these trends signal our radical change in the group's underlying profit compared to previous years, as the chart in the slide shows. Compared to sharp falls in the net operating income, after provisions in previous years, in 2014, there is year-on-year growth of around 30%, which continues to accelerate over previous quarters. The improvement will benefit basically from 2 types -- 2 type of actions: on the one hand, due to the gradual implementation of various of the group's units of specific plans to improve productivity, efficiency and engagement of customers. In the fourth quarter, we will complete the rollout of the cost plan with the incorporation of units of a smaller relative weight. We will also continue to extend Santander Advance after Mexico in September and Portugal. Last week, it is the turn of the U.K. to break through in the fourth quarter before we jump into Brazil and Chile at the beginning of next year. Moreover and in parallel, and as I will show you later, we will continue to work on many digitization initiatives and integration of the group through the job role posting, Santander ideas 1 and 2, the engagement survey for 183,000 employees and so on. On the other hand, some strategic operations and alliance is underway, which offer a future growth potential. In Brazil, after incorporating GetNet in the third quarter -- it's the acquiring business, we are going to put into effect a joint venture with Bonsucesso spur payroll lending, which has been decreasing all this year, which will increase business and engagement. In consumer credit in Europe, the business acquired from GE Money in the Nordic countries will be incorporated during the fourth quarter in order to create a management area whose contribution to the group in the medium term could be equivalent to Germany, in our view. Lastly, and in relation to the joint venture with PSA in Europe scheduled for 2015, we are working hard to bring forward the contribution of the business to the group's results. All these measures will affirm the idea I put forward in previous presentation. The group has begun to recover profits and profitability, which will continue and begin to spread to all units in the coming quarters and year even though we see a more difficult environment due to the lower GDP growth and to the lower interest rates and to lower interest rates for longer. Let me just finish because we're always saying that we are improving our franchise and just to show you some of the activities we are doing. On one front, we are trying to enhance -- are having -- focusing on customers and having an integrated view on -- around the customer. We -- the target was basically to improve our data quality and analytical capabilities, try to maximize the business's effectiveness with very powerful commercial tools in order to deliver to each customer what he needs and have a more customer-fit value proposal for each customer. The actions we've put in place are -- basically, we are improving our data quality through IT and operations and our risk data aggregator. We have implemented advanced business management tools, like the Neo front that we mentioned before, and I will now show you what are the plans in terms of implementation in the different countries. And we have worked hard on segmentation and incorporated specialized models and value propositions for each segment, like private banking, Advance for the SMEs or the affluent segment. Just a quick look to what is the Neo CRM that we have in Chile. That is an advanced business tool model at the commercial front for all bankers to use when they are dealing with customers, but also -- not only at the branch level, but also on a multichannel basis. It will provide a 360-degree customer view. It helps in terms of customer integration in order to truly understand how the customer is integrating with us. So for example, he goes into a branch, and the bank clerk can already see if this client has done a simulation for a mortgage through the Internet, and he can continue to try to close the sale on the spot and to continue with the advise process. It brings, of course, business intelligence in order to try to find more areas in order to increase our wallet share with customers and try to cover more of their needs, very user-friendly, which is absolutely key. It is being implemented and will be implemented during this quarter in Brazil, in the U.S., in the U.K. and in Spain. And in 2015, it will be implemented in Mexico, Poland and Portugal. Of course, we are taking the Neo CRM of Chile as a base, and it will be adapted to the particularities of each country in terms of the customer needs and also the maturity of our franchise. Just to give you an idea in terms of figures -- and I don't want you to extrapolate this to what could be the fact in other countries. In Chile, we saw an increase in commercial productivity of 53% since we implemented the Neo CRM a couple of years -- more than a year ago. And the satisfaction of the -- of our bankers in terms of the bank helping them, making their job easier, has increased. On the other hand, we are working on the distribution model. Our targets were basically to redefine the branch model as a more valuable channel, taking into account how the customers are changing the ways they interact with the bank. In this sense also, we needed to enhance our digital channels and, of course, take a very close look to all our customer journeys in order to improve our customer experience, trying to generate a simple banking model. We have been reviewing our branch model, and I will show you later that we have already some proofs in place in Argentina and Chile. We have a -- at the corporate level, we have developed projects that are being implemented in the countries by the local teams to develop channels, and we have projects to improve the critical processes experienced by customers on day-to-day, the very critical processes like the on-boarding, opening an account, applying for a mortgage, which are basically in every country being addressed in order to guarantee that it's a very, very streamlined process, which guarantees quality and reduces costs by eliminating bureaucracy in all of these processes. Just a quick look -- I'm sorry for the chart because it's full of flags and data, but as you see, we're working on the -- on a multichannel approach on the mobile with our project that is called Mobile First, where we will be implementing the personal financial manager before the first -- before -- by next year in most of our countries; the mWallet on the mobile implemented in Spain this quarter and the OPEN [ph] Bank in Poland, the U.K. first half of next year, and second half in Chile or Brazil; and notifications and alerts and the wall [ph], a -- that will be also in Spain in place by this quarter. We're working also on the self-service on the ATMs in order to improve the quality of the -- of our ATMs and increase the functions of these ATMs to make them more customer friendly. We began already in the U.S. and in the U.K. where we will be launching them in Spain. But as you see also, Brazil and Portugal are on the spot. Working also in the Internet, of course, for channel analysis and then for pull sales, our Wi-Fis in branches. Especially, we want our bankers to onboard a customer, showing into our mobile capabilities in order to show them how to work with this tool and enhancing, of course, with the advanced project. Our digital companies platform for SMEs where we'll have new homes in Spain and Brazil, and the mobile apps for SMEs in Spain and Poland just this quarter and next year in Brazil and the U.K. We're also digitizing some banking services where basically, we're trying the bankers to -- through the -- with an iPad, they have their bank there so they can advise and close a -- transactions and operations with the clients at their office or at their home out of the branch. This is an experience we have imported from Mexico where it's called [indiscernible], which has had a great success in terms of productivity and in terms of quality of service and satisfaction of our bankers. So we are spreading this to some other countries. In the contact center, also from Mexico, we have the voice print with very good success in terms of the satisfaction of customers and a cost reduction in terms of a number of time of every call, which will spread especially in Brazil where we receive more than 30 million calls every month. And we're working, as I was mentioning before, on the branch model with some prototypes in Argentina and in Chile. We'll have also some prototypes in Spain by the second quarter of 2015 and spread this to Brazil, obviously. This is just a few examples, but I think it was noteworthy to show you facts of things that are implemented or basically some that are being implemented that are our day-to-day business in order to make a more customer-centric bank and try to enhance the engagement of our customers. So thank you very much. We now move on to the -- to a Q&A. José Manuel Campa: Good morning, everybody. We'll now proceed to the Q&A session. As usually, we will address first the questions that we have been receiving via WebEx. We'll encourage you to continue to send questions you may have. And as usual as well, we will address the questions received by major themes. Starting with the first major theme, we have a range of questions that have to do with TLAC and the process of new regulation regarding this area as well as our plans to issue -- currently -- our issues that we have done and future plans of issuing AT1 and Tier 2 capital. In this regard, we have questions from Stefan Nedialkov from Citigroup, Francisco Riquel from N+1, Sergio Gamez from Bank of America, Britta Schmidt from Autonomous, and Andrea Filtri from Mediobanca. And I guess these questions come -- most of them will be summarized in basically 3 things, when we have a clear view of what the impact of TLAC will have in terms of our liabilities going forward, the structural liabilities, whether we have any sense or where the amount of issuance or what plans do we have for the remainder of 2014 and 2015, both in terms of issuance of AT1 and Tier 2. Javier Marín Romano: Yes. Very good, sorry. Well, first thing, with respect to TLAC, you should all remember that Santander is organized from a resolution perspective as a multiple point of entry. So the TLAC should not be addressed at a consolidated level, but it should be addressed at the different units level. So in that sense, our initial approach is that it shouldn't have a meaningful impact in any of our affiliates as we're well covered with the initial assessments we have in terms of where TLAC should stand even though you know we still don't have what will be this level. In terms of issuances, we continue with the plans that was basically to have more or less around 1.5% of additional Tier 1 and 2% of additional Tier 2 in the midterm. So we will continue with our issuances in order to meet with these targets. José Manuel Campa: Thank you. A second range of questions also regarding what impact of new supervisory regulation changes have to do with the new regulatory authority and our relationship with the ECB, particularly in the range of our dividend policy. So we have questions from Stanislav Riuni [ph] from BNP Paribas, Juan-Carlos Calvo from Espirito Santo, Daragh Quinn from Nomura, Britta Schmidt from Autonomous, Victor Rodriguez [ph] from FDA [ph] and Raoul Leonard from Deutsche Bank. These questions basically address 3 issues. One is whether, with our existing level of capital and particularly the guidance we've given them of fully loaded Basel III, we are -- we think that we can continue to maintain the dividend payout as we currently have it; second, whether we have had any indications from the new regulator from the ECB about -- regarding our dividend policy and its application going forward; and third, range of questions is also having to do with the fact that are we planning any change in the timing of our dividends due to fiscal aspects in Spain. Javier Marín Romano: Okay. So, well, the ECB's -- we'll begin to meet today the supervisor. We've had lots of contacts with them basically in all the -- at every level in order for them to better understand Santander. So hopefully, through the joint supervisory teams by the ECB and Bank of Spain, this should be achieved. With respect to the dividend, we have received no indications. With respect to the dividend policy, as you know, the dividend policy set at the General Shareholders' Meeting every year, we have already approved a dividend policy for this year. In fact, in terms of timing, we're not changing. We are already -- we have already announced the complementary dividend for January 2015. And basically, that's it. José Manuel Campa: Okay, thank you. We have a third question of the area regarding AQR. We have a question from Mario Ropero of Fidentiis who's asking whether the impact from AQRs are booked to this quarter and if any -- or whether there's any expected further impact to be booked next quarter. I should say that we have only EUR 51 millions of specific provisions identified in the AQR, and those have been already booked in the first half of the year, so there's really no additional expectations of any booking in terms of the AQR costs. So moving on to the cost section, our announced new cost targets in our cost plan. We have a number of questions related to this. The questions basically come from Sergio Gamez of Bank of America, Britta Schmidt from Autonomous, Ignacio Cerezo from Crédit Suisse. There are 2 range of questions. One, well, "If you can give a little bit more flavor on where those cost savings are going to be coming from, particularly to what extent, whether they're coming from different geographies or just across-the-board and whether they're going to imply branch closures, reductions in staff. And the second point -- the second range of questions have to do with the impact that these costs savings will have on the P&L going forward, particularly whether the additional costs will all directly go into the bottom line going forward and whether there are any expected restructuring plans or restructuring costs particularly resulting from these additional cost savings. Javier Marín Romano: Yes. So in terms of geographies, you will probably see something similar to what you have seen for the cost plans for 2014 where basically, the biggest units, let's say, Brazil and Spain, should account for the bulk of it even though we are wide-spreading all these costs -- our cost efficiency -- our efficiency plans into the smaller units. So everybody will contribute into this, including the Corporate Centre. In terms of impact on P&L, we have -- our aim is our costs to grow below inflation in -- at the group level in terms of composite inflation and in every country where we are. So basically, this should mean a reduction in real terms. What we are looking forward is to -- we need to invest definitely in the franchise. You have seen already all the plans we have for 2014, for 2015 and beyond in terms of transformation of our commercial franchise. And it's not only about the digitization of the -- at the customer level but also in quite a number of areas. And we are -- we will use some of this in efficiencies that we are finding on the running the bank in order to enhance our franchise in the countries where we are. So -- and in terms of restructuring costs, we don't expect to have a significant restructuring cost. What we expect is that this should mean this -- we should have a bank that is simpler, that is more customer friendly, where our bankers have better tools in order to assess our customers and where the customer journeys are at least, if not the best, at least as good as the best. José Manuel Campa: Thank you. Now we have a number of questions regarding the outcome of our tender in Brazil and the tail-off effects from that. We have a question from Francisco Riquel of N+1 Juan-Carlos Calvo from Espirito Santo and Sergio Gamez from Bank of America Merrill Lynch. These questions basically come down to 2 areas. One, whether we have a new outlook regarding the performance of our Brazilian franchise, particularly in the context of a macro, that has more deteriorated. And the second one has to do more with the technicalities of the tailwinds of that tender, particularly with respect to any flowback. What is the meaning of the announced share -- buyback of shares that the Brazilian subsidiary has announced this morning? Javier Marín Romano: So with respect to the performance of our bank in the economic environment, I said before in previous presentations that the results of our franchise in Brazil will be more due to our work and our success or failure than on the economic conditions, and I stand to what I say. And I am sure that all the work that we are doing there will have a -- it's a reflection on the results of the group. And let me now move -- José Antonio, can you explain on the tender? José Antonio Alvarez Alvarez: Yes. The legalities of tender in Brazil, there's a couple of events there. The first one that may produce now is seen in the price of the share of our subsidiary. The first one is the new weaving [ph], if any, in the main indexes, so particularly BOVESPA and Morgan Stanley emerging markets indexes, that is happening around today or tomorrow. The reason why we -- our unit in Brazil decide to ask the board for having more owning interest of stock was partially due to not to have a significant disruption in the price formation in the market in these 2 or 3 days. In relation with the others, with all the relevant data for this, and please confirm with the Investor Relations Department, what they have in mind is the shares we issue of the parent company start to trade in the market to the 7th of November. But please confirm that. This -- and the APR [ph] is the 10th of this month. But confirm this with the Investor Relations Department because I may be wrong and this may be one -- changed one day. That -- those are the technicalities in relation with the tender offer. José Manuel Campa: Yes, please come back to us with the specific date. We'll be happy to provide you all the necessary information after this conference call. Moving on to a different area of regulation. We have a number of questions regarding our situation with the CCAR process in the United States and some related impacts from that. In particular, we have questions from Raoul Leonard of Deutsche Bank, who's asking whether we can update on the CCAR process, whether we're planning to apply for the fiscal year 2015. And we also have related questions about whether the implications that we have seen from the CCAR process and the lender we have done there, whether we expect -- this is a question from Victor Rodriguez [ph] of the FDA [ph], whether we expect that the ECB will run a qualitative splitting in addition to quantitative assessments going forward in a similar way to what the U.S. has done. Finally, we also have a related question whether we can update on cost of this probe, but I think that we have done that already in the presentation. Javier Marín Romano: Now the -- basically on the CCAR process, right? José Manuel Campa: Yes. Javier Marín Romano: So I think José Antonio elaborated on this. We're working hard in order to improve our franchise and resolve the regulatory questions that we have about the CCAR or the enterprise risk management process. As you know, from a quantitative perspective, our bank in the U.S., our Santander Holdings, is one of the most capitalized banks in the U.S. Of course, all this works means that we are increasing the number of employees, as I went through the presentation, almost by 400, and it will basically increase our costs at the holding level on the different units of -- for about -- around USD 100 million, both for personnel costs but also for administrative expenses in terms of improving the IT platform. As José Antonio said, this is a multiyear plan in order to create the basis not only to go through the CCAR successfully but also in order to improve the quality of our franchise in the country. José Manuel Campa: Great, thank you. Now moving on to more issues of our strategy. We have a number of questions related to inorganic growth and transactions. We have questions from Alfred Alonso of Kepler, Britta Schmidt of Autonomous and Atif Alif, The Citadel. So those are basically on 2 areas, whether we have an appetite for acquisitions, particularly in the case of Novo Banco in Portugal or Monte dei Paschi di Siena in Italy. That's one question. Second question is whether we can give any update on the developments of the negotiations relating to the deal with Pioneer. And the third related question, whether -- on the announced transactions that we have announced or we're in the process of completing in the fourth quarter, whether we'll be using those capital gains to book against the restructuring charges or to improve capital ratios. Javier Marín Romano: Okay, Novo Banco. We are very happy in Portugal. I was there in -- last Friday. We will probably increase our market share 2 percentage points this year. So we are growing organically incredibly well. Of course, our obligation is, in every country where we are, to take a look to all the opportunities that can be there, but we are very, very rigid in terms of the strategic fit and the financial fit of any operation that we do. So of course, we will take a look, but nothing is granted, of course. We're not, again, looking into Monte dei Paschi di Siena, and we have had no contacts with respect to this. With respect to Pioneer, we issued a note where basically, we said that we were in conversations with them in order to integrate Santander's management with Pioneer, and there's nothing new on that front. And with respect -- and the third question was about the capital gains that we booked in the fourth quarter. They will be used basically to strengthen the balance sheet. José Manuel Campa: Thank you. One final issue on regulation. We have a question from Carlos García of Societe Generale, whether we see a risk that, as HSBC has reported today, that we will need to have significant additional investments to satisfy more compliance on regulatory issues globally. Javier Marín Romano: Yes, definitely. I just spoke about the case of the U.S. So that is why we need to go deeper into the efficiency plans on the [indiscernible] Bank because they grow the bank, plus the regulatory costs are going to absorb a meaningful level of resources. So that is why we need to find that combination that should help us to improve our franchise on one side, both from a commercial point of view, from a customers' perspective and also from our regulators' perspective with all the regulatory environment that we're seeing right now, at the same time we grow our costs below inflation. José Manuel Campa: Thank you. We have one final issue in terms of investment costs and expenditures. We have a question from Britta Schmidt of Autonomous whether we can provide some guidance on the cost that the additional investment into IT and digitalization can imply in terms of million-or-so dollars and over which horizon, additional costs in digitalization initiatives that we've been talking about, whether we can give some guidance on what we imply in terms of additional costs or it's just in -- within our general operating budgets. Javier Marín Romano: Well, there's a number of initiatives. It's not easy because in order to understand, because these -- the -- most of them are some multiyear plans. For example, the RDA or, risk data aggregation process that should help to improve our data analytics for all the -- in credits and in customers will be a EUR 500 million initiative to be done on a 4-year basis. But this is just a part of it. That is why I was mentioning that in order to be performing correctly, addressing all these projects, we need to -- we needed to go deeper into the efficiency plan. José Manuel Campa: Thank you. Moving on to issues within Australia having to do with our financial management. We have a number of questions regarding the evolution of our core equity Tier 1 capital ratio throughout the quarter, in particular where we can provide some framework, what has been the breakdown of the 52 basis points increase between 3 components, basically the contribution of the AT1 issuance that we have done, the organic growth, the risk-weighted assets. Javier Marín Romano: Basically, the contribution, as I stated, was half due to organic generation and the other half basically due to the AT1 issuance. José Manuel Campa: Thank you. We have another set of questions regarding our fully loaded Basel III capital position. Questions from Mario Ropero of Fidentiis, from Carlos Calvo of Espirito Santo, Daragh Quinn of Nomura, Ignacio Cerezo of Crédit Suisse and Raoul Leonard. What will be our expectations of our fully loaded book going forward beyond this year? And second, what will be the implications of the Brazilian transactions in terms of this ratio, if any? Javier Marín Romano: A couple of things. First, as you know, we don't provide the long-term expectations. So I already mentioned that we expect this year to be -- our fully loaded Basel III between 8.5% and 8.6%. Our approach to this is that we should -- and we've been mentioning this during the last quarters, right, that we need to compare the ratios, taking into account what are the risks that every bank, every financial institution is carrying on their balance sheet around their way of doing business. So the AQR, the -- basically their stress tests have shown that Banco Santander is very conservative in terms of our policy for provisioning but also our business model is a business model of lower risk, as being demonstrated on a stressed -- on -- during the stress scenario as being the bank that destroys less capital over our peer group, basically 1/3 less than -- sorry, 66% less than our next competitor. So we believe that Banco Santander, due to our business model, due to our diversification, we have a ratio of capital that are -- we are very comfortable with it. José Manuel Campa: Thank you. I believe that this last explanation very detailed also addresses a final question that we have on capital by Benjie Creelan from Macquarie, which was wondering why did we feel comfortable running the bank, operating the bank with levels of capital that appear to be lower than our peers'. So moving on to... Javier Marín Romano: Especially that one I explained. José Manuel Campa: Exactly, yes. Thank you. So moving on to another issue having to do with our ALCO portfolio, Francisco Riquel from N+1, Mario Ropero from Fidentiis, asking us basically whether we can detail the composition of our ALCO portfolio as of this quarter, as well to give some flavor or breakdown by country and duration. José Antonio Alvarez Alvarez: Okay. Well, the ALCO portfolio has been relatively stable. They are in the region of, I think, is EUR 66 billion, of which -- including the insurance company. So that is EUR 4 billion, EUR 5 billion. In the bank, Spain is EUR 21 billion; in Brazil, EUR 11 billion; Mexico, EUR 3 billion, U.S. EUR 5 billion; Poland, EUR 5 billion; U.K. EUR 5 billion; and the other, another EUR 6 million, EUR 7 million. Yes? Those are the main numbers. Typically, the duration of the balance sheet is particularly short at this period in Spain and in U.K. due to the fact that, well, the available-for-sale portfolios are not enough to offset the negative duration of the current accounts. José Manuel Campa: Thank you. We have 2 questions also related to the contribution of the ALCO portfolio this quarter, one from Andrea Filtri of Mediobanca, which asks for the contribution to the overall group in the P&L; and Benjie Creelan from Macquarie, which specifically asks whether we can provide a contribution of this to the P&L in Spain of this portfolio. José Antonio Alvarez Alvarez: Well, the ALCO portfolio in Spain is producing -- between the Corporate Centre, because the ALCO is split between the Corporate Centre and the retail -- we've had the retail and we also have some in the Corporate Centre, is producing, in terms of net interest income a year -- an entire year, between EUR 300 million and EUR 400 million, yes, split between Corporate Centre and the business in Spain. José Manuel Campa: Okay. We have a couple of additional, more specific questions on the financial management, one having to do with the accounting of the AT1 issuance. Raoul Leonard of Deutsche Bank asks, how do we account for the AT1s that we -- have been issued, whether this is a P&L item, this -- the AT1, the coupons that we pay on the AT1s? The second question has to do with our tax performance. Sergio Gamez from Bank of America Merrill Lynch asked why our tax rate in the Corporate Centre has been so low this quarter. José Antonio Alvarez Alvarez: Well, I mentioned in the presentation in relation with the Corporate Centre we have one thing that is more or less stable, that is the lower costs, the lower wholesale funding costs that goes into the Corporate Centre. And we have specifically this quarter one issue that comes and goes but is the hedge of in the rate -- sorry, interest exchange rate risk, the -- depending on we have hedges for prospective profits in some jurisdictions like Brazil and partially Chile. But this is a tactical fetch [ph]. So sometimes, we have it, sometimes we don't. And this quarter came in this line. And we also sold some bonds in the ALCO portfolio, but those were the -- this is the Spanish, not the 3 components, lower funding costs, ALCO and exchange rate risk. José Manuel Campa: Thank you. Now moving on to the issue of credit quality. We have 2 general questions that are related. Carlo Digrandi from HSBC asks -- is asking why are the loan loss provisions higher quarter-on-quarter given that NPLs continued to decline. And you already explained in the presentation that this was partially due to the performance of Santander Consumer U.S.A. So Ola Cruz [ph] of Redburn continued on this question, asks, why is the cost of risking rising in Santander Consumer U.S.A.? What is -- will be the over-the-cycle cost of risk for this business? As well as, related to this, what is the right coverage level that we should see for the group overall and, in particular, in Santander Consumer U.S.A.? Javier Marín Romano: Well, I think José Antonio already elaborated a little bit on the Santander Consumer. But basically, provisions are growing because through risks also. One is that the production is 30% higher than last year. The second reason is our methodology for provisioning where we're provisioning for 17 months, which takes 2 fourth quarters that are from -- that are normally higher provisioning -- higher nonperforming-loans-producer quarters than the rest of the quarters. And we are in -- and we are producing slightly more consumer credit than prime car credits. So these are basically the 3 reasons for increasing provisioning in Santander Consumer. With respect to cost of credit, we also gave some views on that, right? Where the group cost of credit is standing right now, should we exclude Santander Consumer at 1.25? And we see this clearly trending lower. We expect that next year, it should be stable to slightly lower to where it is today. José Manuel Campa: Thank you. Continuing with the issue of credit quality and now going by geography, we have a question about credit quality in Spain from Ignacio Cerezo of Crédit Suisse. He asks whether we'll see improvements in our guidance going forward on the cost of risk in Spain. And if they were to see improvements, what are the main reasons why the performance on the cost of risk, particularly lower NPLs or with higher recoveries or more stable property prices, a bad outlook? Javier Marín Romano: Well, the reason right now is basically that, as Antonio said before, the new entries -- the new NPLs' entries are 94% below last year. So basically, we are seeing very clear in risk -- improvement in the risk profile basically due to the improvement we're seeing also in the economic conditions of the economy. We are -- we think that we should close this year on what were our initial expectation at the beginning of the year, closing our cost of credit in Spain between 100 to 120 basis points. And this should be trending lower to reach something that should be, across the cycle, the normal between 60 to 70 basis points by the end of 2016. José Manuel Campa: Okay. Focusing still in credit quality but now Brazil, Francisco Riquel, N+1, and Ignacio Cerezo from Crédit Suisse. They both asked about our expectations on nonperforming loans there, whether we see a pickup going forward. And what will be our guidance towards 2015? Javier Marín Romano: Well, our -- the figures we have for Brazil in terms of nonperforming loans are encouraging. So when we are seeing early arrears, they'll all trending down, and that's a very good sign as from what we can expect from nonperforming loans. Of course, the performance will continue to rise. The mix that has been hurting us on one side on the net interest income on the other side is helping us in terms of the trending lower of the NPLs as we are growing in a lower-margin businesses and segments but, of course, with a lower cost of credit, like mortgages or BNDEs or the agro -- or the agro business or the corporate segments. This year, basically the credit consumption is flat or with a small decrease. With Bonsucesso we will come back into the payroll credit, which is also important. So I think that I'm positive with respect to the expectations we can have with respect to the cost of credit in Brazil. José Manuel Campa: Thank you. One final question on credit quality now regarding Mexico. Mario Ropero from Fidentiis asks whether we could comment on why the NPL ratio increased in this quarter, and what do we expect in terms of evolution going forward. And particularly, what level of cost of risk would we consider to be sensible given the risk profile that we have in the country? Javier Marín Romano: Well, in this quarter, as José Antonio elaborated, we have to mark up a couple of projects that were basically the reasons for the increase in the quarter. The rest of the bank, we're seeing good trends. However, our expectations in terms of the growth of the portfolio of credit -- of growth of credit is big for next year. So my view is that probably, the specific provisions should decline, but the general or collective provisions should increase for next year with the -- at the same pace as we increase the size of our credit book. José Manuel Campa: Thank you. We have -- now moving on now to different geographies and business areas, starting with Spain. We have a number of questions regarding the evolution of loan volumes throughout the quarter. In general, this questions come from Ignacio Cerezo of Crédit Suisse, from Francisco Riquel of N+1, Juan-Carlos Calvo of Espirito Santo, Mario Ropero of Fidentiis. Basically, the questions are in 2 lines: one, whether with the loan -- the loan book fall that we have seen throughout the third quarter, whether it's mainly due to seasonality reasons or whether where we think there's a pattern there; and second, whether we can be given some -- whether we can give some guidance of where do we see volume growth going forward in Spain also going into 2015. Javier Marín Romano: Well, definitely, it was absolutely seasonal, the decrease in the third quarter. We see this every year. We expect -- we have seen a pickup in October, and we expect a good fourth quarter. So our initial expectations of growing the credit in 2014 are still there, and we are confident that we'll be up to that. With respect to 2015, we continue to see some acceleration in credits. So -- I'm not going to give some figures, but credit for the new production for SMEs is 34% higher than last year, the new production in mortgages is 75% higher than last year. We're -- we continue to see every month a slight increase or an increase with respect to the previous month and I think an increase with respect to the same month of the previous year. So our expectations for 2015 is that we should continue to see our credit portfolio growing. José Manuel Campa: Thank you. We have an additional question regarding volumes in Spain. This one is specific on SMEs, Stefan Nedialkov from Citigroup asking us how do we see the SME lending in Spain, and particularly how has our market share performed since the beginning of the year; and second, how we see yields spreads developing in that area. José Antonio Alvarez Alvarez: To comment in the volumes, I think we launched this Santander Advance program in March. Is it working well? I mentioned in the presentation that the new products and the new volumes are going up 34%. In relation with the second part of the question that was more the net interest, the margin, I mentioned also that we are seeing some margin compression. There is competitive pressures in the market, and we are seeing pressure across-the-board. Still, a couple of basis points, but we continue to see a quite dynamic competitive environment in this front. José Manuel Campa: Thank you. Moving on still within Spain, now to the issue of spreads. We have a number of questions regarding our cost of deposits. These are questions from Juan-Carlos Calvo from Espirito Santo, from Britta Schmidt from Autonomous, from Andrea Filtri of Mediobanca and Rohith Chandra from Barclays. The questions basically are along 3 lines. What is the cost of deposit -- our existing cost of deposits now in the third quarter? Where do we see a floor in the cost of deposits going forward? And third, whether we'll see across Europe a convergence on the cost of deposits across the different peripheral countries. José Antonio Alvarez Alvarez: Well, this is in the deposit cost. I don't have in mind, the number is 0.7%-something. It's going down where we started the year in 1.25%. We're around already below 0.8% the overall deposit cost. This is split between a couple of basis points in current accounts, some still higher than 1%, significantly higher than 1%, in time deposits. As we show in the presentation, the new production in time deposits is coming up 0.55%. So there is still room to reprice the time deposit book and still room to reduce from the current around 0.8%, 0.7% something total deposit cost. In relation with the third point, the convergence size, well, I would provide the numbers with the deposit cost in Portugal and in Spain. You see the new production in Portugal, I -- speaking by memory, was coming at 1.36% in time deposits while in Spain was 0.55%, still a significant leverage in support to -- for -- to the so-called peripheral countries. The liquidity positions of different financial systems affects this. And also, there is a question of other competitors in the markets. Particularly in several markets in Europe, there are even government bonds sold to the retail at very competitive rates that affect the time deposits. Okay? So it's -- I will say, if there were no other non-bank competitors in the markets, I will be positive on convergence. If they saw the competitors in the market not being balanced, I'm not so sure that is going to happen so quickly. José Manuel Campa: Thank you. We have a question regarding commissions from Francisco Riquel of N+1. He points out that fee income looks weak beyond this -- beyond the typical season for the spring quarter, and he wonders whether we can elaborate on the trends and provide some guidance for the coming quarters, particularly on the impact that the recent regulatory measures on credit cards and pension fund rates may have on this line. José Antonio Alvarez Alvarez: Recent [indiscernible] in Spain. Javier Marín Romano: Yes. With respect to commissions, now we have basically the impact of the interchange fees. With respect to credit cards, it's been -- but we have also the some of the effects of the [Spanish] the initiative that we brought to the Banesto customers that, of course, with the comparison with last year is dragging also on the P&L. But aside from that, we see a pretty good P&L [ph] in terms of funds. In insurance, we see a slight decrease in investment insurance because some of that money is going into funds. But we're happy. I think the trends we are seeing in Spain are good, and we are positive with respect to the future. José Antonio Alvarez Alvarez: If I may, what you have in the quarter in commissions is the drop in commissions comes mainly from the wholesale side. Javier Marín Romano: Yes, to this... José Antonio Alvarez Alvarez: Yes, it's not the retail side. It's the wholesale side that you have going on in the markets there in the third quarter is a seasonal low, yes. José Manuel Campa: Thank you. To finish with Spain, we have 2 questions regarding our run-off real estate portfolio. We have a question from Mario Ropero of Fidentiis and a question from Carlos Peixoto of BPI. Basically, they ask whether -- do we expect the net interest income in this division to turn positive, as well as whether we can give some update on what's the rate of asset sales during the quarter and also where we're seeing a large number of recoveries in the portfolio. Javier Marín Romano: Well, we don't expect the net interest income in this portfolio to become positive. Most of the credit that basically was sitting there is moving into NPLs or into repossessed. So basically, that division, should we run on our net interest income, that is negative. That is basically the cost of financing the repossessed assets that they are holding on the balance sheet. With respect to recoveries, well, we're not counting on that. It is true that the sales we're doing right now are basically done on a -- with no loss, only with a slight profit, that the outlook is better, but we are not counting on any of these recoveries in terms of increasing our profit for the next quarters. José Manuel Campa: Thank you. Moving on to other divisions. We have 2 questions regarding our Santander Consumer Finance division. A question from Raoul Leonard, Benjie Creelan of Macquarie. Basically, they're asking whether we can explain what was the underlying reason for the large negative provision in our income for this quarter and whether this is one-off. And then the second question, also from Raoul Leonard of Deutsche Bank, regarding Consumer Finance in Canada, our announced acquisition there, whether we could elaborate a little bit on the strategic rationale of this acquisition, and whether we're planning to report this under our Consumer Finance division going forward or we'll see that as a stand-alone unit within the group. Javier Marín Romano: Well, I think the question of Germany, that is basically a one-off. José Antonio really elaborated and it's due to the handling fees question that all the financial institutions have now in Germany. And with respect to Canada, Canada is a very interesting market. We have entered this market through the -- a business that we know well, that we -- and that we do in North America, in the U.S., that we do across Latin America, that we do in Europe and that we now do in China, as you well know. So we're very happy with this operation. And definitely, yes, it will be under the Santander Consumer Finance division. José Manuel Campa: Thank you. Moving on to the U.K. division. We have a question from Britta Schmidt of Autonomous. She's basically asking what do we expect to happen on the U.K. mortgage market, particularly on mortgage spreads, now that 2 regulatory issues have been cleared, particularly the mortgage market review, and also the announcement of the new leverage ratio that's going to apply on the U.K. banks. Javier Marín Romano: Now our expectations with the -- with our mortgage book is to grow at the same level as the market. So basically, the market is expected to grow at around 2%, and this is what we expect to be growing in the U.K. We don't expect any impacts from the mortgage review because we already adapted our processes and everything to be fully compliant with it. So no impact with respect to any of these questions. José Manuel Campa: The leverage ratio. José Antonio Alvarez Alvarez: I guess the leverage ratio. Javier Marín Romano: Yes. And yes, for the leverage ratio. Well, we have a new paper that was issued in terms of the guidance for the leverage ratio. We'll have 3% for the U.K. with some buffers in terms of for systemic institutions and so on. And we have -- but I don't think the expectations were much higher, sitting up between 4.5% and 5%. So it's gone lower than many of the analysts expected. So I don't think this should have a big impact on the mortgage market in the U.K. José Manuel Campa: Thank you. Moving on to the Western Hemisphere, particularly Brazil. We already addressed the question that we had prior regarding the macro outlook, but we have more specific questions on the evolution of volumes going forward, loan volumes. We have questions from Stefan Nedialkov of Citigroup, Francisco Riquel of N+1, Mario Ropero of Fidentiis and Daragh Quinn of Nomura. These questions basically have to do with how do we see the composition of our loan book going forward likely to change in 2015. What is our risk appetite for growth going there? And also, did you -- do we see any potential risk on growth volumes -- on loan growth volumes next year due to the macro outlook? Javier Marín Romano: Well, our expectation with respect to the macro is that the growth of the country should be better than this year and be slightly above 1%. This year, we've been -- we are growing credit well, specifically in the segments where we wanted to grow. And we are doing come, as you saw with the -- as we mentioned with Bonsucesso in order come into the payroll market again. But we think that for next year, we can expect volumes to grow slightly better than this year but probably in single digits. José Manuel Campa: Thank you. Now moving on, still in Brazil, regarding the evolution of net interest income and margins. We have questions from Francisco Riquel of N+1, Ignacio Cerezo of Crédit Suisse and Daragh Quinn of Nomura where they're basically asking what's outlook for margins going forward and, in particular, what are the apparent decrease on net interest margin in quarter 3 of this year, when we should expect that going forward between the change in the mix profile. Javier Marín Romano: Well, I -- we don't see any particular margin compression due to competition right now in Brazil. So the change in our margin -- in our business margin is basically due to the change of mix. And I don't expect to see the net interest margin to continue to have a big drop and -- more especially even after the provision charge. José Manuel Campa: Thank you. One last question on Brazil from Sergio Gamez of Merrill Lynch regarding our trading gains. He wonders whether this has to do with portfolio rotation of our ALCO portfolio. Or are there any other specific issues in those trading gains in Brazil in terms of[indiscernible]. José Antonio Alvarez Alvarez: Well, I mentioned in the -- it's the comparison with the second quarter. The second quarter was particularly low. You analyze several quarters in a row is the comparison between the third and the second quarter because the second quarter was abnormally low. It's not that we have something abnormally high in this quarter. Javier Marín Romano: [Spanish] ALCO portfolio. José Antonio Alvarez Alvarez: Well, in relation with the ALCO portfolio, well, we've been pretty active with this. The portfolio now, as I mentioned before, this EUR 11 million, is lower than the usual size we have in the country, yes. José Manuel Campa: Okay. Moving on to Chile. We have 2 questions regarding Chile. Daragh Quinn of Nomura wonders that there seems to be a deterioration in economic conditions in Chile. What would be our outlook for provisions and loan growth going forward? And Sergio Gamez of Bank of America Merrill Lynch asks us what will be -- what was the underlying source of the negative impact on the net interest income for the quarter. I think we have already discussed this on the presentation, but you might want to elaborate further, particularly where we should expect further negative impacts going forward. Javier Marín Romano: Chile. Yes, the economy of Chile has been slowing down this year. Our expectation for next year are a better growth than what we have seen in 2014. We don't expect any material impact in provisions due to the deterioration that we have seen in the economy in the previous months. José Manuel Campa: Thank you. Now moving on to our... José Antonio Alvarez Alvarez: Well, in relation with the inflation, it's very well known. Normally we have a -- the mortgage portfolio in the country, that is pretty large, the -- is -- they're sitting in UF. So it's basically inflation-plus rates, while the liabilities are -- all of them in nominal rates. This position -- this loan position in inflation means that when inflation comes relatively high, the quarter affecting us... [Audio Gap] is also true. So we were mentioning in the quarter that the level of NII was very high due to this, and this quarter the inflation came on the lower side. So on this, we'll continue there because this is a position that is quite structural. You can reduce a bit or increase a bit, but to hedge 100% is not possible. There is no -- the market is not big enough or there is no counterparties to hedge 100% of this position. José Manuel Campa: Thank you. Moving on to questions on the last geography, Poland, that we have questions. We have questions from Britta Schmidt of Autonomous, 2 questions: one, whether we can elaborate on the commercial reason to grow deposits so strongly in Poland; and the second question, whether the Polish divisional P&L that we'll report includes already the Consumer Finance business that was sold from Santander Consumer Finance to BZ WBK. Javier Marín Romano: Okay, second question, no, it doesn't include it. We report Poland in their local figures they report it. But we report our Poland Santander Consumer Finance unit within the Santander Consumer Finance. The first question, with respect to deposits, it's been basically a broad campaign that has been launched in order to increase the number of affluent customers that we have. We have on-boarded 70,000 new affluent customers, which we now need to work in order to strengthen our relationship for them -- with them. So it has basically -- it has nothing to do in terms of management of the balance sheet even though, of course, it will have an impact in terms of reducing the cost of financing the Santander Consumer Finance balance sheet now that it's consolidated. But basically, it was a customer action in order to increase the number of affluent customers that bank with us. José Manuel Campa: Thank you. We've finished the coverage of all our geographies. We have received 2 additional questions regarding the group level that I would like to put forward to you, one from Andrea Filtri of Mediobanca and also from Carlos Peixoto of BPI. These questions have to do with issues related to the ECB. And particularly, we had a question whether we have -- we have a Pillar 2 charge for coming out of the AQR, from, well, some portfolios coming out from the AQR. The answer to that is true -- is no. But then they asked whether we expect an annual repeat of the EBA stress test scenarios. And second, whether we can elaborate on our approach to the coming TLTRO auction in December, how much do we expect to raise in that auction and what's our current exposure to the ECB. Javier Marín Romano: So with respect to the Pillar 2 charge, no, we don't have any Pillar 2 charge and we don't expect any. And with respect to the TLTRO, we went already to the auction on September. We will go again in December. The -- José Antonio, you can elaborate on the figures, but basically the -- EUR 9 billion is what we expect from both of them. José Manuel Campa: Thank you. We have reached the end of all the questions that we have received. I hope we have addressed them all adequately. If we were to have any -- if you were to have any additional issues or additional questions, I like to remind you that we, the Investor Relations, are always at your disposal. We'll be happy to address them individually. Thank you very much for attending this quarterly results presentation, and have a nice day.