Maria Luisa Gómez Bravo - Head Investor Relations & Shareholders Carlos Torres Vila - President, Chief Operating Officer & Director Jaime Saenz de Tejada Pulido - Chief Financial Officer

Maria Luisa Gómez Bravo: Good morning, everyone, and welcome to the Third Quarter Result Presentation of BBVA. I am Luisa Gómez Bravo, Head of Investor Relations. And joining me today are: Carlos Torres, President and COO of the group; and Jaime Saenz de Tejada, our CFO. As in the past, Carlos will begin with the presentation of results, and we will be moving straight on to the Q&A after that. As you know, we will try to answer as many questions as possible during this presentation, and the IR team will remain available throughout the day to answer any pending questions. So over to you, Carlos.

Thank you, Luisa. Hello, everyone. Thank you for joining us this morning. Before reviewing our quarterly results, I'd like to give some macro context for our footprint. Given the volatility that we have seen over the past few months especially in the emerging markets. The markets - the global financial markets have been quite affected by a combination of factors and concerns around China and its slower growth. The lower commodity prices associated with that, including oil and the continuing uncertainty surrounding the Feds' rate hikes extent and schedule of that, and problems of more of a local nature in some relevant emerging countries such as Brazil. And all of that has had undoubtedly an effect on sentiment regarding the emerging markets. And it will have an effect on growth going forward and inflation as well, on a global level and also in our footprint. Now, even in this slower scenario, slower growth, we still expect growth levels of 2% to 3% for both 2015 and 2016 next year, in the majority of the countries where we operate, assuming on a base case scenario of a gradual slowdown in China. And our developed economies, the U.S. and Spain, will continue to grow well. In the U.S., we continue to see solid domestic demand, healthy indicators such as employment and disposable income favored by the lower oil price. In Spain, the macro fundamentals are strong. GDP growth, this year will be above 3% and next year above 2.5%. And we are seeing eurozone peripheral risks reduced. And as you have seen, the ECB has reinforced its commitment to additional support as required to support growth. In the emerging market footprint, growth will slow down. But I would like to distinguish three different areas. In Turkey, we expect growth rates at around…

Yes. Thank you. Thank you for the questions. So, on capital, I think it's important to give a bit of color to better understand what has happened in the quarter and what we can expect going forward as well. I would start by repeating what I said just now in the review of the presentation that we have had quite an exceptional of quarter in terms of the market evolution. It's really an exceptional downturn that we have not seen such a movement on a quarterly basis over the last seven years, actually since the Lehman Brothers event, in many of the markets, and that has affected our footprint, in particular, quite sharply. Currencies within our footprint were really down in a sharp way quarter-on-quarter. Depreciations, for example, of 8% on the Mexican peso or 17% on the Colombian or 13% on the Turkish lira, et cetera. So, that's quite worse than even the second quarter of 2013 when tapering started. The same applies to the evolution of our main equity stakes which have had in the quarter very sharp corrections. Telefónica was down 15% and the remaining stake that we have in Citic went down 18%. So, it's this market volatility that has impacted our core capital in an extraordinary way, in a very significant way as well, and as I was saying, the combined effect of the market movements and others was 29 basis points. And to the questions on the specifics, I'll give the highlight and then IR can probably give more detail if needed to those of you who have more questions. But I would say that this is distributed, more or less, on an evenly way between the various effects of the mark-to-market on the non-sovereign available for sale portfolio, which is mainly the two…

Yes. Good morning to all. Okay. Regarding the evolution of total equity, total equity went up by €2.6 billion in the quarter but it's true that shareholder funds were down by minus 2.3%. The main explanation, as you can imagine, is a minus €1.1 billion loss that we had in the quarter and then the two dividends that we had to recognize also took out an additional billion. The valuation adjustments are down by €650 million, and in the three, it's roughly all the available wholesale portfolios in here. There is no filter. We're talking minus €500 million. And then the FX movements add an additional €250 million. In this quarter, as we have the full consolidation of Garanti, our minority interest increased by €5.6 billion which adds to that €2.6 billion in total equity that we have. Regarding sensitivities and how much we will recover, as I just said, we had a very good performance in the scrip dividend, that was closed a week ago, 89.7% of our shareholders wanted to receive shares. So we will recover around €500 million in the fourth quarter. And as Carlos has already mentioned, market volatility has allowed us to recover already 20 basis points. So I would say that a significant piece of what we've lost in the third quarter has already been recovered. In the case of sensitivity to the Mexican peso, I think we've shared in the past these numbers. For every 10% devaluation of the peso, we lose 7 basis points in core. So, we closed the quarter at around MXN 19 against the euro. We're now at around MXN 18.3, so, a portion of the recovery has been - has had to do with Mexico already. Maria Luisa Gómez Bravo: Thank you. More questions on capital. Stefan Nedialkov from Citi asks have you received your stress requirement? And are you comfortable with it? Carlos?

Oh, well, as you know, this is a dialogue between the supervisor and the banks on a bilateral basis. And we have had meetings as part of that dialogue. We have also received a draft of the letter but have not received the final one. And we are very comfortable with what the letter says and the requirements associated with it. Maria Luisa Gómez Bravo: And going on, Daragh Quinn from KBW, Stefan Nedialkov with Citi, Alexander Patelski from Kames Capital and Carlo Digrandi from HSBC asks where do you see your core Tier 1 ratio at the end of this year? What is your objective for capital in 2016? And do you think this is the lower limit? Did you reiterate your dividend policy for 2015? And what do you expect to pay in dividends in 2016?

I think we already touched upon some of those. So, end of the year we'll be at or above the 10% that we envisioned for 2016. We see that ratio going up given the capital generation that we're having and the other effects that I mentioned. Dividend policy, there's no change neither now nor for the future, so that we remain with the policy of gradually transitioning to a cash dividend with a payout ratio of 35% to 40% over the next couple of years. Maria Luisa Gómez Bravo: On DTAs, Andrea Filtri from Mediobanca, Raoul Leonard with Deutsche Bank asks if we can indicate how the DTA-DTC levy will impact our P&L. Will you be able to net off historical taxes paid by Unnim and Catalunya Bank in your calculation of your net DTC position?

Yes, we will. And in terms of the impact, we don't have a final number, but the estimate we have. It's around €70 million after tax for 2016. And then that will be coming down as we, of course, pay taxes. And the asset - the deferred tax asset base goes down. Maria Luisa Gómez Bravo: And Samir Desai from Morgan Stanley asks, following the consolidation of Garanti, do you have any near-term plans to issue a Tier 1 and/or Tier 2?

We do not have any near-term plan to do an issuance in Garanti. Of course, we're monitoring the evolution of the core Tier 1 ratio and the total capital ratio, which has been affected by not only the FX volatility, but also by the market volatility in Turkey. But we feel that we have sufficient levers at our disposal in the next few quarters to increase significantly these numbers and we don't expect anything in the short-term locally. At group level, we haven't done any Tier 2 transactions this year. As you know, the bucket is at - the 2% bucket is at 2.8%, so it's filled already at 2.8%, so we are very strong there. So, no short-term needs. And in the case of the Tier 1 bucket, at the 1.5%, we are already at 1.1%. You know that we've done transactions not only at the beginning of each year. We will see what is the situation in the market. But yes, I think we still have one more transaction to go to fill completely the Tier 1 bucket. Eventually we will do it. Maria Luisa Gómez Bravo: Moving on to FX to forex, Stefan Nedialkov from Citi and Britta Schmidt from Autonomous asked how much was the P&L FX hedging benefit or loss in the third quarter? How much FX hedging benefit goes away in 2016 versus 2015 and what are your hedging plans for 2016?

Okay. Let's start from the last questions. Our hedging policy has not changed regarding earnings. We will try to hedge between 30% and 50% of earnings on a 12-month view. The 2015 fourth quarter P&L is hedged at around 50%. And 2016 hedging is still in the low range of the numbers that I've shared with you because we do believe that the lira and the Mexican peso should not behave as bad as they've had in the last few months. Regarding impact in the quarter on the hedging policy, FX has been negative. FX impact in the quarter has been negative. On the year, without Venezuela, we've been able to have a positive impact of €131 million and €24 million of those comes from actual hedging. Okay. So, that's I think the answer to the first question. Maria Luisa Gómez Bravo: Britta Schmidt from Autonomous also asks if the trading loss in the corporate center is largely FX-related.

No. We have a positive on the corporate center because of FX movement, as you can imagine, in this quarter. The loss in the corporate center has mainly to do with the equity portfolio that we have accounted there. Maria Luisa Gómez Bravo: Alexander Patelski from Kames Capital and Tomas Nicolau from MainFirst asks if core capital hedging policy across geographies especially in Turkey, do you hedge Bancomer's equity from FX volatility, I think...

Yes. I think I've already answered that. We are thinking about increasing our hedging percentage as I've just said, until we are around 50% in terms of core. All the excess in core that is not naturally hedged by the ratio is what we hedged. We hedge at 50% and we are thinking about increasing that to probably 70% and this is something that we will do in the course of the following quarters. Maria Luisa Gómez Bravo: And Daragh Quinn from KBW asks how big a depreciation do you think there could be in Argentina and what is the sensitivity of capital to any depreciation there?

In our case, well the book value of Argentina is roughly €900 million. In countries in Latin America, we operate with a huge asset density. So, as you've been able to experience when we did a very significant adjustment in the first quarter in Venezuela, that did not lead to any impact whatsoever in our core capital ratio. So, that would be what we would expect if anything happens in Venezuela regarding the currency. The peso is now at 10.9 roughly. Our research department believes that it could go to maybe 14 during the course of 2016. But that probably very much depends on who eventually wins the presidential election. So, I would say that we still have a sufficient, unknown facts to have a certain answer there. Maria Luisa Gómez Bravo: Okay. We're moving now to questions on business areas. Let's start with Spain, the banking business. And we'll start with spreads. Let's start with lending spreads. Johan De Mulder from Bernstein, Mario Ropero from Fidentiis, Daragh Quinn from KBW asks if you can give more detail on front and back book lending spreads. What is the average duration of your back book? What is your opinion on asset spreads going forward? Is competition over? And then on the deposit cost, Mario Ropero from Fidentiis asks if we can talk a little bit also about the front and back book levels of time deposits in Spain.

Okay. I think on this front, I'm going to talk ex Catalunya Caixa. And then, I'll give the numbers for Catalunya Caixa because they complicate the comparison. I think we had a very good quarter. I don't think that competition is going to go away. But from what we've seen in this third quarter, I think it seems like we are acting much more rationally in Spain. And I say this because the front book in mortgages is flat in the quarter. We just lost 1 basis point there, from 190 basis points to 189 basis points, that's the spread. In the commercial portfolio, we increased the spread - in the consumer loan portfolio, sorry, we increased the spread from 679 basis points to 683 basis points. The spread going down in the public sector portfolio, 13 basis points to 87 basis points. We saw an increase in the midsize segment, in the midsize company segment from 202 basis points to 215 basis points, and we also saw an increase in the corporate segment from the very low second quarter that there were some one-off transactions from 138 basis points to 172 basis points in the segment, so very positive news I think on the loan side. The trends on the funding side remained pretty much the same in the third quarter. Time deposit cost went down by 4 basis points over the second quarter from 30 basis points to 26 basis points which allowed the total stock of time deposit to go down by 19 basis points from 93 basis points to 74 basis points. This has allowed BBVA ex Catalunya Caixa to increase the customer spread by 2 basis points in the quarter to 198 basis points from 196 basis points in the second quarter which was also an increase from the first quarter that was 193 basis points. Now, it's important to realize that the minus 9 basis points that we've had in the loan deal side, again, this quarter, 70% of it is due to the lower Euribor rates that we are still experiencing, and only 3 basis points is due to actual competition. The overall deposit cost went down to 11 basis points, went up - yes, went down, sorry, 11 basis points from 56 basis points to 44 basis points, so minus 9 basis points plus 11 basis points leads to plus 2 basis points, and I think very positive news in this third quarter. Maria Luisa Gómez Bravo: And on public sector loans, Raoul Leonard from Deutsche Bank asks about our public sector lending portfolio strategy. Can you give us color on the size and can you give us some color also on the yield of this portfolio in the third quarter? And what impact that the government ruling have on reducing this? And will you substitute this income through government sovereign bonds?

Okay. I think in the question of spreads, we already talked about it. The thing that I didn't tell you, Raoul, is that the total spread of the book is currently at 191 basis points, okay? That was the only bit of info that I didn't give you. Okay. Regarding this portfolio, which we're talking roughly €24.3 billion. This is a very significant news this quarter. It went down by 6.3% quarter-on-quarter. I think it's remained surprisingly stable during the first six months of the year. But all along the year, we've been sharing with the market that the impact of the Royal Decree that was issued at the end of last year will eventually have an impact. And that we will probably concentrate it in the second half of the year. So that is what has actually happened. And more should go down in the fourth quarter of the year. On the sovereign bond side, nothing is changing. Our sovereign - our ALCO portfolio remains exactly the same. That's roughly €37 billion, and our overall public sector exposure remains exactly the same at around €33 billion. So, the numbers are completely stable. Maria Luisa Gómez Bravo: Thank you. Moving on to some questions on NII, although I think we've answered a few of these perhaps but Daragh Quinn from KBW, Stefan Nedialkov from Citi, Britta Schmidt from Autonomous, Raoul Leonard from Deutsche Bank, Andrea Filtri from Mediobanca, Arturo de Frias from Santander, Francisco Riquel from Nmas1 asks, first of all, the customer spread declined 5 basis points in Spain quarter-on-quarter to 1.83%. What is the outlook in coming quarters? And do you see any lessening of assets spread competition and increase in the profit costs? Do you still expect low-single digit growth in loans and NII in 2015 in Spain? And what is the outlook for NII, NIM, and loan growth in Spain for 2016?

Okay. The way I answered the question before was without Catalunya Caixa, and that's the way we explained it. They're plus two in the quarter. With Catalunya Caixa it's minus five, and that's because Catalunya Caixa's customer spread went down by 33 basis points in the quarter from 119 basis points to 86 basis points because of the removal of the floors, okay, which was something that we knew it was - we were going to do and it was taken into account when we bought the franchise. Regarding volume growth, I think that if we take out what is happening in the public sector portfolio that I just talked about, I think that the dynamics in the retail side remain pretty much the same. The consumer loan book is growing. The mortgage portfolio is - will end up the year around minus 2% as we were expecting, so no major news there. We've seen a decrease in the commercial portfolio this quarter. This has been the first time that this has happened in the last four quarters. We've been growing roughly at about €1 billion per quarter since the third quarter of last year and this has changed a little bit of the trend although we believe it is for different one offs, so we're pretty sure that that trend will change, so that we will be able to be flat year-on-year in terms of volume ex the public sector portfolio. That, with the good behavior of customer spreads that we are having ex Catalunya Caixa, allow us to be confident that we'll be flat to a slightly positive in NII in 2015. And as you all know, we don't get give guidance for 2016. Maria Luisa Gómez Bravo: Let's move to costs Alfredo Alonso from Kepler, Francisco Riquel from Nmas1, Stefan Nedialkov from Citi, Britta Schmidt from Autonomous, Daragh Quinn from KBW, and Mario Ropero from Fidentiis asked the following questions on costs. What part of the increase of expenses in Spain is due to the non-recurrent items? Which ones have been registered in the quarter and how much could be expected in next quarters? Please, could you quantify the allocation of costs from the corporate centers to Spain? What drove costs in Spain so high, the cessation? Outlook for fourth quarter in 2016? Can you explain the jump in costs in Spain during the third quarter and what is the cost base expected post Caixa Catalunya synergies in 2016 and 2017.

Okay. Let me take that one Jaime. On costs, the - first of all, the increase that you have seen in Spain has nothing to do with the digitization, so that is very clear. In fact, we will be expecting that digitization will be driving efficiencies as I mentioned during the presentation as well. We are already seeing increases in productivity that are quite impressive in some of the products. We were only showing illustratively, for example, the consumer loans, but within that for example, I recall about a year ago, I was presenting in a conference to some of you in London and was giving some statistics on how, for example, the financing of credit card transactions through the mobile phone was exploding and growing exponentially, doubling the total amount of loans that the bank with financing including all channels, in just a few months. Well, that trend has continued and if we were doing before that functionality was available on the phone, we were doing around 7,000 to 8,000 loans of that type per month, we had already doubled that by October last year to around 15,000. Well that number now is around 30,000 per month. So it has quadrupled the total amount and the exponential trend continues. And that is happening in product after product with some variations, of course, on the rates of growth but it's happening throughout. So, digitization will have a positive impact not a negative impact on our numbers and that includes costs. So, what has driven costs is really the, of course, the integration of Catalunya Caixa that this quarter is contributing three months fully in the quarter and was only two months in the second quarter, and, of course, it was not there last year. And then the allocation of expenses…

The numbers are pretty much the same as they were last quarter. The total ALCO portfolio is €36.6 billion versus €36.7 billion, duration is 3.4 years versus 3.5 years, and yield is around 2.75% something like that, okay. And those are numbers excluding Caixa, okay. Maria Luisa Gómez Bravo: Okay. And one question on asset quality, Andrea Filtri from Mediobanca asks if we can guide on loan loss provisions in Spain in 2016.

What we've said for loan loss provision in 2016 is that it should be between 60 basis points and 65 basis points cost of risk, the good behavior that we're seeing in Spain, I think, gives us a lot of confidence that we should achieve then. Maria Luisa Gómez Bravo: Okay. And Carlos Peixoto from BPI asks regarding mortgage floors. Do you believe that any retroactive impacts could be in force for BBVA if the European court rules that floors declared null have full retroactive impact? What would be the impact of full retroactions?

Yeah. There has been some news this week on this and maybe too much. As you know, we had a Supreme Court sentence that caused us to stop applying the floors to all of our clients starting in May 13. And this is a final decision by the Supreme Court of Spain, and we believe that, as the commission believes as well, that the matter, as it regards, BBVA has been judged, and it's final. So, we don't expect any impact coming from that in our particular case. Maria Luisa Gómez Bravo: Okay. Let's move on to Mexico, and I'm going to have to speed up a little bit here so that we can go through all the questions that remain. And I'm a little bit conscious about time. Mexico. Alfredo Alonso from Kepler, Stefan Nedialkov from Citi asks what are the reasons for pressure on NIMs to Mexico and what the outlook for 2016 is? Regarding competition in loans, Stefan Nedialkov from Citi asks if we are seeing increased competition in lending. And regarding NII, I have three questions as well. Arturo de Frias from Santander, Raoul Leonard from Deutsche Bank asks regarding NII or NIMs fell 28 basis points quarter-on-quarter to 5.7%. What is the outlook for margins going forward? What is the outlook for NII in terms of volume growth versus NIMs. Which loan segment are you focusing on? And if we could update our guidance and expectations regarding loan growth and NIMs in Mexico in 2015 and 2016? And finally, on NII as well, if we can explain the P&L sensitivity to the Fed's interest rate hikes.

Okay. I'll try to go fast and try to answer everything. This quarter, we've seen a very significant growth in loan volumes. So, yes, we might have competition. But quarter-on-quarter growth has been 5.1%, when year-on-year is 15.2%. So, Bancomer's franchise is growing very strongly. This is allowing us to increase our market share overall. This has been the case year-on-year, once again. This growth is being driven by the commercial portfolio which enjoys lower spreads than the credit card portfolio that we continue to experience in the financial side, lower increases. And that's what is leading to a smaller customer spread which is down slightly to 10.6% in the third quarter of this year from 10.9% in the second quarter of 2015. This explains that this 15% year-on-year growth in volumes, because they are true for loans and customer deposit, has only translated in a 12% growth in NII ex-global markets, because, as you know, especially at the beginning of the year, the global markets area did not perform well. So, even with the country growing at roughly 2%, the behavior that Bancomer is having is very strong. And this is having very positive consequences in the cost of risk side which is clearly below the expected guidance of 350. Our sensitivity in Mexico to interest rate increases is a little bit below 2% for every 100-basis-point increase in the curve. And we do expect the central bank to follow whatever the Fed does. Maria Luisa Gómez Bravo: Okay. Moving on to costs in Mexico, Stefan Nedialkov from Citi, Britta Schmidt from Autonomous and Francisco Riquel from Nmas1 asks if you can explain the jump in costs in Mexico and when shall we expect positive jaws if any?

I think the main reason for the deterioration in Mexico, which is the main reason also in Latin America, is the FX impact. We have contracts denominated in U.S. dollars and a very significant depreciation in the quarter is affecting the cost side. And then things that we knew that were going to happen like the double cost that we're experiencing this year because of the two buildings that we are currently operating. The best that I think we can achieve this year is for flat jaws. I don't think that we are going to be able to generate positive jaws this year. Maria Luisa Gómez Bravo: Okay. And another question as well is do you stick to this 10% profit growth target in local currency for 2015?

Completely. And I think the quarter has shown that Bancomer is getting closer to that number. We've been improving the top line quarter-on-quarter every single quarter during 2015 as we were expecting, and the same is true for the bottom line. We are at 9.6% and sufficiently close to the 10%. And there's always a seasonality and the fourth quarter tends to be very strong in Mexico. Maria Luisa Gómez Bravo: And in asset quality, Francisco Riquel from Nmas1 asks if we can comment on the outlook for the asset quality and cost of risk in the coming quarters in Mexico.

I think I've already mentioned that. I mean, NPLs have fallen by 21 basis points in the last three months, cost of risk is below our initial guidance. I think trends remain very positive. The cost of risk in the quarter you've been able to see it in the presentation of Carlos, 3.3%, I think also helped by the change in mix. Clearly, the dynamics are very positive there. Maria Luisa Gómez Bravo: Okay. We move to South America, Mario Ropero from Fidentiis asks when can we expect a relaxation in the level of growth of costs?

I think I've already answered. I think partially it's due to the depreciation of the local currencies. Many service agreements that we have in the region are denominated in dollars. And I think that's the most important reason. Apart from that, expansionary plans that we had in some countries until last year. So, that's the only reason. Maria Luisa Gómez Bravo: Okay. And on asset quality, Robert Noble from RBC and Francisco Riquel from Nmas1 asks if we can comment on the outlook for asset quality and cost of risk in the coming quarters. And Latin American cost of risk is surprisingly good compared to previous guidance of increasing into year-end. Should we expect this to continue? Is there any impact from lower commodity prices and provisioning yet?

Yes. Cost of risk is good overall. It's better than expected in the U.S. It's better than expected in Mexico. It's better than expected in [indiscernible], so around what was expected in Spain, lower in Turkey and that's also the case in Latin America. We were expecting between 15 basis points and 20 basis points deterioration year-on-year ex-Venezuela and only 10 basis points have been reflected in the P&L in year-on-year - sorry, year-to-date and so the quarter has shown an improve of 5 basis points and dynamics are very good. We haven't seen so far any deterioration in pretty much any country and except probably Peru. Peru and slightly Colombia are the only countries where we're seeing slight deterioration in the cost of risk. Maria Luisa Gómez Bravo: Okay. We're moving to Turkey now. Britta Schmidt from Autonomous asked, Garanti's results have disappointed. What is your expectation for future performance? How happy are you with the return on investment and would you support the potential Garanti investment in Finansbank?

Okay. I can answer on the P&L part but not on the second part that Carlos will answer. Are we disappointed? I think the underlying trends as was clearly shown in the results presentation two days ago have been very solid. This quarter impact have been affected by the very low recognition of income coming from the CPI linkers and partially also by the mark-to-market of certain portfolios due to the FX movements. NII line remains very strong. It is true that we had those capital gains impact and cost of risk. And the cost base has also shown a significant increase partially due to the FX impact plus a series of one-offs, fines, et cetera, that I think you're very aware of. And cost of risks are behaving very well. So, the underlying trends, I think in Turkey has not changed. And even in this very volatile market conditions, Garanti is demonstrating that it's very good at managing volatile situations, managing prices very well. And I think that should remain true in the future.

On the M&A question, I think as we always do we don't comment on specific deals. But I think already Jaime mentioned our position in Turkey and how happy we are with our ownership of Garanti. It's the leading bank. If there are consolidation opportunities, they will surely look at them. And if they make sense, we would support. But I would not like to comment on any specifics. Maria Luisa Gómez Bravo: Okay. Arturo de Frías from Santander asks if on an ongoing basis, revenues increased 5% and costs more than doubled. Can you explain the performance? Arturo, I think Jaime just answered that. Johan De Mulder from Bernstein asks if we can give guidance in Turkish credit costs and NPL formation? And is there stress being witnessed on FX-denominated loans, 40% of total, given that lira is trading at record low levels versus the dollar?

The dollar portfolio is only going down, so that's I think a very positive news. We're gaining market shares significantly in lira loans but that's not the case in dollar loans. We're down by 96 basis points only in the quarter. And that I think is a reflection of the conservative approach that I think we generally have in all our subsidiaries. And I think that's clearly reflected in NPL ratio that has gone down in this situation by 7 basis points quarter-on-quarter to 2.6% in Garanti. Recoveries have improved very significantly and has led to a cost of risk of 103 basis points, which it is an increase but only of 3 basis points versus the second quarter of this year and definitely much lower than what we had the third quarter of 2014, which was 110 basis points. We stressed the portfolio every single month and for FX movement in Turkey, and no significant deterioration has been seen as of yet. Maria Luisa Gómez Bravo: Thank you. Moving on to the U.S., Stefan Nedialkov from Citi asks about the outlook for loan growth, NIM, cost of risk, and cost growth in 2016, and also Stefan asks about an update on digitization initiatives at Compass.

Let me start with that one. Like in the other countries, we are moving ahead with many initiatives in Compass regarding digitization. Some of them are of a global nature. In fact, we are driving a single development agenda to ensure that the solutions, the good solutions that we develop for our customers are deployed in all of our geographies as fast as possible and that we avoid multiple fragmented efforts in the various places. And Compass is part of that. It's both contributing as well as benefiting from the global developments. I would highlight the few products that have been launched with the digital first and mobile first mentality including the NBA Amex Card. And we're just starting the season now and we have good hopes of that being a success, that product. Or the ClearSpend product that was launched a couple of months ago with - or even less, I think, just a few weeks ago with impressive pickup in customers on a weekly basis. Our mobile app was redesigned and the new deployment has won the award for the best mobile banking app. We have many - we have inaugurated a development center in Birmingham where we have a Scrum team working in all of these developments not only for the front-end but also in streamlining the processes at Compass. I would finally highlight the open platform project which has lots of potential to add additional business. It's really about connecting our new state-of-the-art banking platform that we invested heavily in the past. And then it's really a competitive advantage to really provide services to third parties leveraging that platform. We have connected, as you know, probably from press releases. We have connected with Dwolla and are now in the process of connecting with Simple bank, and that will be the start of that open platform strategy.

And regarding 2016 guidance, as you know, we don't give any, but 2015 numbers are moving as expected. Good, strong loan growth around 13%. Customer deposit, around 10%. Spread is stable. Only 1 basis-point in customer spread, down versus last quarter. We're down to 310 basis points, robust numbers. Nothing in cost of risk, as I mentioned, lower than what we were expecting for the year. We're still at around 20 basis points, 23 basis points for the year. So, I think very good numbers coming from the space. Maria Luisa Gómez Bravo: Okay. We're going to finish because we just have practically five minutes to go on strategy. Raoul Leonard from Deutsche Bank asks if we - or says that we have been very busy on structural changes, Garanti, Catalunya Bank, sale of stakes in China. Are you now largely finished or should we expect further changes?

Okay. I would make two comments. One is that capital allocation and the return on net capital is a core part of our strategy, not just for M&A but even for all decisions that go from day to day, origination to longer term planning, capital planning, growth planning. That's, again, the same as efficiency. It's one of the priorities to ensure that we maximize return on capital taking into account also the new regulatory requirements. So, that has a bearing also on the configuration of our portfolio. But beyond commenting on M&A, which we, of course, don't do, we are continuously reviewing that portfolio and considering opportunities to strengthen the positioning in the markets where we see high potential and also exiting those that don't or moving capital away from business segments that generate less to those that do generate the return that we require. I think we have a clear strategy that you know in terms of what fits and what doesn't fit. And of course, this focus on value creation for our shareholders. Now, having said all of that, what we're focused on is really to be a better bank for our customers, as I said, leveraging technology, leveraging data to do that in the markets where we operate, and generating organic growth in the markets where we operate in the most attractive segments. Maria Luisa Gómez Bravo: A few questions on consolidation in Spain from Johan De Mulder from Bernstein and Andrea Filtri from Mediobanca asks if we can please elaborate on our M&A strategy in Spain, and specifically, if we are planning any further acquisitions in Spain, bank acquisition rumors, so on.

Yeah. They are the same. In Spain, we have grown significantly through acquisitions, taking advantage of the crisis and the concentration that the industry has gone through. So, thanks to the Catalunya Caixa NIM deals, we now have a market share of around 15%. And we're focusing now on gaining share organically. Of course, if there are opportunities, we will look at them, but we have an organic growth strategy. Maria Luisa Gómez Bravo: Also, in Spain, Daragh Quinn from KBW asks if given the growth in digital, could you close 25% of the branches in Spain?

I think longer term, we will see a significant reconfiguration of the channels through which the customers relate to the bank. As you can see, the transactions in branch continue to go down as mobile customers continue to grow exponentially. That trend will surely continue because our customers are demanding that, our - the customers that relate to the bank through digital channels interact more often and they are more happy with the bank. They love us. They are really promoters in a big way. And that will continue also as we continue to deploy lots of maybe small things that together, they add up to really a revolution. And we have many things already in the hands of our customers that simplify their lives, really take away the need for them to come to the branch for low value added activity, servicing activities, operating tasks that are really best done by the customer in their free time or when it's more convenient for them. And that will definitely, longer term, have an impact. But I think here, we cannot put really the cart before the horse. We have the branches also to drive sales, and that's a very relevant factor in today's business model. So it will be a gradual approach as we shift interaction both on the sale side as well as on the servicing side, to channels that the customers demand. It will have that consequence that you're referring to in the longer term. Maria Luisa Gómez Bravo: Okay. Thank you. Robert Thomas from T. Rowe Price asks given the negative impact this quarter from equity stakes, what is the rationale for continuing to hold these stakes?

Well, as you know, we have two main equity stakes, Telefónica and CNCB, as Carlos has said at the beginning of the call. In the case CNCB, we've been slowly but surely disinvesting. We used to have 15%, and now, we're down to 3.26% at the end of this quarter. And it has been a very profitable investment. In Telefónica, we owned a little over 5% of the company. And it's true that with some volatility quarter-on-quarter, the reality is that this is a very efficient stake in terms of both capital consumption and fiscal and financial costs especially during these days. And I think we - it adds value to our shareholders and also to the shareholders of Telefónica. But we must also take note that it's been available for sale. So, eventually, this stake could potentially be sold out. Maria Luisa Gómez Bravo: And the last question, as we're running out of time, is on Turkey. [indiscernible] asks if we are planning to increase our shareholding percentage in Garanti the other Turkish markets?

No, we're not. But I think we are happy with the stake that we have in Garanti Bank of 39.9% and the control we have of the bank through the board and all the plans that we're putting in place to work together in really capturing synergies and leveraging things in which we believe is adding value to Garanti and vice versa. But there is no plan at all to do what you say. Maria Luisa Gómez Bravo: Okay. Thank you very much, Carlos. Thank you very much, Jaime. And thanks to you all for attending the call. As of right know, the investor relations team remains available throughout the day for - or to answer any remaining questions that you all may have. Thank you very much.