Banco Santander, S.A. (SAN) Q4 2014 Earnings Report, Transcript and Summary

Ana Botín-Sanz de Sautuola y O’Shea - Chairman and Executive director Jose Antonio Alvarez - Chief Executive Officer, Executive Vice President of Financial Management and Investor Relations Jose Manuel Campa - Head, Investor Relations Ana Botín-Sanz de Sautuola y O’Shea: Good morning. Welcome [Technical Difficulty] Group 2014 Results Presentation. And thank you for joining us. Since I assumed my new role as head of the Santander Group, four months ago, I had cleared the four priorities going forward. And so our focus has been, first, governance and board composition. We now have a board with 60% independent members of which 33% women and four nationalities with a good mix of skills and experience. The executive team, we have new team that brings international experience from inside and outside the group, and in addition we have simplified the corporate structure. Three, capital, after a €7.5 billion capital increase we are now amongst the best in overall capital ratios versus our key competitors and we have a sustainable dividend policy. And fourth, and that is what I want to talk to you about, the fourth area of focus, which has been the strategic review of all our business and setting up priorities. There are six major trends that are shaping the way, in which we think about banking and we could group them around three. First the macro trends, which we see as overall positive for us; U.S. and UK, very positive view with expected growth of 3.6% for the U.S., 2.7% for the UK. Europe, less growth, but we expect QE and lower oil prices will deliver new investments and higher than expected growth, with countries like Spain with a projected 2.5% increase in GDP in 2015; emerging markets with a diverse performance but still growth. The second trend, of course is regulation. The regulatory house we live in is being rebuilt as we speak. We need more clarity on important things like capital, banking reform, or resolution frameworks. And the third, digital and consumer revolution, this is perhaps the most profound and its impact is here to stay. Digital technology is changing banking as it changes our customers’ behavior. In many of our markets 85% to 90% of transactions are done digitally. Smartphone users check them 150 times a day. That’s being close to your customer. With so much choice available to customers, earning their loyalty is more important than ever and also more difficult. And this revolution means we must offer a different kind of bank. Santander’s response is summarized in three words: simple, personal, and fair, a point to which I will return later. So this is our starting point, our model. It is unique. No other bank has this combination of, first, a diversified presence with a well-balanced emerging mature markets mix delivering growth above peers, expected average GDP growth in our markets close to 3% by 2016; second, with the strong retail and commercial operation in all of those markets, we are or could be or have potential to be top three in our ten core markets, where we have access to one billion potential customers; third, our model autonomous subsidiaries, in liquidity and capital, but with integrated IT and support and control frameworks, to deliver group value added; fourth, with strong balance sheet with a predictable risk profile we have delivered a dividend every year, for more than 50 years including during the crisis; and last, but not least, a tough global brand, according to Brand Finance, we’re number ten in the world, and it is one of the many ways in which we add value everyday from our corporate centre. In summary, Santander is today a well-diversified retail and commercial bank with recurrent earnings generation, low rates and attractive growth profile. Our purpose is to help people and businesses prosper. It has always been part of the Santander culture, since its beginnings as a small regional bank that look to support international trade and commerce with Latin America. Our aim is to be the best retail and commercial bank that earns the lasting loyalty of our people, customers, shareholders, and communities. So what does that mean? The best bank is not necessarily the largest. It is a combination of many factors: retail and commercial bank, this is our essence; traditional banking, delivering sustainable results; loyalty is the core of our opportunity, building lasting relationships with all our stakeholders; people, customers, shareholders and communities, to create a virtuous circle, loyal employees will achieve loyal customers that will deliver better returns that will revert to society. Just as important as our aim is how we achieve it, how we act and behave each day. And we ask our teams and our customers about the type of bank they want and the three words that summarized it were simple, personal, fair. This is the Santander way. And we will put in place initiatives to ensure our culture which is consistent with the Santander way to be the best bank for our people, for our customers will work to add value for them through our products and our services in an efficient way to earn the loyalty. For our shareholders, we will use our reinforced capital position and predictable risk profile to grow our profits in a sustainable way. And when we achieve this, we will be able to further support the communities in which we operate, among other programs with our flagship Santander Universities. We want to be the best bank for our people and our way to achieve this will be by being simple, personal and fair. And we have done more than 6,000 interviews, talked to our people across the countries in which we operate to ensure we land these principles according to the local culture. We are working a specific initiative to promote this cultural change, a global talent management program and internal communications program led by the local CEOs, reviewing our training and development for all our teams and also review our objectives and incentives. The UK example, we aligned objectives and incentives to our simple, personal and fair objective, and the best example was to introduce a gateway to customer satisfaction for all employees from the CEO to the branch managers, nobody would get a bonus if customers were not satisfied according to our metrics. And the goal is to become top three bank to work for in most of our geographies in 2017 and ultimately in all of them. Earning the loyalty of our customers will be our top priority and the base of our strategy. We have 92 million retail customers and only 12.2 million are loyal customers and that is a customer who does most of his or her banking with us. Growing this number is the most significant opportunity we have and they will deliver benefit and measurable results. It should grow our current account balances as a result of having more transactional customers. This is already happening in certain countries. It will allow us to better understand, have better information on our customers, our customer behaviors and deliver more profitable lending growth. I will say we have a goal to grow more than our peers and have and deliver this growth with the right returns. They will ultimately allow us to grow our profit as loyal customers are four times more profitable. Our goal for 2017 is to have 17 million loyal retail customers, that is 40% more than today. And again, we have specific initiatives underway to achieve this. Products that foster loyalty like the 123 account, our services in select private banking and others. More importantly we know this can be done. I have seen it in the UK. With 123 account in three years, we’ve multiplied times three our current account balances, double the loyal customers, and moved from last to first in customer satisfaction with the resulting increase in £1 billion in revenues. In corporate and SMEs we have a very similar opportunity. We have three million customers of which only 26% are loyal. We have a unique value proposition for corporate, offering all companies specialized products and services that normally are only available for larger corporate; our SMEs, our retail network and digital channel, our strong presence in 10 countries and working together with our private banking offering. But in addition, we offer innovative and differentiated program unique to Santander. Our breakthrough in the - program in the UK or at banks in Spain and other countries where we offer financial and non financial support for SMEs, Santander Trade, a portal to support SMEs who are looking to import or export we have already 14,000 customers on boarded, and finally the Santander Passport, where if you are a Santander customer you will be treated in the same in every single one of our banks. So where are we in terms of results, we have grown this year our lending balances by 7.7%. We expect to grow above our peers in the future. And the goal is to exceed 1 million loyal customers by 2017. The second strategic initiative for our customers is operational excellence. We have been cost leaders for many years. Going forward, we understand operational excellence as delivering the best service in an efficient way, adding value to our customers. And we have not always been leaders in customer service as you can see in this graph and that is why we have a dual goal to become top three in customer satisfaction across geographies, while maintaining the cost leadership. We are working on two fronts to achieve this. First, simplifying our customer processes across the bank, leveraging on digital technologies. And second, adding value from a simplified group structure. We have already taken steps towards this by reducing from 15 to 11 the number of divisions in the group, but we will add value as I say by providing corporate frame works and control and sharing of best practices to the countries who are the ones responsible for leading the businesses. Our digital offering is core to our business model. Our digital customers are more loyal and three times more profitable. However, today, only 28% of our customers use our digital channels. The objective is to increase this to 45%. That’s almost double by 2017. This will drive more loyalty, more last customer relationships, and as a result more revenues. It will also reduce the cost to serve. Here we’re working on several fronts. We’re upgrading with specific programs our online and mobile channels. We have created new innovation area which reports directly to me and we have initiatives already going like our $100 million Fin-Tech Fund. So what does this mean for our shareholders? After our €7.5 billion capital increase, we are amongst the best in overall capital adequacy. As you can see in the slide, if we consider our business model and risk profile, which have been validated by the recent AQR and stress test, our reinforced capital base will now allow us to pursue organic growth opportunities to support our customers and to pursue a sustainable dividend policy increasing the cash dividend payout from €1 billion to €2.5 billion. Very importantly going forward, we will assign this capital in a more efficient way as we focus on organic growth, mainly in Europe and the Americas. We will be stricter in the internal capital allocation, allocating capital to those businesses where we see higher potential return. We will be stricter in our acquisitions criteria so let me be clear we are not currently considering this a priority and we’re not considering any acquisitions. In summary, this will allow us to deliver return on tangible equity between 12% to 14% by 2017. And to achieve this profitability excellence in risk management will continue to be essential. We are working on several initiatives which we group around what we call the group-wise risk management program where we are enhancing the holistic and timely control of all types of risks in the group. And this is an example in what we call the risk data aggregation project we’re investing €500 million. The goal is to achieve a predictable risk profile with NPL below 5% and with high coverage levels. Going forward now, most of our geographies we see at entering growth cycles. We expect an average GDP growth as I said, close to 3% by 2016. So a positive macro together with the growth in revenues, driven by developing better customer relationships and loyalty, improved performance in cost and customer satisfaction and strong balance sheet and prudent risk management will allow us to deliver higher growth than our peers and improve profitability to our shareholders. We are building from a solid base of results. We increased our profit by 39% in 2014, showing improvement in net interest income plus 4%, expenses down by minute 0.6% and provisions minus 14%. And going forward again, our aim is to deliver higher earnings per share growth than our peers. This is driven by a solid increase in customer business. Our loans are growing by 5% with deposits and mutual funds growing by 6%. And as you can see almost every single one of our countries is growing across all markets with one exception, which is Portugal on the credit side. Finally, I want to mention our commitment with our communities. Santander Universities is a focus of this commitment where global leaders in education with innovative program of support to entrepreneurs and SMEs as I explained, but we also have many local programs where we’re supporting charitable initiatives through our branch teams. We have committed €700 million over the next few years, as we announced in our meeting in Rio last summer, to support higher education. So with this contribution to our communities we closed the virtuous cycle of people, customers, shareholders and communities. So what does this mean for our main geographies? If I have to sum it up, and I said this earlier, earning the loyalty of our customers is the unique opportunity we have going forward. And just as an example, if we’re able to grow in just these four countries to 40% loyal customers out of total active customers which are already with us in the bank, in the UK and Spain and 25% of the total in Mexico and Brazil, we would generate between €2 billion to €3 billion of additional income. But most importantly there will be satisfied customers, which means better and more sustainable revenue generation going forward. So earning our customer’s trust, growing the number of loyal customers is the most important common denominator of all our local strategies. And briefly just what are our main goals country-by-country? In Spain and Brazil, this strategy entails a legal transformation with major emphasis in digital which will result in top-line growth higher market share in SMEs and commercial with the UK continuing along the current path. These three countries should contribute to circa 4 million increase in loyal customer by 2017. In Spain, our specific game is to lead the retail and SME markets by investing in our digital offering and become the bank of chosen in the Spanish market for all customers. In Brazil, we have completed now the integration and we have a solid platform. We are now aiming to build the retail franchise which again will deliver top-line growth based on loyal customers and a more balanced business mix. In the UK, the priority remains to continue building on the 123 strategy which has been very successful, continue growing the SME franchise. We have grown from less than 3% market share in SMEs to more than 6%. In the U.S., which is a developed market with emerging market GDP growth, we expect 3.6% growth for 2015. Our priority is compliant with the new regulatory requirement. We are confident we will deliver on our commercial transformation plan to improve our return on equity. Mexico, we see huge potential for us. We have ambitious loyal customer growth targets both for retail and corporate, again by investing in digital and leveraging on the relationship with the U.S. and opportunities like the new infrastructure, energy, and telecom projects. And finally, Santander Consumer Finance, which will continue delivering profitable growth. So to become the best retail and commercial bank, we will work on the execution of the strategy I have outlined. We have set for ourselves specific and measurable targets for each of our stakeholders in the four quadrants; for our people to be the top three bank to work for in the majority across geographies; for our customers achieving 70 million loyal retail customers, one million SMEs and corporate; with growth in our customer loans above our peers and to be among the top three in all our geographies in customer service and reach 25 million digital customers. For our shareholders this means to up to 14% return on tangible equity, a fully loaded core capital of between 10% and 11%, NCR ratio of below 5% with the gross income below 45% and higher earnings per share growth than our peers. And finally for our communities, I mentioned the €700 million commitment we have made, giving out 90,000 scholarships in this period, and being top 10 in the Dow Jones Sustainability Index. And we will track the progress against these metrics twice a year. To give you visibility on our plans by country, we’re proposing to review this progress in more detail in an investors’ day to be held next September and we’ll be very happy if you could join us. So in summary, Santander offers today a combination of both financial strength and growth above market through organic growth. We believe the current environment offers a huge opportunity for us and that we are well placed to take advantage of this. We will do it by strengthening our culture, by strengthening and giving more value-added products and services to our customers and communities. We will do this by growing organically increasing our customers loyalty will be the key building block and do it profitability through offering them the best customer experience on leveraging on our operating excellence. We will be going forward even more rigorous in our capital allocation and certainly to those businesses that have higher potential. I joined Santander in 1988, so I know my team and our business quite well. Over the last month, as I explained, made the necessary changes both at the Executive and Board level, so that going forward as of today, we can focus on building the best retail and commercial bank that earns this lasting loyalty of our people, customer, shareholders, and communities. Ultimately, as I see it, the measure of our success will be that in every market we’re operating, our customers are the ones bringing in new customers. And I’m confident, we will achieve this, because we are a team willing to go that extra mile to serve our customers. Most important is our aim to be simple, personal, and fair. A simple bank offers its customers a service that is convenience, products that are easy to understand, however, and whenever they choose to bank. It makes its processes better every day, so they are easy and clear for customers and its teams. A personal bank treats its customers as valued individuals providing a professional personal service they can trust, it supports colleagues to develop their skills and achieve their own ambitions. And a fair bank treats people as they likely to be treated and earns investors an adequate and sustainable return, I mentioned 12% to 14% return on equity while contributing its share to help communities. So thank you very much for listening. And I turn over now to Jose Antonio for the results presentation.

Thank you, Ana, and good morning to, everyone. Let me to - as Executive Chairman has reviewed our vision of the group, our strategic priorities, and medium-term objective, let me to - focus in the results in 2014, full-year results. Well, instead of going as usual, we call the units in the presentation, I will focus only in the three larger units, but you have all the information in the package we gave to you all. Let me to start - we talk a few words about environment. In 2014, the global economy grew 2% with a recovery –some recovery in the global countries, particularly in U.S. and UK, a more moderate growth in the emerging economies. We’ve been living in an environment with certain volatility and uncertainty due to geopolitical risk and the falling prices in some raw materials, particularly, important the oil. In the Banking business, we continue to be affected by the extremely low interest rate environment that remained at historic low in most economies. Finally, last but not least, if you rollout the requirement, which are affecting both sides of the P&L revenues and costs, in this environment, we were able to increase profit - some profitability, gaining market shares in key segments on both, improving our operating capabilities and improving our cost income, and second, mainly maintaining a solid liquid on low risk balance sheet. Beginning with the first point, well, 2014 compared with 2013 was a strong year. We’ve seen a process of normalization. We come from very low levels and we normalized this. The profit grew 39% over 2013, or 49%, excluding the exchange rate impact. Revenue grow in nine of the 10 markets, I think are in market in which we operate, because we’re well under control, lower provisions due to a general improvement of the cost of deposits. As a result, all units increased the pre-tax profit for the first time since 2007, and we improved the profitability ratio both in terms of efficiency and revenues per share went up 24%, and return on tangible equity that we are at the 11%. Going to the balance sheet, volume reflect really what we said to you in the - when we increased capital, volumes are big enough both in loans where we grew 5%, while the previous year we were decreasing 2%, and deposits from mutual funds customers funds grew 6% compared to plus 3% last year, and most important of these, we grew 6% with reduction with a significant reduction in the funding costs. We continue to have a comfortable liquidity position. NPL ratio improved for the fourth consecutive quarter. We strengthened our capital position with a capital increase finally out of the ECB asset quality review and stress tests show our model is significantly lower risk than those of our competitors and we gain out of this exercise showing that our resilience is much stronger than our competitors. Focusing the P&L - 2014 P&L, let me to start with fourth quarter compared with the third quarter. Fourth quarter commercial revenues grew for the quarter running and provisions continue to normalize, they were at the lowest level in the last two years. The bottom line gained 9% lower than the previous quarter due to three provisions. The first one, trading gains were €331 million lower than the third quarter, that were extremely high. Second, the impact of the German federal court ruling on accounting fees that were charged in the corporate center that has a net impact of €260 million, and a higher tax rate in the fourth quarter, mainly in the corporate center due to the adjustment, we adjust the annual tax rate in the corporate center in the fourth quarter. Going to the full-year results, year-on-year you have in the slide changes with and without exchange rates. Let me to focus in the - without the impact of the exchange rates, because it’s what shows better where are the trends of the local - at the ground? Well, the first area is the P&L statement is very solid. We are growing revenues of double rate than the costs and provisions are falling. So these shows a consistent delivery quarter-after-quarter in the upper part of the P&L. The second impact on this is more a one-off, there is a change in the new international accountant standards, the so-called IFRIC 21, which means anticipating the recurring contributions to the deposit warranty funds that these reuse the profits of 2013 in €195 million, and this reduced the earnings - increase when we compare 2014 to 2013 higher than otherwise will be the case. I think there an important one is, we do not include any extraordinary gain in this P&L, and I will show you in the next slide, the capital gains regarding 2014 around €1.6 billion, where 100% dedicated to restructuring costs and impairment of tangible assets. In the fourth quarter, we’ve got €250 million capital gains from this total of the insurance business in Ireland related with Consumer Finance, and where 100% is allocated as I mentioned to restructuring costs basically. Going to the P&L, when we see revenues, costs and provisions, gross income continue - grew continually for the year, so you see the upper trend objects in the gross income, 6% in constant exchange rates year-on-year, operating costs 3%. The fourth quarter went up is seasonally high, you look at the last year, it happened the same. There is one-off kind of one-off effects at the end of the year, every year the fourth quarter comes a bit higher, and provisions have been declining quarter-after quarter. Analyzing, internally the revenues, when we look the internal revenues, four ideas. The first is high quality. The more recurrent part, net interest income and fee income accounted for 92% of the total gross income, both of these lines evolved very well. Net interest income increased consistently and quarter-on-quarter and the fourth quarter was good in this regard, all the units did quite well, mainly the remaining one Brazil, UK, Spain, Mexico did very well, But this kind of nonrecurring item in Chile due to the high inflation, we will elaborate later on, because in Chile this year the results were extremely higher and this is not sustainable due to the high inflation and there is a light impact in parameter €30 million, 40 million due to GE Nordics. The income was also a slightly growing trend. Trading gains were significantly lower than - in the previous quarter, not that low compared with other quarters, but the third quarter was, as I mentioned before, extremely high for the standards of the group. Going - we go to the gross income year-on-year terms. There is a still negative impact of exchange rates. The growth comes basically for the - from the net interest income that grew 9%, all units gross income grows to set Brazil, I could elaborate later on in Brazil, and we will see that the mix was - the main reason was the gross revenues didn’t grow in Brazil, but we grew at net after provisions grew in the country. The - where the growth comes from, I will explain into two slides, in emerging countries, mainly due to volumes, in developed countries, the main reason of the growth of the NII was the lower cost of funds. When it comes to costs, what the role below inflation rate does, as you know, this is our target. The 3.6% average inflation in the group between our costs grew 3% and 2.2% excluding parameters. The performance was driven by units when we come to Brazil, Spain, Portugal, and Poland costs in real terms are falling. And our acquisition costs are growing for different reasons, we have in Mexico, opening branches in U.S. mainly due to regulatory cost. We’ve hired more than 300 people at - for– in this - to couple with this regulatory cost, these regulatory issues we have there. Finally, in the UK, where we produce an amortization of [indiscernible] particularly in the fourth quarter, because - due to this. We perform our targets in the efficiency plan. We were expecting to reduce to have €1 billion savings, we’ve got almost €1.2 billion savings, mainly the savings come from Brazil and Spain as you can expect, we have mentioned before, and some of those from the corporation. In some cases, it’s due to integration, in some cases, it’s due to a - doing the same things in a different way, particularly in Brazil, where we were able to keep almost flat cost environment 6%, 7% inflation. Looking ahead, we intend to maintain our final targeting €2 billion gross savings for 2014 to 2016, we are opening new lines of work in 2015, in order to indentify new possible synergies. As a Group, as I mentioned before, our aim is to grow below the inflation rate - the cost base. When it comes to provisions, well, are trending down. I put those two lines there, one including SCUSA and other without SCUSA, because SCUSA being relatively small in terms of size, is relatively high in terms of the provisions due to the nature of the business. The provisions declined 10% year-on-year. In SCUSA, we are not significantly 47% in the U.S. The size of the portfolio is much larger than in 2015, because we include the Chrysler agreement in 2013 mid-year and the portfolio in 2014 is 25% larger. The covenant ratio in SCUSA is 296% compared with 240% as of December 2015. The cost of pay declined from €143 million from €169 million, and we felt SCUSA to €116 million, where we still see some home to decrease the cost of trade across the globe in 2015 with normalization that is happening in our markets, particularly in Spain. Going to the balance sheet side, when Ana elaborated about the loans, we grew loan book 5%. The first idea is a changing trend of group, so in previous year the loan book was shrinking. Secondly, there we have a clearly started to grow. I already mentioned the targets in SMEs, the launch of Advance and more focused growth in some jurisdictions like the U.S., in GBM, in SMEs in Poland, so plenty of projects to grow the loan book all across geographies and different geographies. And in individual customers, particularly these are sharp rising mortgages in Latin America and consumer trade in mature markets. In Brazil, mortgage grew 34%, in Mexico 17, in the Spain and UK, we are growing, the new production is growing significantly, we will see later on, and for finance, we are also growing nicely all across the board. When it comes to deposits to our mutual funds, well, grew 6% while the question here is to grow with lower economy cost, as we did. Our strategy has been to grow in current accounts, we grew 9% in demand deposits. These are 5% falling in bank deposits on 18% rise in mutual fund, so is - the mix is also improving in an environment, where to grow in deposits with the rates being close to zero is a difficult environment. In terms of liquidity, nothing to add, it’s a comfortable position. The loan to deposit is fairly equal than previous year. The structural funding is good. And when it comes to the ratios, the LCR - about the LCR and the net stable funding ratio, we are okay on those two ratios and this doesn’t represent any kind of concern to us. In credit quality, overall MPL falling 5.19% declining for the four consecutive quarter. This is 42 basis points below the end of 2014, 2013, excluding the MPL, the GE Nordics, the ratio will have drop at 16 basis points in the last quarter, through areas in relation with MPL, the first area is shortfall in the net interest is 51% below in 2013. First decline in the MPL is year-on-year and improving in the fourth largest units, particularly in Spain and Brazil which I will comment later on. The coverage ratio rose to 67%, while it’s important to take into account that 60% of the loans classified have real guarantees and, so that requires less coverage. In short, we are seeing good trends in all the parameters related to credit quality, and we expect this to continue into - along 2015. Capital ratios, we disclose all these capital ratios at the time of the capital increase by the fully loaded capital is - core equity Tier 1 9.7%, pricing 12.2%, and you have the level of ratio at the comfortable levels. As we mentioned in the capital increase, our target is to be between 10% and 11% core equity Tier 1 on a fully loaded basis. This is an excellent position to exploit the organic growth opportunity that we see in the majority or almost in all our markets. Financial ratios, well, the efficiency, we improved efficiency by 1.1% in the year. EPS went up 24% and return on annual equity went up 1.4% due to 11%. These trends put us in the right path to attain the medium-term gross that we have, yes, made public. Well, going to the business areas, the first in list we show to you is the attributable profit by geographic sector. We have UK, U.S. UK and Brazil 19%, and Spain 14%, the U.S. 10%, and all other countries, Mexico, Chile, Poland, and Germany between 5% and 8%. As I stated - as Executive Chairman, our diversification distinguish us from our international peers. When we look at the units by attributable profits, well, we have the first idea all the units, but Mexico were growing in profit after taxes, Mexico the tax rate grew from 8% to 20%, pre-tax profit about 9% higher impacts us. U.S., there is a small change in parameter before the minority interest grew before this profit was 4% higher in dollars, so all the core units increased, say, pre-tax profits in local currency and for the first time this was first time since 2007. I can analyze the three main units, UK, Brazil, and Spain later on, but let me to say some words about the other units. In Consumer Finance, while the business is performing well, we’re growing basically double than the car sales and the production is growing double than the car sales. So we are gaining market share. The outlook for 2015 is very good. We’re speeding up the implementation agreements with BSA. In fact the business in France and UK started to be part of the group 50%, as you know those are joint ventures at the beginning of February. This is some €10 billion - around €10 billion portfolio were incorporated. The total under the agreement is around €19 billion. So €10 billion were already incorporated. For the rest of the year, we expect around summer to incorporate Belgium and Portugal, around the fall, Spain, we should run in Holland and at the beginning of 2016 in Germany, Austria, Italy - and Italy. In U.S. the units follow different strategy, Santander Bank is focusing on the franchise position the balance sheet, selling number of the assets. SCUSA increased significantly in origination and sales, and its focusing in serving activities that is - which is lower risk. We continue to build a commercial franchise and to adapt to the regulatory requirements. We continue to work and invest on the regulatory front in a process that is going to be multi-year because the hurdle we face is still significant. Mexico, we have an expansion plan, the plan was to open 200 branches. We opened 95 last year. Pre-tax profit increased due to the very good growth in gross income, volumes, and lower cost of risk. We continue to invest in the business in 2014, and we want to be one of the leading banks in investing in the government infrastructure plan. Chile, the results or not, as I mentioned before, are not the 100% recurrent. There is a significant impact of the relatively high inflation. So we see relatively low inflation in 2014 - in 2015 that is going to affect significantly the results this year went up to 35%, very likely in 2014. In 2015, the result will fall with a more normalized inflation. But the underground business - the business in the ground is growing around double-digits, 9% to 10%, and another 35% where we’re showing a dotted line due to the high inflation. In Poland, we’re growing well, in the lowest interest rate environment we see in the country. Well, then the rate and results are good, but there is a significant impact of the very low - for the countries then there seem to be very - we are looking at the - also at the Swiss franc to ensure that, well, we will see the developments in 2014. As of today, we do not expect - and we do not expect a significant impact, but we will keep an eye on the developments there. Lastly in Portugal, well, literally best bank in the country is well known the only bank that is making - is able to generate profit in the country. We are gaining share in this environment both from deposits and loans. The profit is continued to normalization 65% up due to lower cost of funding on provision. There is a still room to reduce funding costs in Portugal, because are still relatively high compared with other markets. I will narrate a little bit more on Spain, UK and Brazil. In Spain, well as we were anticipating in the previous quarter, we grew the loan book 2%. The last quarter we were 1%, that this reflects the effort we are making particularly in the SME segment. And on the fund side we are growing 5% with a significant different mix with a lot inside deposits and mutual funds and time deposits are falling as a result of that the new time deposits, the cost is 0.44% and the opportunity cost to remain in current account is relatively low. In the results, the profit more than doubled due to lower provisions, cost savings, and recurring net interest income, net interest income grew 9%. Operational costs dropped sharply due to the integration, provision and continue to normalize, still significant room to go. The costs of credit dropping to 1.15%, I always tell you that the average cost towards the cycle is 70 basis points, so there’s significant room to go there. And we’ve captured significant part of this in 2015. Well, in coming quarter, we don’t see significant changes of trends. We continue to see reduction in the funding cost, is still that we are seeing pressure on the asset side. There’s significant competition on the asset side, particularly in SMEs and also in mortgages. Well, if we look at the volumes, the loan book, we basically in company, 5% up. We are increasing the production of new mortgages 64%, not just enough to offset the amortizations and we’ll grow in SMEs 27%, well above the sector that they’re growing 8%. And thanks to Santander Advance and which also saw 31% increase new production in the large companies. In deposits the fourth quarter was pretty much the same as the previous quarter trends, raise in demand deposits, mutual funds, and falling time deposits. Loan to deposits remain in a very comfortable position of 88%. Well in NPLs, the NPL entities - the net NPL entities fell 92% year-on-year. The trend is already reflected in NPL ratio, while the coverage has remained stable. In UK, there is a change in trends in volumes, well, grew the loan book 3% and 2% the customer funds. In the lending side, grew 8% in companies. We’ve been growing significantly faster than the markets. And in mortgages, well, the growth new lending went up 43%. In deposits, well, these are obviously suggesting the cost [ph] of more expensive [ph] deposits at the same time will continue to be extremely successful with the 123 product in current accounts as we can see later on. The profit grew 30%, net interest income 16%, lower provisions. The costs, as I mentioned before, in the fourth quarter the increase was partly due to amortization of the datacenter. So, well we are seeing improvement in efficiency there. Looking at the commercial side of the business, well the 123 strategy continued to increase the number of customers at the base of 100,000 customers per month and €1 billion in new deposits per month and new current accounts per month. We continue the bank that is capturing more switchers, 25% of the switchers we are capturing. We continue to extend our position in corporates, we are growing at 8%, as I mentioned before, and we’re investing new business centers, and relationship managers, you’ve got the figures - you’ve got the figures there. In short, commercial dynamics and results were very good. We want to do more of the same in 2015, increase loyalty of customers, growing current account, continue to grow faster than markets in business and corporates, and continue to have a clear focus on efficiency. Finally in Brazil, well in a not very macro-economic environment, relatively high inflation, 6.4%, GDP flat as interest rates went up to 12.25%. The business is performing relatively well in December among business and results are beginning to reflect the results of our strategy. The better growth in the loan book 6% quarter-on-quarter, probably 10% year-on-year, probably this is a little bit overstated because some of the portfolio is in dollars and as a result of the depreciation this overstate a little bit in the growth in the lending, but excluding the exchange rate lending grew in the last quarter 5% quarter-on-quarter that is remarkable. There is better trend in SMEs following the fall and the start of the year. We’re strengthening also the segment with the launch of Advance this quarter. Mutual funds grew 16%, deposits 8%, so we are seeing pretty good trends, encouraging trends in the country. The profit to €1.55 billion, plus 8% year-on-year, in local currencies some change implemented due to the loss in the last few months, but not very significant. Fee income increase up by nice rate, net interest income plus income in the last two quarters was higher than the previous year. When it comes to the loan book and this is important to understand the dynamics in Brazil, we are growing very fast in large corporates and corporates and mortgages, relatively low yield, low risk portfolios, while in the other individuals that is basically consumers and SMEs we’re not growing. This helps to understand why the net interest margin has been trending down and provisions also trending down. So in - and the credit quality improving. So in short, with this selective lending by products, by segments, and with a new mix of profitability and risks, we are getting 13% growth in net interest income after provisions. In credit quality we do not - we expect to continue with these trends not to be the same pace of decline that we saw in the last couple of quarters. And in the country we see the country with the macro is not particularly good, probably thoroughly flattish kind of GDP we say for this year. But the bank, our banks have the capacity to improve and to grow internally. We made two acquisitions that will help this, to keep us growing above our peers. We acquired GetNet, the minority interest in GetNet, the acquiring business. And we are going to integrate Bonsucesso, that is the payroll-based lending where we are quick, while we reduce our loan book in 2014, while our competitors are growing well in double-digit and we expect address this issue in 2015. The outlook, let me to sum up a little bit. We’re seeing good dynamics in results and volumes, comfortable capital and liquidity position. We’re improving risk. We are doing a global risk management program on several years. We are working on increased customer linkage and satisfaction as part of our operational excellence targets and we are - we have measures on these regard to combine gross income, customer satisfaction and employee’s engagement along these process. The objective for this as the Executive Chairman has mentioned, is to make Santander the best bank to work for, do business with and to invest in. In order to focusing the aspirations we have in financial targets, we have three-year objectives for improving the key aspects of the bank. Well, we expect to grow faster than peers, above peers. Operating excellence in the three components gross income, customer satisfaction and employee’s engagement. Risk management with our target was already stated. The solvency are 10% to 11%, core equity tier 1 on fully loaded basis, and profitability is 12% to 14% with an EPS growth that I think is going to be superior to the peers. And now, we remain at your disposal for the questions you may ask or you send to us through the web.

Thank you, Jose Antonio. Good morning, everybody. We proceed now to the Q&A session as usual. We will be corresponding questions that we have received via e-mail. And at the end we will look for any other questions that may be remaining or that may arrive via WebEx. Let’s start first with a blog on strategy. We have an initial question from Francisco Riquel from Nmas1 on strategy. The question is given your ambition to become top three in the main markets where you operate, do you have any M&A plans to get there in the markets while you’re currently below top three? Ana Botín-Sanz de Sautuola y O’Shea: Yes. So we’ll consider add-on acquisitions in the core markets where we operate. We don’t have this is a priority at the moment. Our priority will be organic growth, as I outlined in my presentation. But there are some examples - for example, Portugal, we are looking at something in Portugal, as you said, but this is not a priority for us over the next few years.

Okay, thank you. Second question also on the strategy for Rohit Chandra for Barclays, which geographies do you see as the greatest opportunities to increase your loyal customers? Ana Botín-Sanz de Sautuola y O’Shea: Yes. I think I had a slide in my presentation. So, where I covered the four major markets, where we have the largest number of active customers, that’s Brazil, the UK, Spain and Mexico. In these four countries we have close to 14 million of active customers. And I’d say, the biggest increase potential in the next couple of years is probably Spain. Just give to you an indication, in Spain we only have 23% of what we call loyal customers at the group level, and our aim is to go to close to 40%. Just to make clear what we define loyalty in this group measure, as retail customer who has a primary banking relationship with Santander. And these are the four markets where we expect the biggest growth in loyal customers.

Thank you. A follow-up question also on the strategy and customer loyalty also from Rohit Chandra from Barclays, how is the focus on loyal customer expected to change the business mix between different products and between retail and corporate customers? Ana Botín-Sanz de Sautuola y O’Shea: Well in this major markets and we’ve seen this happen in the UK the biggest changes, the increase in current account balances. However, if you go to a county like Spain, where we already have a very significant part of our balance sheet in current accounts, the change in mix will be less dramatic than what we’ve seen in the UK. But in general, going to more loyal customers in the definition where loyal customer is someone who has a primary banking relationship with us, you should expect higher growth in current accounts and debit cards, credit cards. In terms of the mix between retail and corporate, this depends very much on the geographies. Again the UK is an example, but Brazil and Mexico, where the growth in SMEs and corporates should be faster than the retail side, but it’s going to take a long-time to have a significant impact. For example in the UK, because of the size of the retail, in the case of the UK mortgage balance sheet. But in general, we are expecting to gain market shares in several markets on the SME and corporate side.

Thank you. We also have a question on the implications of banking union for you’re having a M&A strategy. This question has been asked by Andrea Filtri of Mediobanca, but there are also a number of related questions on the same issue. For instance, Marta Sanchez for KBW asked about the possible transactions of Pioneer and Nova Bank, where you can give an update on that, same thing, Andrea Filtri. Ana Botín-Sanz de Sautuola y O’Shea: So banking union, I’d say generally, it’s good news, it’s happening, so we’ve taken significant step forward over the last few years and it’s very positive for European growth and therefore for European banks. I think this is a very positive opportunity, however I think this is at least for us more a medium-term opportunity. I don’t see that there are any - well, there is an example I made of Portugal, but that is not really driven by banking union. I do think over the medium term that you’ll start seeing more pan-European banks offering services. But I don’t see that in the next few years. And there was another…

Pioneer. Ana Botín-Sanz de Sautuola y O’Shea: Pioneer, do you want to say something. Pioneer - well, do you want to say where we are in Pioneer? And Portugal we’ve just answered, but Portugal we’re just analyzing the opportunity. We are a major bank in Portugal and as far as of the system and as we did in the case of Spain when there are opportunities, we will take a look at them. And Pioneer for Antonio.

Pioneer, well, what I can tell you at this stage, we’re still in negotiations. What I can tell you, this makes a lot of strategic sense. But we are still in negotiations with the other parties...

Thank you. Then we have a number of questions regarding the general outlook for the business going forward. We have a question for Ignacio Ulargui from BBVA on what is our view regarding margins and volumes in the Spanish operations as well regarding lending yields for Spain as well, how do we see the overall outlook for Brazil as well? Ana Botín-Sanz de Sautuola y O’Shea: Yes. In terms of the, let’s say, the outlook at the group level and then we maybe, Jose Antonio, you want a complement on specific countries, but I’d say overall, so the guidance we given is to 2017. We given guidance in terms of achieving a gross income below 45%, return on tangible equity within 12% to 14%, core capital being between 10% to 11%, EPS better than peers, and so on. So these are the guidelines that we will give for the group. In terms of 2015, our specific markets, what - it’s quite different I’d say Europe from Latin America. In most European countries - the top line growth will be driven more by volumes than margins, even though in the first few months of the year, certain countries will continue to see some margin benefit like Spain. UK for example, the guidance is broadly flat margins for 2015 and growth in volumes. The second important idea is that we are growing and expect to grow more than the market and continue to grow more than the market in countries like Spain or the UK, more in SMEs and corporates. In the case of the UK growing mortgages in line with the market. So those would be the main guidelines in terms of specifically for Europe. In terms of Latin America, obviously the tendency is quite different. And we do expect different tendencies and depending on the markets and more both margin expansion in some cases and growth in volumes. In the case, we also have PSA coming on board this year. So that’s the significant addition to our business. This means €3 billion in the UK and a total of €8 billion, €9 billion for the group, €10 billion for the group I understand.

By the total it is €18 billion. Ana Botín-Sanz de Sautuola y O’Shea: €18 billion, so that as a summary is how we see 2015. Jose, could you take it out on Brazil?

Well, you mentioned Spain and Brazil, margins, volumes, lending yields. Well in Spain we remain positively, we can still keep reducing the cost of funds. The main uncertainty from the asset side, as I mentioned in the presentation where we continue to see margin pressure. Overall, we remain optimistic about the potential growth of the net interest income in Spain due to our combination of volume, higher volume, lower cost of funds, and some pressure on the asset side overall, we expect to be positive. You mention Brazil, the trends, well, I said, we expect to grow revenues. On the like-for-like basis, we are improving the net interest margin in the lending book. The change in mix is, we expect in 2015 not to be a significant as it was in 2014. So overall, with a relatively low and relatively low for Brazil means around inflation 6%, 7% loan growth we should be able to grow that to grow net interest income in Brazil in 2015.

Thank you. Again, coming back to Jose the business outlook by different geographies, we have a question from Rohith Chandra specifically on the UK outlook, particularly where the net interest margin can continue to rise with mortgage pricing under significant pressure. What would be the volumes, what would volumes be the main driver of 2015 in the UK, or do you expect any other interest income? Ana Botín-Sanz de Sautuola y O’Shea: I think, UK I mentioned already, so UK will be more about volumes. We expect overall margins broadly stable for 2015, put some pressure on the asset side and some improvement - continuing improvement on the deposit pricing, but overall margin is stable and growth in net interest income coming from volumes and continuing growth above market in SMEs and corporate, and growing in line with - in terms of mortgages that is our expectation. We grew the balance sheet this year by 2% already, so growth is already happening in volumes.

We have a next question on digital transactions from Mario Lodos from Banco Sabadell Bolsa asking us whether we have any kind of details from the share of the retail transactions versus traditional transactions in our online business? Ana Botín-Sanz de Sautuola y O’Shea: So this number is very different for different countries. Some countries like the UK, most of our transactions are done actually online either digital or mobile, in other countries, it’s still quite behind. The important thing is that in our plans, we’re aiming to almost double the number of digital customers, the customers that deal with us through digital channels. We’re investing in many countries significant amount and the objective is that all our customers can see, can manage, and buy all our products through all our channels, and that is the goal for the next couple of years in all our major markets. Again, in some markets we are there and others will be there by the end of this year and few others will take maybe a couple of years.

Thank you. We have a question specifically on our guidance that we have given on M&A by Rohith Chandra of Barclays, we said that basically the capital increase will help us in our organic growth by the small acquisitions complementary to this organic growth, maybe could also be considered, the question is, were we able to provide an indication of what sort of size does that type of M&A means? Ana Botín-Sanz de Sautuola y O’Shea: Well, the only indication we can give is, what we are looking at in Portugal, that is - they are not significant sizes. We don’t have anything that is significant except the Portuguese opportunity we are looking as I said.

Okay. Well, two more questions on outlook in our guidance, one question from Juan Carlos Calvo from Banco Espírito Santo asking guidance for 2015, particularly on operating expense and cost of risk? Ana Botín-Sanz de Sautuola y O’Shea: We - I mean, the guidance is the guidance we’ve given to 2017, but I think as Antonio and I was mentioned already that we see the top line growing more through volume growth than margin expansion. There is exceptions like Spain, where we still see some potential for improving deposit funding actually in the UK, but net interest margin is actually going to be broadly stable in some of the markets, where this year we’ve seen significant expansions of growth coming from that growth in fee income, operating expenses, we’ve given the guidance of reaching 45% cost income by 2017, where it’s 47% this year. So, obviously, there will be slight improvement there. Also, on cost of risk, I would say, stable to down in most of our markets with almost no exception.

Very good. One question, again on guidance, on the impact that the QE from the ECB, this again from Juan Carlos Calvo from Banco Espírito Santo, what do we think that this will impact our banking business in the years on, particularly in volumes and then interest margins? Ana Botín-Sanz de Sautuola y O’Shea: So it depends what the timing is in terms of the question. I think medium-term, it’s incredibly positive. It has to come with other measures like structural reforms continue in the countries like fiscal policies and very importantly having banks being able to lend again. But overall, it’s very positive for growth, it’s - therefore very positive for the bank. However, in the very short-term, it could be marginally negative for margins. There will be more pressure on the asset side. Again, it depends on the repricing on the liability side and how long that taste and how much more we have of that. But I would say net-net, it’s good. We’ve seen demand pick up again in our case, so Santander new production in Spain was up 64%, 65% for mortgages last year, the new production SMEs and corporate, I think we gave these numbers between 27% to 31% growth. So I think net-net this is positive, again, and it will not be the same. But in the countries, where we operate Poland, Germany, Spain, we are quite positive on growth for this year.

Okay, very good. One last question on general strategic things, we have a question from Raoul Leonard from Deutsche Bank regarding changes in management. The question is that we have announced a number of senior management changes over the last few months. Are we finished with this management reshuffling, and are we seeing already tangible benefits, for instance in falling costs? Ana Botín-Sanz de Sautuola y O’Shea: Well, I would say, yes, we’ve done. We are not anticipating changes at the senior level, we’ve made quite a few changes. But I would like to emphasize that with some exceptions like our Chairman in the U.S., our Chairman in the UK and in Brazil, all these changes are from people with lots of experience in the group. So, we already, I think, nobody needs a long adaptation period. So we are ready to go. We’ve made the changes, we think it’s good to have made the changes, so we can now focus on running the business and that is what we are going to do execute on the plans that we have outlined and start focusing on our customers and our people and delivering on our plans.

Thank you very much. Moving more to more of specific issues, we have a question on specific details on our agreement with PSA and our joint venture going forward. I’m Juan Carlos Calvo from Banco Espírito Santo and Stefan Nedialkov of Citi are asking we can give more details particularly regarding the timing of the deal going forward, the implication on earnings, as well as on core capital ratios?

Well, in the PSA as I commented this business that affects, I think, 11 countries, but is mainly concentrated in France, Germany, UK, Spain and Italy. We already close - we already incorporate to the joint venture with France and UK as of beginning of February, this is around €10 billion loan book. We expect along the year as I mentioned in the presentation in this summer couple of other countries and to finish the integration of all the PSA deal at the beginning of 2016, at the end, we are going to help around €18 billion loan book, while the majority of those loans in Santander models so the capital consumption you have the details. The target in this kind of business, I’m taking our assisting auto finance business in Consumer Finance as a proxy, we are getting clear of around 1.6%, 1.7% return on risk-weighted assets, and this is what the kind of return we expect from the PSA. If you remember that we are going to have 50% of this business, yes, so those are joint venture with 50% owned by Santander Consumer Finance and 50% owned by the group PSA.

Thank you. We have another specific question regarding regulatory concerns in the U.S. particularly the SICAV process, Raoul Leonard from Deutsche Bank is asking us where we can you give an update on the implications of the SICAV process, I think we have given there on the presentation already. But the question more is specifically he is asking whether we are still investing or we should expect costs to fall in the second-half of 2015 as the SICAV results are published, are these costs are structural in our business?

As I mentioned in the presentation, we are still facing significant hurdle there, significant. We - I keep investing. We need to keep investing. This is a multi-year process. As I mentioned, we have 500 people. This is going to stay probably increased because of this regulatorynot only the SICAV, overall the regulatory requirements and because we are still going to go up at some point, probably more in 2016, 2017, we will be able to produce some of those not in particular a big number, but some of those related model we bend our services that we are now hiding in order to offset or to build basically the models that we need to build for the - for - to have an outstanding SICAV as required by the regulators.

Thank you. Now moving up to our section on capital and financial management we have a number of questions, we have a question from Andrea Filtri of Mediobanca and Stefan Nedialkov of Citi regarding our guidance of 10% to 11% targets for capital ratios. The question basically implies that, what will determine where we’ll go towards the 10% or 11% and whether the ECB is comfortable with or has given an indication how they feel about this target.

Well, the 10% to 11% is our internal assessment, is our internal target. Well, I think taking into account the capital has always two sides. The risk you’ll have in your business model and the absolute amount of capital. We think that the 10% to 11% for our risk profile is where we should be. And we don’t have at this stage an indication of the ECB in relation with fully loaded ratio where we should stay in this ratio.

Thank you. Also on capital targets, basically they were asking us, again Stefan Nedialkov from Citi what does this guidance imply or assumes for dividend payouts, buybacks, and M&A?

Well, it was already mentioned, yes, so M&A is clear. We are focusing organic growth. We’ve seen that we have significant growth in front of us in terms of organic growth. And we mentioned the capital - when we raised capital that we expect mid-single-digit risk-weighted assets growth in 2015. And in dividend we already set our stance there to have a growing dividend policy with a payout between 30% and 40%. And the dividends grow along with the profits.

We have a question from Raoul Leonard of Deutsche Bank on DTAs, asking us about the amount of monetizable Spanish DTAs and Portugal DTAs as of the end of the year. I answer that the Spanish DTAs amount were €5.7 billion monetizable, and the Portuguese were negligible, non-existence. Moving onto our core portfolio, we have questions from Raoul Leonard, Benjie Creelan from Macquarie, and Marta Sanchez of KBW, basically asking us about the volumes of our ALCO portfolio and in specific about our available-for-sale assets in Spain, we’ve seen have to be increased significantly over the quarter as well as the UK where we can get to what are the tactics of this ALCO portfolio.

Well, as you know the role of the ALCO portfolio is to hedge or to hedge off too much the interest rate risk. We’ve been growing very fast in current accounts, in sight accounts both in Spain and UK. Our balance sheets are relatively - not only relatively are very short, so the duration of balance sheet both in the Spain and the UK is negative. And some of these portfolios is trying to offset partially, not 100% because of the relation is negative in both countries and these portfolios tend to offset partially some of the interest rate risk we are facing. Now truly those commercial balances are the position us to high rates by natural, by the nature of the business.

Very good. We have a specific question from Ignacio Sanz from UBS which asks, what are the underlying interest rate assumptions for Santander’s geographies for the 12% to 14% RoTE target that we have given? Basically we can provide details on this later on. But I can just announce that this is based on the forward curves of the different countries, forward interest rate curves that were put into the budgeting process. Interest - we also have questions regarding the also [ph] risk-weighted assets, for Ignacio Sanz again and specifically on Santander Consumer Finance. What was - what is the reason behind 5% fall quarter-on-quarter, while the loans grew by 3%?

Well, I don’t know it’s specifically to this, but we’ve had to approve the internal rating basis models in Germany. Yes, I think as a result of the approval of these internal rate base models, the risk-weighting fell significantly, having said that, we’ve got the approval for consumer lending, not for mortgage lending in Germany, not yet. Okay, so still some room to go, but we are not including this in our forecasting just because in the past we were not particularly good in forecasting when we’re going to get the models approved, yes.

Okay. In the same of risk-weighted assets, we have a question from Raoul Leonard of Deutsche Bank, highlighting that in Brazil there was 20% jump in risk-weighted assets of the quarter. What should be the future churn of risk-weighted assets going forward given this high increase in the fourth quarter?

Referring to specifically what?

Brazil risk-weighted assets…

Brazil risk-weighted assets, well risk-weighted assets in Brazil should grow along with the loan book. I don’t see any other particular reason. There is - potentially there is one saving that we’ve been anticipating for several quarters, that is due to operational risks. As you know the standard model in operational risk is a percentage of the revenues or revenues in Brazil are very high due to the high net-interest margin, while we were expecting to go from the standard model and to the standard alternative model. For several quarters we haven’t been able to get there. And we were anticipating that was in the range of 20 basis points to 30 basis points, unsure that we will now go to the standard alternative or we’re going to go directly to advanced model in operational risk that we provide some of the savings.

Okay, thank you. We have a question regarding handling fees from Raoul Leonard of Deutsche Bank. He noticed in the corporate center there is a charge for $332 million. He wonders how much of this was due to the German handling fees and whether this issue is now completely resolved or whether could there be further provisions ahead?

Well, I mentioned in the presentation the net number - the net charge in the corporate center was €260 million in the fourth quarter for these issue of handling fees in Germany. Going forward, we do not expect, because we stopped the handling fees, which are handling fees in 2012. And these settlement we done is - that the one that does go from - if I remember well, from 2004 and 2012. And there is nothing significant that may come in the future.

Very good. Now moving on to more specific questions of our specific geographies, particularly in Spain, a number of questions from David Vaamonde from MainFirst, from Marta Sanchez from KBW, Rohit Chandra from Barclays. All of them asking basically - whether we see term deposits have come down again this quarter; do we see a floor coming in the price of term deposits and what’s the implication of this with net interest margins going forward.

Naturally, we see a floor for time deposits, probably to go beyond certain limit is going to be difficult, as you may understand, but having said that, the average costs of deposits that at the end of 2014, if I remember well, was around 0.6%, 0.60% something. We still expect a significant reduction on the average costs of those deposits, because on average the new production of time deposits is coming up 0.4% or something like that. But the average cost of time deposit is still north of 1%. So we still expect significant reduction there, yes.

Another specific question in Spain also regarding the time deposits costs has to do with our company in Catalonia, Raoul Leonard of Deutsche Bank and Mario Lodos of Sabadell Bolsa both ask where we can give some details on how this company has evolved in volume and in margins, and whether we apply, we expect to apply this tactic in other regions in Spain.

Well, this specific campaign in Catalonia the target is to increase our market share. Well, I don’t have the details on those deposits, but these not when I was talking before about the overall the costs of deposits include naturally this campaign in Catalonia that given their size is not going to be material in terms of the trends in overall deposit costs.

Okay. Now moving onto Latin America we have a general question regarding our Latin America operations from Andrea Filtri of Mediobanca, he’s asking, how will our Central and South America franchises coped with the low commodity prices; what is the implication for this for our business in this region.

You mentioned low commodity prices, the only one that may affect - the only commodity that may affect in a significant way or in some way our business is oil, mainly due to the reduction in CapEx in the result in Brazil that was already announced by Petrobras. And maybe the thing happened in Mexico in some way in relation with Pemex. We’re reviewing our exposure not to these companies that we don’t expect any particular outcome that the contractors of those companies, is not significant, is not something that worries us. That is where we expect not a significant reduction on activity going forward due to the reduction in CapEx in the oil exploration industry.

Okay. Thank you. We also have some specific questions on the impact on Petrobras in Brazil, which I believe you have answered already. Now moving onto Brazil, we have two ranges of specific questions, Ignacio Ulargui from BBVA and Rohit Chandra from Barclays. Both ask us about the outlook going forward. How do we see us positioned in the market, have we seen the bottom in terms of margin pressure, and how is our change in product mix change going to be evolved going forward particularly in 2015 without the main risk to credit quality that we see there?

Well in relation with the margin, as I mentioned before on a like-for-like basis, we are not seeing margin compression in Brazil. So quite the opposite we’ve been able to re-price up some products. The overall net interest margin fell due to the mix. Well we expect to grow to address some of this issue in 2015, due to the launch of Advance in SMEs, that as you ask, we show in the presentation, we were not able to grow in SMEs in 2014. And our book decrease in individuals that naturally is the highest margin. With Bonsuccesso in the payroll-based lending, our book decreased significantly, while our competitors were growing in 15% to 20%. And we expect to address with GetNet and Bonsuccesso our relatively weaknesses in individuals and with the Advance program in SMEs. So we expect the mix to remain changing but not at the base we saw in 2014.

Okay. We have another specific question on Brazil by Raoul Leonard on Deutsche Bank regarding on trading gains there. He said, that we’ve reported a negative trade income in the fourth quarter, what will be the reasons for that?

Well, by definition trading rates are volatile. I suppose, I don’t have a specific announcement for this. Probably this should be related with the increase in rates, probably, comes to my mind. I am not 100% sure. Yes.

Well, thank you very much. I believe that we have no further questions to be addressed at this time. I hope we have addressed all of them thoroughly. Nevertheless after this conference call, please feel free to contact anybody in the Investor Department Relations - Investor Relation Department; I apologize, for any private questions or clarifications you may have. As you may already know I have recently been appointed to the group, by the group to new responsibilities in the area of regulatory affairs. As a new head of Investor Relations, Sergio Galvan has been appointed already to this position. Sergio is already here with us, welcome and fully engage. And I would like to thank you all for your professionalism towards me throughout this month. I have served in this role as Investment Relations Director and I wish Sergio all success going forward. I would like thank you all for joining this conference call. And I wish you a good day. Thank you very much.