Banco Bilbao Vizcaya Argentaria, S.A. Management Discusses Q3 2013 Results - Earnings Call Transcript

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Banco Bilbao Vizcaya Argentaria, S.A. (NYSE:BBVA) Q3 2013 Earnings Call October 25, 2013 3:30 AM ET


Ángel Cano Fernández - President, Chief Operating Officer, Director, Member of Executive Committee and Member of Global Asset Allocation Committee

Tomas Blasco Sánchez

Manuel González Cid - Chief Financial Officer and Head of Finance Division

Unknown Executive

Good morning, everyone. Welcome to this webcast for the presentation of the BBVA Group Results for the Third Quarter of 2013. The presentation and explanation will be given by our COO, Ángel Cano; and then we'll have a Q&A, which would take place immediately after the presentation, which will also have our CFO, Manuel González Cid, to help us. Any questions that for reasons of time can't be answered during the webcast will be dealt with by the Investor Relations team during the rest of the day. Ángel, you have the floor.

Ángel Cano Fernández

[Spanish] Welcome to this presentation of results of the BBVA Group for the third quarter of 2013. Before we start to look at the highlights, as we always do every quarter, there are some highlights of the news that I wanted to cover. I'd say that the tendencies that we've been talking about and we've been observing for some time now are becoming increasingly confirmed this quarter. Perhaps, the United States has taken up a lot of the news during this time. It was the main headline quite often, but finally, the impact we've actually seen has been quite limited from the shutdown. And then the outflow of funds coming from the possible tapering and the easing off of the -- quantitative easing have pretty well flattened out. The international markets have shown very positive performance throughout the quarter. Meanwhile, in Europe, more progress has been made along the right path, moving towards the definition and the implementation of the single banking supervisor and the resolution mechanism. And then finally, here in Spain, the rate of recovery is being slow and will continue to be slow over the next few months, but nonetheless, what we are seeing is that it's likely that there will be progressive growth of the economy over the next few quarters even if there are maybe 2, maybe 3 more quarters in which we'll see overall deleveraging in lending here in Spain.

Now before I look at the main highlights of the BBVA earnings, risks, liquidity, et cetera, there were a couple of things that I think are especially significant that we have filed this quarter. The first one, as we said in the results presentation of the second quarter, has to do with the way that we record the refinanced loans here in Spain. As we said, we had the numbers established with the regulator this quarter and we had to wait until we could do that before we could book them to the accounts. So a couple of comments. We reclassified EUR 2.4 billion. Those are residential mortgages, as well as SME loans, but we've also reclassified EUR 1.4 billion related to real estate exposure. So we're talking about how we deal with refinanced loans, which are established with the international standards applied as strictly as it's possible to do so. So taking into account that all these risks were up-to-date in terms of their payment, if we actually look at our total NPAs, as we report them, we can say -- and these are actual data, that 38% of the total of what we call NPAs actually are up-to-date in their payment according to the contracts that the borrowers have with us. So that means that we've had to set aside provisions this quarter for EUR 600 million. Although, later on, I'll come back to this, I did want to emphasize the following: When we ended the second quarter, we said that we had to expect that provisions in the second half of 2013 to be very similar to the provision levels we had in the first half. Consequently, with this exercise, what we've done has been to move some of the provisions that we were expecting to set aside in the fourth quarter and bring them forward to the third quarter. So the provisions that we had yet to set aside in the fourth quarter will mean that we should be able to comply with our forecast that in the second -- sorry, in the third and fourth quarters of the year, we'll have very similar provisions set aside as we did it in the first 2 quarters.

We've disclosed to the market recently that we were going to be divesting 5.1% of CNCB at market price, and there was no kind of discount. So, as you know, that has 2 effects: First of all, it impacts our earnings, EUR 2.3 billion, and then it also has an impact on our capital according to the requirements of Basel III fully loaded, which would be EUR 2.4 billion or over 71 basis points of core capital. This transaction was carried out in October. So it will be booked to the earnings of the final quarter of this year.

Now moving on to look at the presentation we always give, with the highlights of our results, we're still seeing a very dynamic franchise with a lot of upside, very powerful. So I can confirm what we're doing. In the developed world and in Spain, we can see that a lot of work is being done in order to normalize our business volumes and our returns, as we'll see when we look at the different geographies. And what does that mean? That means that we've got a mix that gives us more than EUR 16 billion in gross income over the first 9 months of the year. It's true, and we'll see this later on when we look at the more detailed figures, that this quarter has been impacted a lot by exchange rate changes.

As to risks and exposure, we have to see the impact of the new treatment of refinanced loans on the BBVA risk indicators, and that means that we now have 4.6% NPA ratio and our coverage ratio is 58%. And we shouldn't forget that of that total NPA level, 38% actually are up-to-date in their payment. So they are complying with their contractual obligations as borrowers, and we are complying with our obligations vis-à-vis the regulator.

And now when we look at the financial figures of the group, we have to look at our solvency, 11.4% core capital, we have, according to Basel 2.5, the current regulation. If we talk about Basel III's fully loaded, and we'll see this, it will be equivalent to 8.4%, and the leverage ratio under fully loaded Basel III would be 4.8%. And with these numbers are not including the impact that we'll see in the last quarter from China nor the capital gains on the Panama sale or Chile, which would actually all add up to about 100 basis points, which should be added to that 8.4% figure I just gave you. So the conclusion is that we feel quite comfortable with respect to our capital ratios.

And then liquidity. Liquidity is no issue for the group at all. It's evolved very positively over the last few quarters. In this quarter -- well, in the first 9 months of the year, in fact, we brought down the liquidity gap by another EUR 22 billion. And what we'll be doing will be to go on being very proactive in the market when different opportunities open up to make it through over the next few quarters.

Finally, the third important highlight this quarter is that once we've got visibility and we are clear about all the events that could occur during the year and according to the recommendations of the regulators and the international bodies, we have decided to amend our payout policy in the group as follows: First of all, we're going to cancel the payment of the cash dividend that we will pay in January 2014. Secondly, we're going to propose to the board and to the general meeting for their approval a dividend of EUR 0.17 per share, which will partially offset the impact of the disappearance of the January dividend. The third thing, we want to establish a payout policy which will progressively, from now on, be based on a payout in cash of between 35% and 40% with respect to the profits of each quarter. So we're talking about a payout very much in line with the standards of our peer groups worldwide. And then fourthly, finally, talking about 2014 now, what we will do in 2014 will be to continue with 2 scrip dividends and 2 cash dividends and then progressively, bit by bit, after that, we will move scrip dividends over to cash dividends until we reach a payout which will be fully paid in cash, talking about, again, as I said before, 35% to 40%. And when I talk about this percentage of dividends to the total profits, I'm always referring to the dividends that the group will be paying in cash in forthcoming years. Consequently, the conclusion is that we are moving towards the normalization of the group's payout policy so that we can meet best practices worldwide.

Now looking at the income statement as such, as you can see, it's been hit a lot by exchange rate changes. We're talking about 4 percentage points of impact in all the different lines of income. Consequently, there's a growth -- or sorry, a shrinking of 3.2% in net interest income, equivalent to a growth, if we get it in constant euros, of 1.4%, or 2.3% if we add the fee income, or nearly 2% if we are referring to the gross income. So the impact of the exchange rate, especially this quarter with the devaluation of the dollar above all, is one of the key hallmarks of what's happened this quarter. We'll see later on.

Why do we see this stability over the different quarters? I mean, that's nothing new. This quarter, it's something we've been seeing for several quarters now. It's basically due to what I often refer to, namely, our diversified business model in which emerging economies see double-digit growth, and they have a weight of 58% in our earnings, whilst the developed economies have a weight of 42% in our earnings. And as you can see, this is shared down to over several different countries.

And if we look at expenses, nothing new here. Expenses and revenues have been hit by the exchange rate that expenses, especially in emerging economies, have benefited from this. So to sum up, when we talk about the developed economies, we can say that, excluding the perimeter impact of the incorporation of Unnim, the expenses are practically flat. Whilst when we refer to the emerging economies, having taken out the impact of the exchange rate, there's a growth slightly above inflation, and that's equivalent to the impact of the investments that we're doing, opening new branches in, for example, Mexico, Colombia, Peru, incorporating new staff because the outlook for business is rather different from -- in developed countries. We've got new ATMs being installed so that we can provide a better service with fewer people in the branches, and we're investing in technology in order to further digitalize the services that the bank is providing customers all over the world, which gives us net income, which, in current terms, has gone down 8.1%. But with that 4% impact of the exchange rate, it would be 4.3%. So we are performing very well in comparison with peers with a 14-point difference in our cost-income ratio against our peers in our favor. And we have to remember the impact that have hit our accounts so far this year or even in this quarter. In 2013, we've been impacted by the adjustment of the final results of the CNCB bank investment in the first quarter, which I already mentioned earlier on. And then this exercise means that over 3 quarters, we haven't had any dividends from Telefónica. We also have a perimeter effect from Unnim being incorporated, which has mainly hit the expenses line. We're talking about over EUR 160 million additional expenses, which have to be added, then the hyperinflation, which is recorded just above the gross income, which has a negative impact because, as you know, inflation in Venezuela is much greater than we had forecast in our yearly budget. And also, the exchange rate impact I talked about.

What about risk indicators? Well, I repeat. Once again, there's been an impact of the way we treat refinanced loans. Here, we can see what would have happened if we had gone on reporting these loans as we had done before. We'd be pretty well repeating the same NPA ratio we had in June, but because of the impact, the group is now at 3.8% and 4.6%, whilst the coverage has gone from 64% to 58%, which has meant, as I said before, that we've had to add to the NPAs the EUR 14.5 billion that we had before. We've now got EUR 17.2 billion because of the additional incorporation of EUR 2.5 billion because of the way we report the refinanced ones. But as I said before, 38% of what we call NPAs actually are up-to-date in payment. And so if you look at the second half of the year as a whole, we intend to repeat with the same amount of provisions allocated as we did in the first half. So the final quarter of the year will have fewer provisions set aside than we are setting aside in this third quarter.

In capital, we've got good news. We are reaching 11.4% nearly of core capital ratio under Basel 2.5. And in terms of numbers under Basel III fully loaded, that 11.4% is equivalent to 8.4%, according to the requirements of fully loaded Basel III. And what we call leverage ratio, that will be 4.8%. I will remind you that in these numbers, we haven't included the China deal nor the sale of Provida or the capital gains from Panama, which, as I said, are going to be about 93 basis points, which we should add to these capital levels.

And that gives us an income statement that's been hit by the exchange rate and, in the first 9 months, by the capital gains from the one-offs that I said, the sale of the pension business in Latin America. And we've got a profit here of EUR 3 billion, and we're growing significantly. And we've got very resilient results, which are constant over the different quarters despite the complex environment that we're seeing in the world.

Consequently, to sum up, when we talk about our sound, robust numbers, we're talking about revenues of over EUR 16 billion because of our diversification worldwide. So the emerging economies are contributing 58% of our revenues, and that's made it possible for us, after adding certain capital gains from sales of the pension business in Latin America, to get an attributable profit of EUR 3.1 billion.

Now if we look at the more structural data, our capital ratios, we feel quite comfortable there, according to current requirements, and also the future requirements of Basel III fully loaded so that you can already see what the impact of the new regulations will be. And we're not even including here the 93 -- nearly 100 basis points of impact of deals that we already know, again, to have an impact. Liquidity, we're doing well. As you can see, we've improved liquidity. An additional reduction of the liquidity gap means that we feel very comfortable about the way we are managing this item. And then finally, in risks, there's been an impact from the new way we have to report refinancing. But on NPA ratio, nonetheless, it's 4.6%, with the reclassification, which is a one-off, which has taken place in this quarter. It will be possible for us to have greater visibility for future NPAs and expect to have fewer new entries, new additions, into the nonperforming loan book.

Now let's look at the different business areas. First of all, we're going to start with the developed world before moving on to the emerging world. Banking business, first of all, the business associated with banking business in Spain. As we can see, the margins are falling. The net interest income is falling year-on-year by 19.5%, and this has to do with 2 issues: on the one hand, the fall in lending, which has fallen by over 7%, as we can see here; and then on the other hand, there's a fall in the Euribor that's had a direct impact on the customer funds because in recent months, the most important impact has been the disappearance of the floor clause. This means -- has led to a fall in 19.5%, but this is in an environment where we're continuing to gain market share both on the lending side and on the deposit side, so over 70 basis points on lending side and over 100 basis points on customer funds. But what's more important than that is that it takes on a lot of new customers that we call main customers for the group's business. In the first 9 months, we've added over 100,000 main customers, and this is what will continue to enable us to continue building the franchise, and we'll see the results of this in coming quarters.

Risk indicators now. Obviously, this geography has seen the greatest impact from the refinancing. We're talking an NPA that's 6.2%, and it would have been 5% if it had not been for this new reclassification. And there are new entries coming in. So this is increasing the balance. And it's true that this ratio also includes the lower exposure we have to lending. With the coverage ratio, this has gone from 45% to 41%. Otherwise, we would be repeating the same coverage ratios that we're seeing in Spain instead of the 38% for the whole group. Here, in Spain, it's 41%, the NPA ratios that are up-to-date. They are current, and the NPAs go up from EUR 9.8 billion that we saw in June to EUR 12.5 billion because of the impact of the reclassifications from refinancing loans.

So in the income statement, we're talking about nearly EUR 500 million in profit at the end of the first 9 months with 2 main features: the impact of refinancing that we just mentioned, and the continued gain in our market share both on the lending side and on the side of customer funds. And in summary, we're attracting new customers and, as I said before, add the ones we consider to be our main customers or principal customers.

If we look at the real estate activity now, if we compare the situation with the end of 2011, we can see that our total exposure is being reduced by around 17% -- 18%, basically in real estate loans. And in the recent months, we're seeing a greater sale in property sales, whereby the end of the 9 months, we'll have sold over 9,800 units sold by the end of the year, which will be twice as many as what we saw at this time last year.

Real estate business has also had been impacted by this refinancing and the classification. It also adds EUR 1.4 billion on top of the balance. So this brings up to EUR 9.4 billion in NPAs in the real estate market, which takes us to an NPA ratio of 55.3% for the real estate business. In this case, the percentage of NPAs that are current on their payments is lower than that for the -- all the other businesses in Spain. And here, it is 34%. The coverage ratio, as we can see, is 73%. Despite that impact of the refinancing, it would have been 73%, but it's 62% instead of 73% for all of our lending exposure to the real estate.

And here, we have the interest -- the income statement in this business that we consider to be gradually taken off our books in the next coming years, but it makes a contribution with a negative impact right on the bottom line of EUR 845 million, which is a great improvement over last year when we saw the forecast that we're making for the real estate decrease of over EUR 1.9 billion in improvement. And in any event, what we are seeing -- especially here in the real estate, we're seeing better prospects that should generate more business because of the growing investor interest, especially from abroad. We've managed to attain a sales rate, especially the individual ones. That is very promising, and our objective remains to reduce our real estate exposure as much as possible and as soon as possible.

Okay, the U.S. now. In the United States, what we have are margins that are falling between 8% and 10%, depending on where we're looking at, the spending on the growth in business that we're seeing on the lending side and on the customer deposit side. If we compare the growth that we're seeing with what we're seeing amongst our peers in the United States, we're growing twice as much on both sides as our peers. This is the most -- the first important point. So we're growing our market in the United States, where we're present. We're also growing in SMEs and residential mortgages with regard to the business there, but we are feeling the impact, especially on maturity of operations with lower interest rates. So there's a lot of pressure on the customer spreads, which has led us to these negative impacts that we can see on the net interest income. It's true that in recent months -- obviously, we go over these numbers month-by-month. We're seeing that the revenues underlying the business have started to show growth month-on-month. So what we're expecting to see here is that the margins should recover in the coming months.

Risk indicators. There's no real novelty from what we've seen in the last couple of quarters. We're in very low rate of 1.5%, with net entry in NPAs of almost 0, with coverage ratios that have systematically grown up to this 120% coverage that we can see at the end of the first 9 months and the risk premium that is very low. And it would be very difficult to improve this moving forward.

The income statement is over EUR 300 million, and we're growing by 2%, but maybe, the most important point here are the good rate of business that we're seeing in our franchise in the United States. And we have a balance with a very well-positioned business when the interest rates start going up with -- because it's the low interest rates that are lowering our margins. But as soon as they go up, though we're not expecting this in the immediate future, that will have an enormous positive effect on this. And 2 positive points: The risk indicators are well under control, and costs are also well under control despite the pressure on costs from the regulators that has led us to clearly reinforce our central structures for internal control.

Emerging markets now. Let's move on to the markets that are far more dynamic. And the first thing I'd like to remind you is that Eurasia includes the earnings at 25% of our holding in Turkey. It also includes our holding in CITIC, our investment in China, up to the 30th of September, 2013. It will remain on the income statement, and as of the 1st of October, it will be taken off the income statement. And finally, we also have all the different Corporate and Investment Banking, the different branches both in Europe and Asia. The main driver of growth, as we have seen in recent quarters, is Turkey. This is nothing new. There's the potential for growth there. It's enormous. It merely confirms what we have seen in recent quarters. And I'm sure it will continue to grow in coming quarters far greater than the developed world. The business is growing very well there, as we saw in the Garanti presentation of earnings yesterday, and this basically translates into the different margins we can see here on the income statement.

I'm not going to go over this again because we've already been over this, but this region will suffer the impact as of the 1st of October, as I said, because it will no longer have any earnings of the equity effect up to the 30th of September. It will be -- but as of the 1st of October, this will not be included. And there's also an effect of a EUR 2.3 billion, part of which is because of the equity method. The impact on capital, I will say -- I've said this several times, is 71 basis points improvement with the new criteria of Basel III. And finally, if we think of China, China is still the fastest-growing country in the world, and economically, it's still going to be the largest economy in the world. So it is -- remains an attractive market. And maybe the only difference here is our initial approach to continue working in China without having to hold a 15% stake in CITIC.

Mexico now. This is the area that contributes the greatest amount of business to our earnings. It's business activity with regard to average monthly balances is not far away from 10% increase and translating to -- then to the different margins.

As the average business for the full year is around 7%, that we can see here, then I would say that the main margins are growing in line with the business, which is between 6% and 7%. And this is in an environment where we are continuing to invest and opening new branch offices and changing our model, especially from the -- to manage the customers by different segments and by unique experience, business experience, with all our customers. So we're basically absorbing the increase in costs because of this change in our business model.

The risk indicators. If we go beyond the occasional increase in the NPA ratio because of the fall of lending balances at the end of the month, but basically, this will recover as we move forward. The NPA ratio is very stable, and the coverage ratio is well above 100%. And the risk premium is -- remains at the same sort of level as what we've seen in recent quarters.

And this brings us to an income statement that is offering EUR 1.3 billion to the -- or contributing, sorry, at the close of this quarter with a growth of almost 4%. And we haven't seen the entire potential of the economic growth in the country, where they've just designed and started rolling out the new reforms that are on the table. And we will see that -- as of 2014, we will see continued economic growth as we've seen in the past. In Mexico, business is dynamic, which translates into revenues. And this improvement in the distribution model that we're working on, these will be the keys not just for this quarter, but also going forward.

South America. Once again, the data is very consistent with what we've seen in recent quarters. Lending is growing, and customer deposits are also growing very soundly. And this translates, quite honestly, into the main margins of the income statement, as we can see, that are growing between 20% and 29%, depending on which margin we're looking at.

Stable risks, as we can see here, just over 2% NPA ratio, stably over the recent quarters and coverage ratios that are very high, as we can see, and the risk premium are highly stable over recent quarters.

The income statement is contributing almost EUR 900 million to the group, and this is growing at around 13%. And remember that up until June, we saw lower growth, but it was also true that we were comparing this with the first quarters of the last year, where provisions that we had to set aside because of the regulations were lower. The keys to this region or the highlights, the business remains dynamic both on the lending side and customer funds, which were clearly transferring to the main margins. And as we have said recently, we are continuing to put on money on the region. In fact, we will continue to invest in opening new branch office and hiring new people so that we can grow our market share in some of the countries, where we think that we should have a higher market share. This is both in Colombia and Chile, and also to grow our business in Peru.

So in short, in summary, and this will bring me to the end and just to remind you, the main highlights that we've seen in this presentation, 2 issues have had an impact on this quarter: The reclassification of refinanced loans, the impact on capital that we'll see in the next quarter of the Chinese transaction; and of course, the new dividend policy that we have communicated to the world today. This takes us to an income statement that is contributing to over EUR 16 billion in revenues as a consequence of the contribution from the emerging world of around 58%, and generating profits -- attributable profit of over EUR 3 billion. Major -- one important thing is capital both from the point of view of the current capital requirement and also what we're considering to see for Basel III fully loaded. And I would repeat. Once again, this 8.4% or the 4.8% does not include the almost 100 basis points of impact of the transactions that are mentioned, China, Chile and Panama. Liquidity, this is going very well. And risks, this quarter, we're absorbing the impact arising from the new reclassification of refinanced loan.

So I'll now hand the floor over to Tomas Blasco Sánchez, our Investor Relations Director, to move on to the questions that we have received.

Question-and-Answer Session

Tomas Blasco Sánchez

[Spanish] Thank you, Ángel. As we do every quarter, what we'll do is that we'll put the questions together in different blocks so that we can answer as many as possible. So we'll start with a block of questions on the dividends. We have several questions here that have been asked by Victor Rodriguez [ph], Mario Lodos from Sabadell, Rohith Chandra from Barclays, Antonio Ramirez from KBW, Mario Ropero from Fidentiis and Benjie Creelan from Macquarie. The questions on dividends that have been asked are as follows: A general question on the reasons for the change in our dividend policy, what are the reasons or why are we changing our dividend policy at the end of 2013? Is this change due to the regulations on the supervision -- European supervision mechanism that we will see in the course of 2014? Has this got something to do it and this will be monitored by the European Central Bank? And a third question, why do we put together the dividend per share or the third dividend per share payable in January? Why are we putting it together with the April interim dividend? And another question, why 35% to 40%? Why is this the right payout ratio, this change from a scrip dividend to a fully cash dividend for an undetermined length of time? Then we have another question on the same percentages that says, "Has there been any indication -- have we've been given any indication from the Spanish regulator to pay out between 35% and 40%?" And a question just to clarify the situation as to whether we said about paying a payout ratio of 35%, 40%. Is this going to be as of 2014? Or does it also include 2014 -- the communication of the dividend policy means that the new system of 35% to 40% payout, is this for 2014, plus some scrip dividends? Or is it going to be after 2014, where it will be fully -- this policy will be fully applicable? I think that covers just about all the questions about dividend.

Ángel Cano Fernández

Well, those were a lot of questions. But as you said, Tomas, they're all related to the same thing. I hope that what I said in the presentation, what I'm going to say now, will make things as clear as possible. Why now? Well, first of all, we shouldn't forget that there is a recommendation, as I said in the presentation, from the regulator, but not just the Spanish regulator, but also from -- well, the international bodies have been making such recommendations, including the IMF. So worldwide, as long as there's uncertainty about the solvency of the international financial industry, above all, in the developed world, it's inevitable that we have to be very clear about being able to confirm the solvency of the banks in the system, above all, in Europe for the next few years. And that's why stress tests are so important, and regulations on asset quality, too. The second thing is that, well, basically, we think that we have to -- in the end, sooner or later, to have solely cash dividend payout. And we think that's quite important in the end at some stage. So we have to make some changes, of course, in order to meet this international recommendation. So we've taken advantage of this forward-looking change to be as orthodox as we can, according to the recommendations, in order to make sure that we can be consistent over time. So we have looked at the payout ratio. And basically, we're saying what the percentage is. We have to look at our capital situation, as I said, and our capital ratios, which are definitely very comfortable. And after that, we have to think how we can pay out the dividend, which is also always going to be in line with our earnings. And we also have to look at the amount of capital that's going into the dividend so that with what's left, we can still shore up our capital ratios and continue to be able to grow in today's environment using our business model of diversified footprint so that we can take advantage of the buoyant growth in some parts of the world. So when we talked about why we want to pay some out in April, it's because we think that in terms of euro sense, what we should be paying our shareholders in the end, against the 2013 earnings, what's being able to work easily in forthcoming years, is really that EUR 0.10 plus EUR 0.10 plus EUR 0.12 plus EUR 0.05, which is the bit that we've decided not to pay in January. So from going from EUR 0.12 to EUR 0.17 means that whilst we are improving on remuneration, we are not undermining our capital ratios in any way. So when we talk about that 35%, 40% payout -- and here, I'm always talking about the payout which is paid in cash, not the complete payout. So from now on, we'll be talking about higher payouts, although in cash, it's always going to be between 35%, 40%. If we look at international standards and look at the list of the main banks in Europe and in North America, we don't really find payouts above those levels anywhere. Consequently, what we want to do is to standardize things so that we have a normalized payout policy, so we'll have a cash payout, which will be normalized over time so we can go on growing in the different countries where we operate whilst, at the same time, shoring up our capital ratios, and that will have an impact as of 2014. In 2014, we still expect to have a payout with respect to cash payout. That is a cash payout of about 35% to 40%. And the basis of this is the idea that in this space of 4 payments, 2 in 2013 of EUR 0.10 each and one in 2014 of EUR 0.17, then we will have EUR 0.37 as the basis that we will have, although we can then normalize from there. And Manolo, I think maybe you can cover the rest, and I don't know if I've complicated things.

Manuel González Cid

No, no. You've explained it very clearly. Basically, I think there are some things that I would like to add. Talking about the payout, we're looking at the international references coming from banks in the United States, who are able to pay out ordinary dividends. Whilst in Europe, what we've seen is that these levels of cash payout were, as Ángel said, rather on the high -- put us on the high end. We are a growing bank. We are a bank with footprint covering emerging markets, where expectations are that we should normalize our profits as well in the developed economies. So we want to retain capital in order to finance our growth. So we think that this target payout is a cash payout, which gives us the possibility of remunerating our shareholders correctly and linking the growth of the dividend to the real growth of profits in the group, which is obviously going to make sense. And then at the same time, we should be able to finance our growth so that we'll have enough capital to grow suitably in the future and also deal with the phase-in into the Basel III standards. So that's why we've established this policy and given high visibility on it, to make it even cleaner in 2014, what we're talking about -- I mean, you shouldn't think that we're going to start to have no scrip dividend. No, we're going to keep the payout system that Ángel mentioned, but then we will look at our profits, and our final target would be bit to bit to substitute scrip with cash dividends. I think this is a sign which is very positive. It shows our dividend payout policy is responsible in this stage. And in a way, I think shareholders should recognize that they can take advantage of the growth of our profits so that without having big impacts on the number of shares, which I think is an important element, we can come back to a policy, which, in the past, was -- up until 2011 when we brought in the scrip dividend, what the group had always upheld with a target payout of about 50%. Then in the regulatory environment we're now, with the outlook for growth we've thought, we would be closer then to 35%, 40%.

Tomas Blasco Sánchez

Okay. And so you've answered the questions about the dividend. We can now move on to the capital. Jorge Andover [ph] from Current [ph] Capital, Andrea Filtri from Mediobanca, Carlos Peixoto from BPI and Rohith Chandra from Barclays would like to have a little bit more color, more details regarding what we think will be the core capital on the 31st of December 2013 under Basel III fully loaded, taking into account and with further detail, as I've said, the different transactions that are still pending, they are recording to the books in the final quarter. And I think probably, what they're mainly after is to know what the situation is with respect to deferred tax assets, DTAs. And as I said before, they want to know the total level of core capital, taking into account all the capital buffers that we currently have.

Ángel Cano Fernández

Our aim here, we deliberately to include the data for Basel III fully loaded in our presentation so that we can see the different effects as we move forward. So this 8.4% -- or the 4.8% does not include the 93 basis points of the impact in capital of the transactions I mentioned. Obviously, neither does it include the impact of the DTAs because we don't know exactly what the final answer is going to be, but we -- from the conversations that we've had, we do know that of these 160 total basis points of DTAs that we have and the future impact that we can deduct from the capital of these 160 basis points that are currently taken out of the 8.4%, we're talking about an effect that could be between 30 and 75 basis points. That is the range that we're talking about in the discussions that we're hearing in the ministries that would -- that we would have to add to the sums that I said at the beginning. And obviously, I'm not talking about the impact of generating profit in the last quarter that this would happen in the capital generation. So roughly and very quickly and simply, I can say that we're aiming for a ratio of around 9.5% as a minimum, and then we'll add whatever impact the DTAs might have, which is going to between 30 and 75 basis points.

Tomas Blasco Sánchez

Liquidity now. Frederic Teschner from Natixis, Mario Ropero from Fidentiis, Alexander Pelteshki from ING and Antonio Ramirez from KBW all ask about our position in the LTRO and how much we have, and what is our strategy to reduce our exposure in terms of LTRO that we have with the European Central Bank. He also -- they also ask for a bit of added color with regard to the causes that lie behind the fall in customer funds that we've seen quarter after quarter, the second and the third quarter compared. And finally, Francisco Riquel, with regard to liquidity, is asking for information about our position in sovereign bonds. What is our bond portfolio at the moment and the issue policy that we are considering for the end of the year and maybe in the first 2 quarters of 2014? And there's another question that's difficult to answer and that is, what is the expected cost? Obviously, this will be quite difficult. But these are the 3 or 4 questions that we have about liquidity.

Manuel González Cid

[Spanish] Well, as Ángel, our CEO, has already said in the presentation, generating liquidity on the euro balance sheet -- well, in the other bureaucratise[ph] it's pretty good. But in the European ones, it's EUR 23 million, and that's fantastic. That's our business right now with the deleveraging in Spain and the growth of deposits, in the market share and deposits. We are seeing that, really, we're generating a lot of liquidity. That means that we're not rolling over wholesale funding contracts when they run out or when they expire. And we're talking about half -- EUR 16 billion[ph] to which we return to the European Central Bank in the first half of the year. And we've only made issues for under EUR 6 million. You remember that USD 1.5 billion were issued to April, but because we have such a sound liquidity position, we don't need to tap the wholesale markets now. So that is our policy we'll have to the end of the year, which will mean that we'll have wholesale maturities of about EUR 14 billion throughout the year. And looking forward to next year, we think that the balance sheet will continue to bring in new liquidity, further liquidity, and we will have to see exactly what the decision is, if the decision comes out with respect to a possible new LTRO or some kind of substitution of the current LTRO with the new one. You know that the market has got a lot of speculation about what the European Central Bank might do there. And with respect to our issuance policy, well, are we going to do anything in the last quarter? Well, it would really only be to refinance possible maturities that we might have next year, but we're not going to need to issue next year for the maturities that we've got because we're generating enough liquidity, along with the liquidity excesses that we have. It means we won't have to tap the wholesale markets hardly at all, which is a very good thing if we look at the income levels. As for the new LTRO, for us, it's not so much the liquidity that it matters because we're quite comfortable about that. It is, however, important in terms of showing what kind monetary policy is going to be reflected in the new of LTRO because it's really giving you forward guidance about the future ECB policies for the forthcoming years. That's what's really relevant for us. And depending on what the ECB decides, our budgets will -- in principle, if there is no new LTRO, will be to significantly reduce our LTRO over the year so that in March 2015, with the maturity, we will be at 0 in our books with the ECB. And then you asked about the falling deposits. If we look at all the details, and you can see that in the more detailed documents we've got, there were drops this quarter, but over the year, they've grown. And the fall is associated to reductions in temporary assignments of assets and the relationship with the government administration. If we look at the residents, the site and term, deposits actually are going up with -- in the retail world. So we think we are doing well. We're increasing our market share in deposits. And you should remember that we no longer got the impact of Unnim in year-on-year comparisons. So our figures are after having included Unnim in our books. And then Paco Riquel asked us about our sovereign bond portfolio. At the moment, we have a EUR 31 billion exposure to Spanish sovereign bonds, which is more or less what we've had for a long time, maybe EUR 700 million increase over the quarter. That's because of our trading portfolios of our treasury stock. And basically, then you could say that it's stable with a term of 2.9 in general. So that's what we've got and what we'll keep. Next year, there's approximately EUR 4 billion, EUR 5 billion of maturity in this portfolio if we maintain it. We've reclassified the available for sale -- a lot of the portfolio as available for sale. So in 2014, we'll have to see. Depending on all the different issues that I've mentioned, we'll have to see what our requirements are, but we think that we will have low requirements for liquidity on the market. And that will mean that the cost -- well, it will be nice to have a degree of certainty, such as Paco is asking of me. But in general, I think that we can say that our spreads have been substantially narrowed over the year. And right now, our senior spread is below that of the treasury debt. So I think that can give you an idea of the kind of cost that we would estimate we will have if we go out onto the market, anticipating the maturities in 2014.

Tomas Blasco Sánchez

Okay. And then in the block of the asset quality review, there are questions from David Lock from Deutsche Bank, Andrea Filtri from Mediobanca, Carlos Peixoto from BPI and Antonio Ramirez from KBW. And so the questions would be, what is our opinion about the threshold of 8% minimum capital, which we saw was announced yesterday? How could that impact on the review of our risk-weighted assets? And the third question as well, if the EUR 3.8 billion of assets that we've restructured or reclassified -- the question is, is the reclassification adjusted to the requirements of the European regulators? Or, in fact, are they more or less demanding than the Bank of Spain's standards currently are? So those are the questions about asset quality review.

Ángel Cano Fernández

[Spanish] Starting with the capital requirement, there is 8% for the central scenario. 8% is higher than what is required as of January 2014, but in any event, getting as much trust in our solvency across to our customers and investors is good news. So 8% strikes us as being better than the 7% that they were talking about previously. With regard to the risk-weighted assets, anything that enables us to compare the quality underlying the capital ratios, I think, is good news because we can ensure a level playing field for everybody, not just for provisions and financial reporting. It's all good news because I think it's the best way to be sure that we are all competing with the same game rules and on the same playing field. With regard to the EUR 3.8 billion, what we've seen recently when the recommendations came out or the new classification criteria for NPAs, this is the sort of thing that I used to see years ago. So this is something that's been applied for some years now. So I think this EUR 3.8 billion is in line with this -- with the new criteria for classifying NPAs. I think even in some of the things behind this recommendation here in Spain, I would say that we are even more demanding than the European requirements or recommendations for classification.

Tomas Blasco Sánchez

With regard to asset quality, we have several question, Rohith Chandra from Barclays, Mario Ropero from the Fidentiis, Mario [ph] Serrano from Morgan Stanley and Andrea Filtri from Mediobanca and Mario Lodos from Sabadell. The question on asset loan quality, what is our best expectations for NPA for the end of 2013 here in Spain, asset quality, and how provisions are forecast for 2014? What are the chances of having an extra charge in the last quarter of 2013? Obviously, this would be related to asset quality. What is our forecast of the cost of risk in Spain for 2013 and 2014? And a question concerning -- with regard to when do we consider that the ceiling in Spain will be for NPAs? When will it peak out? And just to finish, a bit more color with regard to the refinanced loans by breaking it down in categories because we're talking about EUR 3.8 billion. So what categories are included in this EUR 3.8 billion, and maybe you could give us the percentage of coverage for each of these categories. And that's just about -- all about asset quality.

Ángel Cano Fernández

[Spanish] Well, let's start with NPAs, 2013, in Spain. Regardless or apart from the reclassification done in this quarter 2013 because of the impact of the way we look at refinanced loans, the growth entries into NPAs over the last months were gradually going down. Consequently, for this quarter, we've got actually lower levels without the refinancing being reclassified. So for the rest of the year, in the next quarter, we think that the entries into NPAs will be similar to what we would have had if we hadn't had the reclassification. So we can expect to see about EUR 1.5 billion, EUR 1.6 billion, first and second quarters of 2014, of growth entries in the first quarters of the year. So that means that at the end of the year, probably, we're below that, maybe somewhere close to EUR 1 billion but far away from that EUR 1.5 billion or EUR 1.6 billion figure from this year. So that means that we expected in the second half to have a certain amount of provisions which will be similar to what we had in the first half. But now after having had to reclassify the refinanced loans by the end of the year, with fourth quarter having fewer provision set aside, we think that there will be, at the end of the year, a level which, in Spain, will be between EUR 3 billion, EUR 3.2 billion provisioning for Spain, that is, at the end of the year. And then the cost of risk, at the end of the year, this will mean we'll be at about 1.6%, 1.65% maybe in Spain -- in cost of risk in Spain. And for 2014, the outlook would be that it should be about 1.1% probably. The peak in NPAs, well, that's more complicated. It depends on the denominator, which is the loan book balance. And for 2014, we expect the balance to be growing from the beginning of the year in certain, very specific sectors. Those otherwise closely related to export, but we'll still see deleveraging in households and, above all, in the construction industry and the real estate sector. So if we include all of those different impacts, we can expect that the gross entries into NPAs will go down over the year. We've already been seeing this kind of trend, above all, in households and with individuals, but that will mean that regardless of what happens to the denominator, the NPA peak will be between the end of the year, the beginning of next year, above all, because we expect that in the second part of the year, probably, the loan book will start to grow. And so -- although, on average, it would drop over the year, maybe half of what it's dropped this year. But as an average, throughout 2014, it will go down. But the performance of the loan book will be quite different in the first half than the second half of the year. In the first half, we've seen more deleveraging. And in the second half, when we look at it in net terms, we expect that we will see growth of the loan book. And that will mean in the first months of 2014 that we probably will peak out in the NPA ratios according to that formula. And declassifications, Manolo?

Manuel González Cid

Yes, if we look at the breakdown of refinanced loans, we can say EUR 2 billion practically. EUR 1.86 billion are for buyer mortgages, EUR 1.43 billion are in real estate for developers, and the rest is associated to what we do with businesses and SMEs. So that's that EUR 3.8 billion of reclassified debt. And then if we look at the refinanced loan portfolio in Spain, the total amount of refinanced debt to the 30th of September would be EUR 24.8 billion, of which 54% are already classified as NPAs. Only 18% are classified as on the watch list substandard. So you can see there what's been impacting on the reclassification. And 28% are classified as performing. So with respect to total coverage, total coverage is 23%, 39% NPAs and 11% in the watch list or substandard portfolio.

Tomas Blasco Sánchez

Okay. Now we can move on to the business areas, and we'll start with Spain. Frederic Teschner from Natixis, Mario Lodos from Sabadell, Ignacio Cerezo from Credit Suisse, Paco Riquel from an N+1 and also from La Caixa, we have a question -- well, several questions, which are the same one. What's going to happen to the different income lines in the fourth quarter of 2013 and throughout 2014? So what are the trends? I think they've already been explained, but what trends are there in deleveraging in Spain? And what will they look like in 2014? And then how can we explain that the net interest income in Spain has gone down quarter-on-quarter from the second -- third to the second quarter? And that's more than just the impact of the floors, it would seem. So what other explanation is there for this fall? Why did net interest income go down in Spain in the third quarter?

Ángel Cano Fernández

[Spanish] Let's start about the trends of the net interest income. What I tried to make this clear in the presentation with regard to the trends in rates as far as loans are concerned, we've seen how the 12-month Euribor has fallen over 100 basis points in the last 12 months and how the Euribor for 3 months has fallen over 60 basis points. And this has, obviously, had a direct impact, as I said in the presentation, on lending. The value of customer funds, year-on-year, is very stable. It might be slightly lower, the cost of deposits, than last year. But I would say that basically, the customer spread that's fallen 43 basis points in the first 3 -- 9 months of this year compared with last year is because of the direct impact on loans. If we look at next quarter, once lending has taken the impact of the fall in rates, then we have to continue to factor this effect in -- on the customer funds or the cost of funds. According to the trends we've seen in the last few months, the last 2, 3 months, of how deposits -- basically, the term deposits are being renewed and new people bring in their deposits into the group. What we're saying is, in the final quarter of the year, especially if we compare this with the highest cost of deposits last year, which was in the final quarter, the fourth quarter, we will see there will be another 20 or 25 basis points in lower deposit costs. And this will mean that in the fourth quarter, from the net interest income, it's going to be better than the third quarter. And if we're talking about 2014, first of all, we have to absorb the impact of the floors that, in 2013, as you know, will have an impact of approximately EUR 53 million a month, starting with half the month of May 2013. So in 2014, with the same interest rates, we will see a greater negative effect than in 2013. But on the other hand, what we're seeing as an average is a better performance of the cost of deposits, or that's according to our forecast. If we put this all together, what we should be seeing is this offset with the greater business that we're expecting in 2014, then the performance should be slightly negative in 2014 year-on-year but only very slightly. The third quarter, in comparison with the second quarter, apart from the floors that we were talking about, which, as you know, that the third quarter includes the full effect of the floors and the second quarter doesn't -- the floor clause, but we're always talking about a seasonally low quarter because of lower business volumes especially around August because everybody is on holiday here in Spain. And the second point, which is less important -- and that is the relationship with Unnim that we had to do in June, but that's a one-off. To give you an idea, we're talking about a traditionally lower season for that quarter. And the full effect of the floor clause and the direct impact on the loans was the fall in the Euribor. And moving forward, at fourth quarter, they should have been higher than the third quarter because of lower deposit cost. And then for 2014, a bit more business volumes, lower cost of deposit could offset the negative effect for the full year of the floor clauses. And just -- I'd like to add to that, if we look at the quarter in the -- quarter-on-quarter, we have a second quarter of EUR 923 million and a third quarter of EUR 827 million, but the incremental effect of the floor clause between the second quarter and the third quarter would explain most of this fall, quarter-on-quarter, of the net trading income -- net interest income, but it would have been even greater if it hadn't been for the floor clause. We've applied this to the entire quarter because -- although it only came in on the 9th of May. So the margins, despite the environment that we're talking about, the seasonality and the leverages, there are indications of everything stabling out. I think that EUR 264 million is the impact of the floor clause in the period. But if we bear in mind that this comes from the 9th of May, we're talking about EUR 90 million or EUR 90-odd million -- EUR 180 million, something like that.

Tomas Blasco Sánchez

Okay, Mexico now, all the questions about Mexico, asked by Carlos Peixoto of BPI, Rohith Chandra of Barclays, Mario Ropero of Fidentiis, Francisco Riquel from N+1 and [indiscernible] from La Caixa, deal with the cost of risk, the NPA ratio in Mexico. The first question is, what is our consideration of the cost of risk in Mexico in the course of 2013? And also, another question about our exposure to real estate developers, do we expect any kind of additional provisions in the fourth quarter? What is our position concerning the rest of the market? And then 2 other questions concerning, first of all, the banking reform in Mexico, how do we consider the banking reform in Mexico? How could it affect our franchise there? And in general, what do we expect from our business and activity in the fourth quarter and moving into 2014? So we're talking about, first of all, what is the cost of risk in Mexico, what do we expect from the cost of risk in 2014, and would there be any additional impact because of real estate developers in Mexico? What is our position with -- in comparison with the rest of the sector? And then 2 questions about the impact of the banking reform on our bank and what do we -- what is the expected performance for the business and earnings from Mexico for 2014?

Ángel Cano Fernández

[Spanish] Well, first of all, in the presentation, 3.5% is the cost of risk in Mexico. It's higher there because, I'd say, of the importance of consumer finance and the car business in Mexico. It's also influenced more in the second than the third quarter but also in the year as a whole by the provisioning for the developer business in Mexico, what they call the [indiscernible] issue. So in provisioning and reclassifications, we've got everything booked to the second quarter. So in the third quarter, there are no impacts apart from what we have from the Consumer Finance and the credit card business. What are we expecting in terms of cost of risk in Mexico? Well, we are talking about Spain earlier on and we said we're going from 1.65%, 1.67% in '13 to 1.11% or about 1.11%, 1.15% in 2014. But here, we'll be talking about that 3.5% that we saw in the presentation, and we can expect that going -- to go down to 3% over 2014 in Mexico. That's our basic idea. And in terms of business volumes, it's in the presentation, I said that we are seeing more growth during the first part of the year. I'm talking about perhaps 7%, which is spread up in September. We knew -- we know that we've still got a pipeline with transactions with business -- SMEs and corporates, which would lead us to expect growth to be quite stable, in double-digit growth from here to the end of the year. So we can say that we've got quite good visibility there. And we're getting that despite the fact that public investment isn't really at cruising speed yet because in the first part of the year -- and this has had an impact on the low economic growth of the country as a whole, the authorization for public investment had pretty well stopped. And I'd say that there's been a timid start-up in the rest of the year, but we'll expect to see more authorizations coming through in public investment. So it will be possible to see the kind of growth that we had before in Mexico as of 2014. Banking reform, tax reform in Mexico, we know a little bit about it so far. They don't add anything that's going to have a relevant impact on what we do apart from -- with respect to the refinancing of the sector in Mexico. But banks like ours aren't really going to be impacted now or in the future in terms of, really, corporate income tax, VAT and dividend payout policy. Really, the impact on the country's economy won't have a big impact. We are all expecting to see further reforms, above all, in the power industry. And depending on the debt and the quality of the reform, we could take advantage of the very high potential for growth in Mexico, or we could have growth which would just be similar to what we've had over the last few years. In 2014, business volumes in the loan book, obviously, we'll have to see the final details of the reforms, which we'll be seeing over the next few weeks. We could expect to see business volumes grow at similar levels to what we're getting at the end of this year, really double digit, more or less. And the impact will be similar for the different lines of the income statement. I just wanted to add about our exposure to developers in Bancomer. Our exposure to developers in Bancomer is EUR 964 million to the end of the quarter. EUR 670 million would be current performing loans, and NPAs would be EUR 294 million. I wanted to say that this exposure to the performing loan book has been reduced from 2010 by practically 60%. And that shows, I think, very clearly, our capacity to anticipate market trends, which we've always shown in Mexico, above all, with these very specific problems that are being seen in a very specific part of the RE market, so NPA ratio, 30%; and coverage, 47%. And 45% market share in developers, which we had before, has gone down to 13% market share. And that doesn't mean that no developers are making a profit. It's only the developers that were working with the public subsidies. So the other developers in the private sector are still pretty stable in their business performance, although, obviously, we can expect some further reduction maybe.

Tomas Blasco Sánchez

Okay. In the rest of our franchises, in emerging economies, Eurasia, South America, we've got questions from Fidentiis and from Citi and from Autonomous. Basically, the questions are, what do we expect business volumes to be like in Latin America? And in Garanti, really, in 2014, do we see some slowing down of business volumes? What's our best scenario? And in Latin America, what's happening in Venezuela? What do we expect to happen to net interest income in Venezuela? So the question in general terms is, is there a slowdown in Latin America and in Turkey in Garanti? And inside Latin America, could you make special reference to what's happening in Venezuela?

Ángel Cano Fernández

[Spanish] First of all, talking about business, I think what we're seeing in the last few months of this year, in general, both in South America and Turkey, too, is that business is approaching the averages of around 14%, 15%, 16%, 17%. And basically, that is what we're seeing, that we will continue to see in 2014, which means that it's going to grow less than we've seen in recent years, but it's also true that the growth that we saw in the past was enormous, was dynamic. So what we're budgeting or what we're forecasting, without having seen the 2014 budgets yet, although this happened or they haven't been closed, but we're talking about a growth of between 20 -- 10% and 20% depending on the country and depending on how we go with opening new branch offices, as I mentioned in the presentation, in some of these countries. I think it's going to be similar in Turkey, where growth is going to be something over 10%, between 13%, 15% in 2014. But in these areas, I think they're going to be less volatile. They're not going to be safe or as sure as we see -- as the business we see in the developed world. The impact on the margins will have -- what we're looking forward to or what we're forecasting for 2014, more at the beginning than the end of the year, I would say another devaluation in Venezuela. We'll see that when it happens, but we think that after the December elections, the local elections in December. And if there is a devaluation, the impact that will have is that it will reduce all the lines of the income statement for Venezuela. But harnessing the diversification that we have, not just in the group, but also in South America, the impact of events of this kind in a country like Venezuela -- the marginal impact on the whole group is less and less.

Tomas Blasco Sánchez

And then the final block of questions -- we've answered 90-odd percent of the questions and just in the last few minutes. I have 3 final questions that might already have been answered, but just to finish with this block, first of all, concerning the asset quality review, Tina Ricolea [ph] of Comadvance [ph] asks about the impact that we expect from the review that will be conducted by the European Central Bank. Then the efficiency ratio, Rohith Chandra from Barclays asks about the trend in our efficiency ratio in the next 2 years. And finally, Carlos Peixoto from BPI asks about the interest that we may show in the potential purchase of Catalonia bank or Novacaixagalicia. So 3 final questions, the first of all concerns our expectations from the asset quality review conducted by the European Central Bank, our efficiency ratio over 2014 and '15 and its performance, and what is our position with regard to a potential purchase of Caixa bank or Novacaixagalicia?

Ángel Cano Fernández

[Spanish] In our case, we'll see. Well, with respect to Spain, there will be -- we've gone through a recent stress tests, which is an asset quality review, and we definitely had more than enough capital in the stress and the baseline scenarios. So a lot of provisions have been set aside throughout 2013 already, not with the same levels as in 2012 because of real estate exposure, but nonetheless, very high provisions in 2013. Very demanding reclassification of NPAs, and the provisions set aside against these new NPAs will clearly mean that we are well above what's happening elsewhere with respect to our ability to put up with any impact. So we don't expect to see anything negative happening. In fact, the normal thing would be to expect BBVA's numbers to look very, very sound and very, very tough at the end of the quarter because we think that we have very sound levels of capital and excellent solvency, which we've proven to the market. And if you look at the cost-income ratio, while we're working -- as you saw when we talked about costs and about income, we're talking about the emerging and the developed economies. In the emerging economies, we've got investments which we are still making in Mexico, '11, '12, '13, '14, and different items, technology, opening branches and changing our distribution model. What we are working on very hard is to ensure that costs should not grow faster than revenues, and pretty well, we are managing to do that. And the period of getting a return on investment in the new branches should not take more than 1.5 years. So that will have an impact on the rest of South America as well. So in the emerging economies, our aspiration is continued over the next 1.5 years, 2 years, to see that the growth in revenues will outstrip the growth in costs in those countries where we want to grow our market share, namely in Colombia or in Chile, where there is very high economic growth. And so efficiency in that part of the year is under control. We're investing to generate greater revenues in the future, and we'll see that in 2014, 2015. In the developed economies, we will continue to see stability or a fall in costs. So we're seeing our plans, which will give us a leaner cost structure and central level and elsewhere. And so from the second part of this year and in the next few years, once we finished the process of rolling out our new technology platforms in the group, we will be able to optimize the investment we make in technology every year, and that will bring us returns over the next few years. Our investment in technology, first of all, go into software, but then we have to get the payback. And so there's a certain lag in time before we see the impact on our income statement, but we have to roll out our platforms so that we have a standardized architecture throughout the group so that we can take advantage of one-off developments that could be used everywhere in the world. And that will be reflected in better commercial productivity, better service for our customers in future years. And parallel to that, we have to optimize the investments we're making in technology so that we can establish priorities for the most important investments being made in technology, which can improve our customer service. So in the next few years, to sum up, costs will be under control. They will grow in some countries where revenues will be growing more, and they will be under control and even be cut back in the developed economies, especially while -- at least in 2014, the revenues are going to be pretty stable.

Tomas Blasco Sánchez

Okay, I think you've covered that -- those questions. So thank you very much to everyone for attending this webcast. And any questions that haven't been answered...

Ángel Cano Fernández

Just wait. There was another question about Novacaixagalicia. Well, in Galicia -- well, you know that here in Spain, we always analyze all possible transactions with the same criteria being very strict in considering what we could do here or anywhere else in the world. In Galicia, we are analyzing market opportunities. And we've very recently done an analysis, and so we are ready to analyze the specific transaction. And we will continue to analyze things with the same demanding criteria we always apply. We have to generate value for our shareholders with any bid. And so if we are going to bid, the bid will reflect what we think can come in, in terms of increasing our total shareholder return. And that's the only criteria we have. Thank you very much. And if there are any other questions that haven't been answered, then the Investor Relations team will be happy to answer them. So thank you for attending this webcast and this presentation of results. And thank you, and see you next quarter.

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