Alfredo Sáenz Abad - Second Vice Chairman, Chief Executive Officer, Member of Executive Committee, Member of International Committee and Member of Technology, Productivity & Quality Committee José Antonio Álvarez - Executive Vice President of Financial and Executive Vice President of Investor Relations Division Angel Santodomingo

[Spanish] Good morning. We're going to begin the presentation of the group results up to September or Q3.

As usual, I'll present the key aspects and the group results for the first 9 months, and then José Antonio Álvarez will examine the business areas in greater detail. And finally, I will close with a few conclusions.

First point is that the economic context in which we've conducted our business has remained very difficult, particularly in Europe, with significant tensions and loss of confidence of markets in the euro, driving high list premiums in the peripheral countries. This trend has softened in the last few weeks due to the first steps towards banking union and the launch of the European stability mechanism.

The U.S. has performed better with moderate growth but as context, with Latin America, where the IMF has forecast significant growth rate for Brazil, growth in 2012 will go up to 4% in 2013.

In this context, our priority was to strengthen our balance sheet. To do so, we bolstered our strong capacity to generate results.

In summary, our significant aspects are, first, the strength of the upper part of our income statement. Pre-provision profit in the first 9 months was EUR 18.18 billion, which is 3% up on the same period of 2011.

Second, provision for real estate risk in Spain in the quarter was -- amounted to EUR 2.23 billion, bringing the provisions made in the year to over EUR 5 billion. After this, we are meeting 90% of the requirements of the new Royal Decree.

And we've increased total coverage for doubtful loans in Spain, not just real estate, up to 65%, which is 19 percentage points higher than in September 2011. Third, we managed to combine these provisions with capital ratio rising to 10.4%.

Also, the group's capital strength has been confirmed in the stress test carried out by Oliver Wyman, where, in my view, we obtained the best score of all. And fourth, we've continued to be very focused on liquidity, particularly in Spain, where our loan-to-deposit ratio is now at 108% after a further improvement in our commercial gap in the third quarter.

We continue to compare well in credit quality in the main areas where we operate. In all, recurring profit was EUR 4.25 billion in the first 9 months, EUR 1.8 billion after provisions.

Let us now analyze each of these points in more detail. First point is sustained result generation.

The group has continued to generate significant recurring profit -- pre-provision profit in the third quarter was EUR 5.7 billion, in a quarter which is seasonally lower, and EUR 18.2 billion for the 9 months. That's 3% up versus the same period last year, an increase which would have been 5.4% without the perimeter effect.

So we have maintained our excellent track record in this item in our income statement in previous years, where we are among the world's leading banks. And here, I'd like to remind you that this is something that sets us apart from our international peers.

In the first half of 2012, most of them, 9 out of 16, recorded a decline in pre-provision profit, as well as in the weighted average, down 9% versus Santander's increase. And this trend is driven by a good evolution of our most commercial revenues, which are extremely cycle-resilient and rising each quarter and year-on-year.

The second point I'd like to make about this quarter is the fact that we've continued to increase provisioning for Spanish real estate. We've provisioned EUR 2.23 billion gross.

That's EUR 1.55 billion net of taxes. Part of this net figure, EUR 410 million, was offset by capital gains, mostly those obtained by the reinsurance of our insurers in Spain and Portugal.

But most of it, EUR 1.14 billion net, came from ordinary profit and reflects the group's priority in strengthening our balance sheet. Attributable accounting profit was EUR 100 million in Q3, the same level as the previous quarter.

With this provisioning, total in the year was EUR 5.01 billion, net of taxes EUR 3.47 billion, of which EUR 1.02 billion charged to capital gains and EUR 2.45 billion toward the profit. This provisioning effort has limited our accounting attributable profit for the first 9 months down to EUR 1.8 billion, to which, a figure which would have been EUR 4.25 billion if we consider recurring profit.

The third point was our capital ratio. In the third quarter, we have continued to provision, as well as maintaining solid capital ratios.

Core capital under BIS II rose to 10.4%, thanks to the impact of the Mexican IPO plus organic capital generation, which was partly offset by provision and the depreciation of some currencies. And this strength in our capital ratios has been confirmed by the latest stress tests on Spanish banks carried out by Oliver Wyman.

The soundness and resilience of the Santander Group was demonstrated in the worst-case scenario included in this stress test. So in summary, the stress test showed the excellent quality of Santander's loan portfolio with an expected loss lower than that of the sector, the fact that Santander is the only bank that has crossed the maximum impact of the stress test with a Tier 1 common equity higher than at the start of the period under review.

That is, in the worst-case scenario, our ratio rises from 9.7% in 2011 to 10.8% in 2014. That's a surplus of EUR 25.3 billion over the minimum required in the scenarios of the stress test.

And we're, therefore, the only bank to create capital in the period under review. For liquidity, the group has maintained a solid position, which we basically manage to 2 drivers.

First, deleveraging, which has continued in some mature markets, mainly Spain and Portugal. In the 2, we've improved our commercial gap by EUR 20 billion in the first 9 months, partly from the fall in lending and partly from the increase in retail deposits attracted by our retail networks.

Second, the group's very conservative issuance policy, based on a wide and diversified access to wholesale markets via the parent bank and the group's main subsidiaries. This has enabled us to issue, in the year, over EUR 24 billion in medium- and long-term debt via the U.K., Latin America and Spain.

Note where the placements of senior debt by Santander in Spain in the last few months, EUR 4.5 billion, which have received high and diversified international demand, showing growing appetite for Spanish risk. Additionally, the group placed in the market over EUR 10 billion in securitization.

The deleveraging and the various issues are reflected in the group's basic ratios. Our loan-to-deposit ratio has remained at under 120%, and our ratio of deposits plus medium- and long-term funding to the group loans is 113%.

Moving on to credit quality. The group has continued to manage its risk very actively.

As you see on this slide, we compare very favorably with the mean of the industry in the main countries in which we operate, that is Spain, the U.K., Brazil and the rest of the Latin American countries, where we are consistently above the system or the industry's mean or benchmarks. For the group, our NPL ratio is at 4.33%, continuing with the upward trend of previous quarters.

This increase is basically due to trends in Spain and Portugal. Also, Brazil, which in line with the market, is seeing a rise in the NPL ratio in the last few quarters.

On the other hand, Santander Consumer Finance's ratio remains below 4%, which is an excellent level for this type of business. Sovereign Bank remains at record lows, and the U.K.

and Latin America show only very slight changes. As for coverage, the group's coverage rose again in this quarter, up to 70%.

This improvement was mainly due to increased coverage in Spain, up 12 percentage points in the quarter and 20 percentage points since January, as a result of the provisioning made in the last quarters. Brazil and the U.K.

have also improved in the quarter. And Santander Consumer Finance and Sovereign Bank have maintained high coverage levels at around 110%.

Moving on to the group results. On the slide, you can see the income statement and then a column subtracting the impact of interest rate and perimeter changes, which have a negative impact of about 2 percentage points on the top part of the income statement.

If you look at the trends, we can underscore the 2 main conclusions we have reported in previous quarters: first, the strength of our upper part of the statement, with net interest income up 5.4% in like-for-like terms over 2011; second, that this good performance does not feed through to the bottom line. And this for 3 reasons: first, rising loan-loss provision partly because of more specific provisions in some units and partly due to the release of generic provisions by units in Spain in the first half of 2011, which has not happened in 2012; and second, the negative impact of the rising minority interest after placing part of the capital or subsidiaries in Chile and Brazil; and lastly, the impact of greater real estate provisions.

Moving on to income. Without taking into account the impact of exchange rates, you can see that the most basic revenues, net interest income fees and insurance, have remained at over EUR 10 billion in each of the last 4 quarters.

In total, the basic revenues increased 5%, driven by the main component, net interest income, which rose 7% during the first 9 months -- or versus the first 9 months of 2011. In the quarter and by area, basic revenues rose 12% year-on-year in Latin America due to higher volumes and a successful management of spread.

Continental Europe has also shown significant recovery in the last few quarters, particularly in retail banking, with a year-on-year increase of 1%. On the other hand, in the U.K.

and the U.S., we have seen declines because interest rates are at close to 0, plus there have been significant regulatory impact on liquidity and fee income, respectively. As for cost, they have remained stable in previous quarters and they have risen in the third quarter because of the signing of wage agreements in Latin America.

In the quarter, we signed a wage increase of 7% in Brazil and some investments in systems and technology in this area and in the U.S. As for provisions, the chart shows the efforts made by the group in the last quarter by loan-loss provisions and additional provisioning.

In loan-loss provisions in the last quarter, we see a reduction of just over EUR 400 million, mostly relating to Brazil, which as we predicted last quarter, has reduced their provisions. Additionally, and as I have explained already, the group has also provisioned in the last quarters to cover Santander's and Banesto's real estate risks.

With that, the group has already met at around 90% of the new legal requirement. Specifically, the effort made in the last 3 quarters has enabled us to significantly increase coverage for real estate exposure in Spain.

In doubtful loans, coverage rose to 45% versus 33% in March. In substandard loans, to 43% from 16% in March, and in foreclosed properties, to 50% from 48% in March.

This means that the coverage for problematic loans reached 47%, which is much higher than what we had in March. Including outstanding risks, where coverage rose from 3% to 27% in the last 3 months, coverage of total real estate exposure improved from 23% in March up to 41%.

I will now hand over the floor to José Antonio Álvarez so he can review the different business areas.

[Spanish] Good morning. As we've just heard, I will be reviewing the main aspects of the group's business areas in the quarter.

As we always do, here, you can see a slide with the profit breakdown by geographic area. In this breakdown, you can see a good balance of mature and emerging markets.

55% of our profit come currently from emerging markets. And Brazil is, of course, the main contributor, with 26% of our profit; and Mexico, the second; and Chile and Poland with 5% each.

Spain represents 16% of the profit, the U.K. 13% and the U.S.

around 10%. Moving on to the different business units and beginning with Continental Europe.

I'd say that the statement reflects the complex economic environment with low growth, in fact, recession, in several economies, the most significant for us, and deleveraging continuing with low interest rates, plus high degree of regulatory uncertainty for our business. Profit for the first 9 months of the year was EUR 1.8 billion.

That's below the amount at the same period of 2011 because of higher loan-loss provisions. Above that, net operating income rose 6% or 5% if we exclude the perimeter effect from incorporating BZ WBK in the second quarter of 2011.

And as for income, in the upper right chart, you see the sustainability of gross income in the current environment. That is, some of the losses in volume we are offsetting with improved spreads.

In comparison with the previous quarter, Q3 is usually a weaker quarter seasonally because of summer in Europe. But in the chart below, you can see profit, which in the last quarters have remained quite stable at around EUR 600 million per quarter.

Moving on to the different units that make up Continental Europe, beginning with the Santander Branch Network. I should note that we have continued to see a strong growth in deposits year-on-year, a 16% increase.

And deleveraging continues with a fall in lending of 6%. This has had different effects.

On liquidity, of course, the impact is very positive. And our loan-to-deposit ratio, as a result, is down 25 percentage points in 12 months.

And it's at 104%. And probably in the next quarters, we will reach a perfect balance of loans and deposits in our Spanish branch network.

As for results, the year-on-year profit comparison is affected by the release of generic provisions in the first semester of 2011. A positive note, basic revenues reflect the positive year-on-year trend, basically because of the higher volume of deposits and successful management of spreads.

In the quarterly evolution, there's a small seasonal drop as repricing of variable interest instruments down to lower interest. Provisions were flatter in recent quarters and registered a drop in Q3.

And in this sense, we expect the provisions of the Royal Decree are in the corporate center. These are ordinary loan-loss provisions.

We expect them to drop next quarter and the following. But year-on-year, they will probably remain at similar levels given the economic context.

As a result, profits have been on the rise since Q4 2011. In summary, we continue to see significant deleveraging, revenue recovering because of better spreads, volumes falling, flat costs and provisions, I'd say, stabilizing.

Second unit, Banesto, has similar trends, of course, to the Santander Branch Network with some minor differences. Deleveraging has also continued, although in this case, the main driver is the fall in lending of 9%.

Deposits have grown 1%, and so our commercial gap has fallen by EUR 7 billion in 12 months. Probably the main distinguishing feature is the different pricing policy in Banesto.

The cost deposits have fallen quarter-on-quarter, while in the Santander Branch Network has remained stable with rising volumes and stable costs. Banesto, less volume rise and falling costs.

Overall, costs are falling slightly, down 1%. Loan-loss provision is significantly higher than in 2011.

And as a result, profit has remained relatively flat in the last 3 quarters. Next week, as you know, Banesto will report its own results and will offer greater detail on their various lines.

As usual, I am going to talk about the business in Spain as a whole, and that includes the Santander Branch Network, Banesto, Global Banking & Markets, Santander Consumer Finance Spain and Banif, which is a private banking unit that, as you know, also operates only in Spain. And for that, the total gross lending amounted to EUR 210 billion, EUR 199 billion net after provisions, almost 1/2 of which was for companies without real estate purpose and 1/4 for individual mortgages.

Deposits totaled EUR 185 billion. Here we include EUR 12 billion of retail paper placed, of which EUR 80 billion were -- are over 40% demand deposits.

This places our loan-to-deposit ratio in Spain at 108%, with a significant improvement due to the deleveraging over the last 4 or 5 years. Commercial gap fell by EUR 18 billion in the year so far, this due both to a fall in lending, as well as a rise in deposits.

We've seen a strong surge in retail deposits more than offsetting some of the outflows that occurred in the previous quarter and somewhat in this quarter, as a result of automatic triggers in institutional deposits following rating downgrading. If we continue to look at the performance and evolution of our lending portfolio in Spain, in this quarter, we see the same trends as in previous quarters, sharp fall in lending with real estate purpose, further 9% fall in the quarter, and deleveraging of individual borrowers.

The loans to companies declined 4% in the quarter. These are for non-real estate purpose, but that was mostly because of lower repos.

It wasn't really traditional lending that fell. And therefore, we have continued leveraging, particularly in the real estate sector.

As for quality, NPL ratios for real estate loans, although apparently rising significantly from 39% to 43%, that is due exclusively to a fall in the denominator because the absolute volume of NPL balances registered a slight decrease in the quarter. Lending without a real estate purpose has a much lower NPL ratio of 3.6%, which has risen very slightly.

NPLs from mortgages have remained very stable and a slight rise for company and consumer credit, but mostly companies. So as a result, as you've heard from our CEO, Santander's credit quality is significantly better than the sectors in the Spanish market.

If we look at gross entries, that is, before recoveries in non-real estate sectors, and if we use our baseline, 100, before the onset of the crisis, you can see the trend in entries. We see that the business part is harder hit in this recessionary context, with a slightly steeper gradient, but seeming to stabilize in the last quarters.

The other items, mortgages, consumer finance and cards, have remained very stable. Mortgages have remained at the same level as in Q1 2008.

Our -- in fact significantly lower and stable, as far as consumer finance and cards. Peak NPLs occurred 3 years ago, basically in 2009, at the beginning of the crisis, as is usually the case with these kinds of portfolios.

Moving on to real estate exposure. Another fall in the quarter, both in the loan portfolio and in foreclosed properties, which declined by EUR 1.8 billion in the quarter, EUR 5.5 billion since December, underscoring the group's policy of accelerating the reduction of these asset classes in the year.

As I've mentioned, the fall occurred both in loans, as well as in foreclosed properties. The trend in foreclosed real estate, as we've seen in previous quarters, a slight fall, which we expect to continue in the coming quarters, probably accelerating further than in the previous last 2 quarters.

So in short, we have continued to significantly reduce our real estate exposure in Spain and to increase coverage, as you've heard from our CEO, to around 50% for problematic assets and to above 40% for outstanding risk. Moving on to a second geography, Portugal.

The country continues to experience significant financial adjustments based on the agreement reached with the European authorities. That's having a strong impact on GDP growth and activity volumes.

In terms of volumes, the trends are fairly similar to those of the Spanish units. Deposits have been rising significantly, 5%, while lending has been falling at 8%.

In this context, our loan-to-deposit ratio has been improving significantly and it's at 112% now, have been sustained falls in the last year. As a result, basic revenue is in line with 2011.

If we only look at the quarter, they're lower than in Q2, because basically, the effect of mortgage repricing, because mortgages are repriced more quickly in Portugal and the fall in interest rates has had a bigger impact on spreads. Costs declined 4%.

That's a significant decline. The number of branches has gone down.

And we've reinforced provisions in the year because of the tender offer in the first quarter of the year. So profit here was EUR 97 million for the first 9 months in the context, which as we've said, include strong deleveraging, significant cost reduction and a high demand for provisions because of rising NPL ratios in the country.

And moving on to Santander Consumer Finance in Continental Europe. There, recurring profit in a very difficult environment for this business.

Car sales have fallen 8% within our footprint. And there are several economies, particularly in Southern Europe, in recession, which of course, make this business much more difficult.

So what explains this very good performance of this unit? On the one hand, the fact that we are diversified, we have a presence in 12 markets in Continental Europe, so a diversification per country and then also, diversification by products, because there were new cars, as well as the secondhand cars, which are replaced over the course of the economic cycle, and also the fact that we have reached brand agreements with producers.

And that explains why we are earning market share where -- in most of the markets where we operate. This performance in terms of volume is combined with a very good performance in risk management.

The levels of coverage are very high, and the levels of NPLs are relatively low. And the business requires less provisions right now.

So in brief, the profit increased at 2% and the trend is clearly better than that of our competitors in this type of business. In Poland.

Poland, unlike other European economies, is growing not very much, but it does have positive growth. This year, it's going to be 2% of GDP and next year, 2%, too.

Of course, this growth is less than what was expected in the past because it is being affected by the situation in Germany. But the other macro variables in the country, including interest rates, are under control and the rates are going down slightly.

The BZ WBK is still having very good performance in volumes, in earnings and in risk quality and credit quality. Credit quality has improved, and the NPL rate is 4.7%, going down 1.6 percentage points in the past few months.

Deposits grew 4% and loans grew 9%. In both, this growth was in companies, but also in retail.

Although it is true that in retail, more in deposits and in companies, more in loans. In terms of results, if we compare the first 9 months, it doesn't really make much sense because we didn't consolidate the first quarter in 2011.

So it doesn't really make much sense to compare, but the basic revenues and cost were almost flat over the second quarter and provisions were lower. The third quarter profit was slightly lower than the second quarter because of Aviva dividend of EUR 11 million.

So we're very optimistic with regards to complying with our objective, the objective we announced when we made the acquisition. Probably, in the next quarter, we will see the authorization for the merger with Kredyt Bank.

And therefore, next year, we will have the full integration, and that will certainly have an impact on the results of our unit in Poland. We're still very optimistic with regards to its future performance.

The U.K., the macroeconomic and regulatory environment remain complex. And there's reduced activity, low interest rates, while commercial practices and products continue to be reviewed within an environment of greater consumer protection.

Santander U.K. posted an extraordinary profit after taxes of GBP 65 million.

This was a result of the net between the capital gain obtained by our unit in the U.K. and the repurchase of subordinate debt, GBP 533 million, and the provisions made to which was assigned most of it.

And basically, GBP 253 million of the GBP 533 million were put into a provision for the non-core corporate portfolio. This is why the coverage in the U.K.

went up 7 points, as the CEO said. GBP 175 million are for possible contingencies and GBP 39 million are due to the operational costs related to the operation to purchase the RBS branches.

In terms of activity, total loans and deposits are almost flat. By segments, there have been significant changes though, strong growth in the SME business, which grows 20% year-on-year and which will continue to grow because of the participation of the program rolled out by the U.K.

authorities Funding for Lending Scheme, as well as more regional business centers opened. Retail deposits rose more than the sectors at GBP 3.2 billion in the quarter, up 3%, which gives us more growth than that of the industry.

Results. Gross income continued to fall because of the higher cost from the change in the funding structure.

Net GBP 25 million have gone from short- to long-term funding and has a higher cost. Spreads on deposits are slightly lower in a price-tension market, and all at a time of very low interest rates.

As positive factors, we must stress that there have been better yields on mortgages of the front book and corporate spreads. And there is a favorable impact envisaged from the government policy to spur lending to companies and households, which will be added to the lower pressure in the liquidity buffer.

All these impacts take us to a quarter profit of GBP 268 million, including a few extraordinary items that I mentioned earlier. In short, a delivery reflecting a difficult market, which will remain so for some time.

Although, as I said, there are some factors that are quite positive in the performance of the new lending activity. Brazil.

The macro environment was not what we expected at the beginning of the year. There was a market consensus that growth was going to be 3% of GDP.

It's actually growing at 1.7%, half of what was expected. It's also true that in the last part of the year, that is going to pick up.

And the market is once again talking about growth rates of 3% to 4% for next year. Interest rates are at historical lows, 7.5%, whilst inflation was 5.3%.

The government took steps to revive growth, reducing the cash revenue requirement for demand deposits from 6% to 0% and for time deposits from 12% to 11%. Reassignment of directed requirement, for example, small- and medium-sized banks, all of this to bring about higher growth of GDP.

But given the expectations of the market, that is going to happen next year. The lending grew at 10%, less dynamic in the third quarter, like the market.

And deposits are growing at rates of 4%. $2.12 million is the profit, with a -- very solid in the upper part of the income statement.

Basic revenues rose 15%, driven by the volume of lending, management of spreads and the product mix. Cost increased by half the rate of revenues, and the rise in expenses was due to the opening of 90 branches in the last 12 months and the signing of the salary agreement with the financial industry, with wage increases of more than 7%.

That was signed on Q3. Net operating income, revenue minus costs, is 20% higher, which means that this part of the account -- of the statement is doing very well.

And credit quality has deteriorated. There's been a strong increase, therefore, in provisions.

But the third quarter, as we said when we presented the results of the second quarter, there has been a fall of provisions of 12%, which enabled attributable profit to be 7% higher than in the second quarter. We believe that this improvement in provisions will remain in the next few quarters.

Because for the second quarter in a row, we see a better performance of the loans in a regular situation. And this fits with a better macro environment and the improved outlook for 2013.

In short, the bank continues its good tracking business, which will continue to feed through to revenues, probably more via volumes than spreads, adding certain pressure. There is pressure to do that, to pass on to consumers lower interest rates.

Costs are growing at mid-digit rates, and provisions are still high, but are tending to go down, which will stabilize results in the coming quarters. In Mexico, the macro situation is more stable.

The GDP is growing at 3%. And we think that, that will continue in 2013.

Interest rates are also stable, around 4%. Inflation within the Central Bank's target range, which is 3%, plus or minus 1 point.

Activity. The business continues to register a double-digit growth.

Market share gained in SMEs, cards, and demand and time deposits. The unit is not only growing with the market, but it's gaining market share in a market that is growing well.

In terms of results, good performance throughout the income statement. Basic revenues increased almost 20% due to net interest income and fee income.

Fee income from insurance, cash management, there is a good growth in fee income across the board. Higher cost linked to greater business activity, increase in the SME sales team and rentals after the sale of 220 branches in the first half of 2012.

And there is a plan to open new branches, and that is why costs have increased in the unit. Provisions rose from stronger lending, low-risk premium, though, and excellent NPL ratios, 1.69%, 9 basis points less in the year and a coverage of 175%, similar to the previous years.

Profit was more than $1 billion, up 14% in local currency. In short, a good business performance and results, which we think will be maintained in the next few quarters.

If we look at Chile now, a good growth prospect of the GDP. The interest rate is 5%.

The inflation is very low. This is one of the key elements that had a negative impact in the development of the income statement.

Activity. Continued focus on growth in retail deposits, up 15%.

In loans, a slower pace because of the greater emphasis on profitability and on more selective growth by segment and stricter lending criteria, in some cases, because of the credit quality, in other cases, because some segments of the market are not too profitable. Results.

Profits are lower for 2 reasons, first of all, inflation, the impact of about $40 million on the net interest income because of the sharp fall in inflation, something we have previously pointed out could happen. This is why there is this volatility.

And the second element that explains these lower profits is higher provisions, reflecting the deterioration in credit quality, similar to our peers, lower recoveries and a conservative admission to that policy. So in short, low inflation and high provisions led to a 50% fall in profits in the first 9 months before the perimeter impact.

Looking forward, we see some positive aspects for the income statement. It was very difficult to foresee such a low inflation rate.

We don't think that will continue in the future, a scenario with higher inflation and the corresponding stable impact on the net interest income, declining cost and provisions still at current levels for some time. The rest of Latin America, good performance.

Argentina, very good quarter with a profit of $150 million, the highest in the last 2 years. And net interest income and growth in operating income increased by more than 20%.

Profit before tax rose 27%. Attributable profit was up only 15%, reduced by the higher tax charge, 33% in the first 9 months of 2012 as compared to 26% in the same period of 2011.

Profits in Puerto Rico and Peru increased at rates of around 30%. Uruguay's profit more than doubled, though from a small base in the first 9 months of 2011.

United States. The third quarter results are impacted by the charge made in relation to Trust PIERS because of the court ruling to remunerate a coupon higher than what was being accrued.

That was before we took over control. Using a prudent criteria, a charge of $127 million was recorded in results.

Sovereign Bank contributed $416 million. Revenues were affected by the low level of interest rates, and the sale of mortgages, which reduced the net interest income.

Loan loss provisions fell sharply, 28%, because of the excellent evolution of bad debt and coverage. Santander Consumer U.S.A.

contributed $331 million, led the growth 22%. In result, the comparison with 2011 was affected by 2 significant factors.

First of all, the release of provisions in the first quarter of 2011, and a perimeter effect of $50 million between 2012 and all the quarters of 2011, due to the reduced stake of Santander Consumer U.S.A. Eliminating this, the contribution in the last 3 quarters was similar to or more than in 2011.

The LSO [ph] profit was $747 million. The economy continued to grow, but at a slower pace, and expected GDP is forecast to increase 2.2% this year and 2.5% in 2013.

Interest rate fell sharply to inspire growth. And the gap between the 10- and 2-year bond yields was 128 basis points.

So in corporate activities, the area registered lower profits than the previous year, this was due to a net impact of several factors. Net interest income was lower than the first 9 months of 2011, due to the higher cost of credit of wholesale issues, provisions and other results, which include the normal provision for foreclosed asset and the release of EUR 40 million as of September 2011, and then lower tax recoveries compared to 2011.

Moreover, the final result is impacted by the recording of further capital gains and provisions in this area and commented on at the beginning of this presentation. I now hand over to the CEO to give you the final remarks.

Well, our vision on the next few quarters is that Santander will continue in the coming quarters to lay the foundations for the group's future growth, while managing a very demanding environment. It will be very important to maintain the strength of our pre-provision profit, which as I said earlier, today are among the highest of our international peers.

This will require active management of spread and cost, adapted for the situation of each market and a situation which will enable us in the future to take advantage of lower provisioning needs. By geographies, Spain and Portugal are in recession and are highly volatile.

Therefore, our priority will be to complete the provisions, especially for real estate risk. And this greater balance sheet strength in markets in restructuring, as is the case of Spain and Portugal, will help us to gain profitable market share as we have been doing over the last year.

In the rest of Continental Europe, our aim is to maintain the high degree of recurrence in profits. In the rest of Continental Europe, Santander Consumer Finance points to a solid profit and profitability higher than its European peers, backed by its diversification, by countries and product, and also by the brand agreements that we have reached with car manufacturers.

In Poland, we will have more favorable macro and banking dynamics than the EU average, which will produce a good performance, while we press ahead with the merger with Kredyt Bank. In the U.K., we have to manage a very demanding macro and regulatory environment that is having a big impact on our results.

In order to do this, we will improve the profitability of the front book and develop the franchise of individual customers and companies, strengths increasingly visible this year. Latin America aims to generate solid prices and revenues from volume growth and management of spreads.

In Brazil, revenues and provisions will benefit from stronger GDP growth. Mexico will continue to expand its network, 200 new branches in 3 years.

The plan has already begun. With a stronger franchise, we believe the trends and results can be kept up and further gains in market share can be achieved.

In Chile, we will focus on selective growth aimed at the most profitable segments and products in higher credit cost environment. And lastly, in the United States, the objective is to deepen the development of the segments where we have a capacity to improve and grow.

Technology and operational integration, as well as extending to all branches, the new sales model, will enable us to drive new businesses and products such as GBM and cars, where we have very good expectations in the U.S. In short, Santander will continue to boost its capacity to generate recurring profits.

Thank you very much.

[Spanish] Good morning. We're going to, first of all, take questions that we have received over the web page.

We will group these into subjects. We will try to cover all your questions.

But if there are any additional questions that come over the phone, then we'll try to make some time for them, too.

The first question which has to do with strategy and regulation. The first question is by Sergio Gamez from Merrill Lynch, Bank of America Merrill Lynch, is what is our opinion on the possibility of asking for aid from the ECB because of the consequences in the funding cost for banking.

This is a question from the point of view of aid and intervention through these vehicles.

[Spanish] In this type of aid situation where the -- where funding is facilitated through contingent lines or credit lines that are subsided by international bodies in the conditions that have been mentioned, well, clearly, that would give rise to a reduction in the risk premium for the sovereign risk, and consequently also, a fall in the spreads that banks, particularly the most important banks in Spain and of the Spanish financial system, can get in international wholesale markets. This link that is always mentioned between sovereign risk and banking debt will probably continue to be related.

There will be a high correlation and that will mean that the spreads and the premium will be lower. Therefore, from that viewpoint, we see that as a very good thing.

There are quite a lot of questions on the bad bank in Spain. Mario Lodos from Sabadell, Axel, from JP, Britta Schmidt , Carlos Peixoto from BPI, Sergio Gamez and others, have basically 2 questions on this.

First of all, what is our approach to a potential participation in the bad bank, or what are your expectations? What role do you think you're going to play [indiscernible] in the selling of banks and the creation of a bad bank?

And do you think that we will need more provisions, given the transfer prices of the real estate assets, assets and loans?

Well, this is very difficult to answer because it is being built as we speak, by the Ministry and the Bank of Spain. So it's too early to say.

We private agents still don't know yet how this is going to be done, the bad bank, how that it's going to be built. So I -- it's too early to answer.

I can imagine that in a few weeks, we will have more information, and we'll be able to answer these questions on what our role will be, but we can't say now. Of course, this is something that worries us about the bad bank.

What worries us is the possible relations between transfer pricing to the bad bank and the prices at which we have valued our assets once we have covered the provisions from the Royal Decrees, because the information that we have, which has not been validated, I must say, and this information hasn't been fully certified, but according to that information, transfer prices will be 7% to 13% below the established levels, levels established by the basic scenario of Oliver Wyman, and therefore, very near the price level of prices established in the stress scenario of Oliver Wyman. How do those prices compare with the prices derived from the provisions of the Royal Decrees?

Well, there is a difference. This difference, according to our information, while, as I say, we don't have full information, so you have to take my word with a pinch of salt because it's not the -- that information hasn't been verified yet, but it seems that there are transmission expenses, operating expenses, expenses to manage the bad bank and also some additional incentives that they want to give, of potential profit for potential future investors, that all these things have an impact on the pricing of these assets.

But these -- but the difference in prices stem from these elements more than from a different valuation of the assets themselves. But as I say, we are concerned about this, but we still don't know exactly what those prices will be and what the differences will be, and therefore, what the consequences will be.

But we'll have the chance to talk about the bad bank when we have more information in a few weeks' time, and where we can answer with more information at hand.

About Spain and our strategy, there's a question from Matteo Ramenghi from UBS. And that is, whether we're planning any structural decisions in Spain, cutting costs or closing branches or anything structural?

Well, if you look at our numbers with some perspective, and you look at 2012, but also at 2011 and 2010 and 2009 and 2008, you will notice that our costs have not risen in all of those years. For several years now, I can't even remember how many, but quite a few, retail banking in Spain has kept its costs practically flat.

Of course, that is the net result of some costs which rise, because inflation rises or because wages rise because of new labor agreements, plus permanent adjustments we make in our network costs, which are not apparently very significant, but which we constantly are rationalizing and monitoring the profitability of our retail network and adjust it accordingly. We are not planning any major changes in this strategy.

Again, we prefer a more gradual approach. We make gradual adjustments, as we have done in the last few years.

So if the question is whether we're going to be more aggressive in cost reductions, I'd say "no", because we don't feel it necessary. It's not really warranted.

Branches we have are all profitable in the current market conditions, and if any seems to be lacking medium-term growth or profitability opportunities, we make adjustment decisions, as we have done for many years now. I can't even say how many, but at least 7 -- or 6 or 7 years, and that's why our costs have remained flat throughout this period, this very long period of time.

Moving on to the U.K., there's a couple of questions. The first is about the RBS transaction, someone in the Amelia Banca, N+1, Rohith Chandra from Barclays and Juan Pablo Lopez from Espirito Santo, are asking whether this changes our strategy for the U.K., the fact that we've canceled the acquisition of the RBS branches, and whether we can give an update on our future strategy, given this change, and does this affect the targets that we reported last year in the Investor Day?

Right. A first point is that our strategy in the U.K.

does not change. Our strategy is to turn Santander U.K., the old Abbey, into a full-fledged commercial bank, that is with business both with individual customers, which is its main activity right now, as well as with businesses.

This is a strategy that is apparent in Santander U.K.' s organic evolution.

In fact, in 2012, in these 9 months of the year, growth in lending to businesses, in spite of the fact that our market share in businesses is low, lending to businesses has grown very significantly, and that, in a context in which other banks have increased their lending very little. We've increased our lending to SMEs by over 20% in these first 9 months of the year.

And so I think that, together with our mortgage book, which has remained stable, it's only grown by 3%, I think demonstrates our strategy. That is our strategy, and we felt that increasing our, or growing our branch network by acquiring the Royal Bank of Scotland's branches was useful.

In the end, it didn't come through, but it doesn't change our basic strategy. It just makes it more organic and less inorganic, I guess.

There's another part to this question, and that is whether we expect any fines or penalties, because of pulling out of the contract, have we provisioned anything? José Antonio Álvarez has said that the only provisioning we've done has been for operational expenses, charged to the provisions for the tender?

We have provisions, but it's only for direct costs. And that's basically the work and hours spent by people in the bank on this process, which will now not materialize.

And we've quantified that, and I think it was EUR 39 million, as José Antonio Álvarez told you, in the quarter -- sorry, pounds.

And as for the regulatory environment in the U.K., there's 2 questions from Mario Lodos from Sabadell, Bolsa, and he's asking whether we've started to feel the effect of the Funding for Lending Scheme announced by the Bank of England and what might the impact of this scheme be on this year, particularly on 2013? And then there's a second question, and that is asking for an update on potential impacts of the Vickers Commission's recommendations in the U.K.

Do we have any idea of how this might affect us and how things are going at that level?

Well, as for Funding for Lending, that's something that has just been launched. We will be taking part in that process.

It's a GBP 80 billion scheme, if I'm not mistaken. And we will participate with approximately, something in the order of our market share.

But of course, the outcome of this scheme has yet to be seen because it's only just begun. So we'll see it throughout next, where we expect to grow lending.

But as I said earlier, do not forget that we have already been growing our lending to SMEs. And so this Funding for Lending Scheme is actually targeted at banks to get them to increase lending to this particular segment, SMEs.

And we had already been increasing our lending to SMEs, so we didn't really need this Funding for Lending Scheme to grow, because it was one of our strategic priorities already, to grow lending to this market segment. Having said that, we will, of course, take advantage of the boost provided by this scheme, Funding for Lending, in order to accelerate our growth in this segment.

As for Vickers Report, it's not yet -- well, it's a set of recommendations, the Vickers Report, which, as you know, have to be turned into provisions, standards for the banking sector. But we don't really know which of these recommendations will eventually become rules or provisions or laws and which will not.

And so it's highly speculative to say anything on this point now. So it would just be guess work based on possible scenarios of what might or might not become a legal requirement.

It's really far too early to say. In general terms, for our business model and for our business profile, let's say, in the U.K., the impact would be somewhere between tiny and negligible or even nonexistent.

But there might be some impact, but in any case, it won't be significant.

Moving on, continuing with the U.K., there's 2 more questions about strategy and regulation from Frederic Teschner from Natixis and Daragh Quinn from Nomura. The first is somewhat connected to the question by UBS, but it's more about income trends in the U.K.

in the future, what do we expect as far as risk-weighted assets because of the RBS thing, but in general in the country. And Daragh Quinn's question is about the U.K.

IPO. Are we still planning to have an IPO for our British subsidiary?

It's true that income, as you've seen, has been falling. That is a natural and inevitable consequence of falling volumes in lending and deposits in the U.K.

and an increase in the cost of wholesale funding in our bank, also some retail funding, but mostly wholesale funding. Most of the income fall has already occurred.

We may still see a small fall in Q4 and in the first quarter next year, but to a much more limited extent. We will probably reach a turning point for net interest income, as I said, between Q4 and the first quarter next year.

But in any case, the falls will not be as significant as those we have seen in the past quarters. That's my -- and what was the second question?

About the IPO in the U.K.

Right. We've already said that there is no deadline for the IPO.

And months ago, we've said that we were keeping it on the back burner for 2 reasons mostly, waiting for markets to change their attitudes in the U.K. and for our own profit to stabilize and to go back to the kind of growth we saw in the past.

So it's something that we do intend to do. But as far as the win, it is really impossible to predict at this point.

I'm finished with strategy and regulation questions. There's one from Andrea Filtri from Mediobanca and Daragh Quinn from Nomura about dividends.

First, what is our plan? Are we going to maintain our current payout policy?

Will we be offering cash and scrip dividends? And then a question about IPOs of group subsidiaries.

Well, this is of course, the board's decision at any given point, and so to predict now any specific payout policy is not appropriate. But with that caveat, the basic concept is to maintain the same payout policy next year and to have full scrip dividend and/or cash dividend.

So that's my best impression of what the payout policy will be for next year. Although, again, this is a decision that the board has to make.

Moving on to financial management, there's 2 questions about capital. First, from Matteo Ramenghi from UBS, David Vaamonde from Fidentiis, Rohith Chandra from Barclays and Francisco Riquel from N+1.

Could we give more detail about capital variations in the quarter, including the Mexico IPO?

Remember that the Mexican IPO has a 50 basis point positive impact on core capital, but then you have to substract the negative impact of exchange rates on the book value of our subsidiaries. So that's why there's that 10.1% to 10.4% difference in our core capital ratio.

And there's a second question from several analysts, David Vaamonde from Fidentiis, Francisco Riquel from N+1, Jaime Becerril from JPMorgan, Antonio Ramirez from Keefe, about Basel III. How much will the capital ratio be under fully-loaded Basel III scenario, and have we modified our criteria?

No, the criteria are the same that we've reported in previous quarters. Our plan is to remain at above 90% core capital under Basel III in the coming years, so there's not really a change with respect to previous quarters.

There's more questions about DTA, about the treatment to intangibles and DTAs in future regulations.

We'll have to wait until that regulation is announced in the R4, [ph] and then we'll let you know.

As for liquidity, there's several questions. Carlos Peixoto from BPI is asking about exposure to SB.

[ph] Where are we? And questions about the ALCO portfolio.

What's our exposure to government debt? Carlos Peixoto is also asking a question in the same direction, basically liquidity exposure to SB [ph] and composition of our ALCO portfolio.

Well, as for liquidity and exposure to SB [ph], we have the IPO, we mentioned EUR 35 billlion, we mentioned in previous quarters, there's no change there. Our ALCO portfolio overall, as you know, the ALCO portfolio, we don't have any portfolios until maturity in the group.

Everything is classified as financial assets available for sale. And the balance is EUR 97 billion for the whole of the group, of which EUR 66 billion is public debt and EUR 26 billion other private debt, and there's EUR 4 billion which are capital instruments, basically to do with trading.

As for public debt, our exposure to Spanish public debt is around EUR 30 billion. Last quarter, I think it was about EUR 35 billion, so there's been some maturities.

And our second largest exposure is Brazilian public debt with EUR 11 billion, then smaller amounts, EUR 5 billion in the U.K.; EUR 3 billion, Mexico; EUR 2 billion, Chile, the U.S. These are the main exposures.

And the rest of the portfolio is EUR 26 billion in other instruments. And these are basically 40%, 45% in the U.S.

agencies, basically GNEs [ph], some corporate, and in Brazil, where there are some corporate bonds. So that's basically the breakdown of the ALCO portfolio.

Something in Spain, too, but basically, those are the main exposures or the main risks. The portfolio is relatively stable.

Quarter-on-quarter, there's a variation of maybe EUR 400 million in the total ALCO portfolio.

About liquidity or continuing with liquidity, Mario Lodos from Sabadell is asking whether we can give them an update on maturities and issuance policy. I suppose he means 2012 and '13.

And connected to that, if you like, we could talk -- Fabio Mostacci from Ahorro Corporacion is asking why there's this weakness in net interest income in the corporate center in this quarter.

Maturities in 2012 in the Eurozone, I think there's maybe a covered bond issue, I think EUR 1.6 billion. And then in 2013, in the Eurozone, the parent has like EUR 13 billion, EUR 14 billion; Banesto, EUR 3 billion or EUR 4 billion; and Portugal, EUR 2 billion or EUR 3 billion.

The other units, I don't have the figures here, but it's a total of about EUR 20 billion issues. Well, if current trends continue, deleveraging is still significant.

As a general rule, I think that an issue of 1/3 of the maturities would be appropriate for 2013, given our current forecast that deleveraging will continue and deposits might not grow as much as we've seen this year but will still grow. If deposits were to grow as much as they have this year, then deleveraging would be greater than maturities.

We don't expect that to happen, but we do expect to issue maybe 1/3 of total maturities. The weakness of net interest income, as Angel said, is connected to issues.

We're replacing cheap issues with issues that have a cost against swap of over 300 basis points, and part of that is charged to the corporate center, which is why net interest income in the corporate center is so weak.

As for deleveraging, Fabio Mostacci from Ahorro Corporacion and other analysts are asking about the loan-to-deposit ratio in Spain.

As we said, it's close to 100%.

They are asking whether deleveraging is completed and whether it will continue, whether we have any sort of target or what the plan is in our loan-to-deposit ratio in Spain.

Well, it's not that we have a plan. What we have is a general deleveraging of the economy.

Private debt, which is the best proxy we have, over GDP. Private debt over GDP at its peak was 180%.

I think it's now at 150-some percent, 155%. So we think that private debt in relation to GDP will continue to fall to levels of at least 140%, given what has happened in other countries that have gone through similar processes.

Most of this process, of this fall, will be concentrated in the property sector, of course, where I seem to recall that the latest figures I've looked at was about EUR 300 billion in -- I don't know if it's loans or foreclosed assets, but that number will fall significantly in the next months or quarters, and that will bring us to a level that might encourage us to not reduce lending further or at least not in anything that's not connected with the property sector.

As for hedges, Ignacio Moreno from Citi and Patrick Lee from RBC are asking about our hedging policy. Specifically, they're asking about LatAm and Poland.

Do we have hedges there? What percentage of our net operating income is hedged?

Do we expect the weight of these units and hedges to grow significantly in 2013? And Patrick Lee is asking, in these 2 units, specifically, about an explanation of the hedge in Brazil.

Right. We have 2 kinds of hedging policies.

One is with respect to expected profit, and one is for the book value of our subsidiaries. So generally, we have hedged a high percentage of profit budgeted for the year, and that's the case both, for Mexico and Poland and Chile and other units.

In Brazil, in some cases, the hedges or the instruments are different. In some cases, it's just forward.

In other cases, it's just spot. And in other cases, it's caps and floors.

So caps and floors. So there are different instruments to hedge, both the expected profit and the book value, to protect our equity.

And of course, the hedge is, in some cases, particularly the equity hedge in countries, particularly Brazil, where it's high-volume, these are hedges with caps and floors, which is why, when we said earlier that there was a variation in the group capital because of exchange rate impacts. That's because we are not hedged 100%, particularly in Brazil.

In the other LatAm, [indiscernible] countries, the main ones, Mexico, Chile and then in Poland, our hedges are perfect forward, both for profit and for book value of our subsidiaries.

Then there are 2 more questions asking for more detail, coming from Espirito Santo, about the valuation of the joint venture means of payment here in Spain. And Ignacio Moreno is asking about risk-weighted assets in Spain, and if you agree, we will answer that in detail in writing.

And the evolution of risk-weighted assets in the Santander network is up EUR 400 million or EUR 500 million in the quarter. It's basically a business mix effect and others, but we can give you the details later, if you agree.

And there's actually one more question about financial management and strategy from Benjie Creelan. Can we get some guidance or forecast for growth for the group, particularly, net profit in 2013?

So we don't really give any guidance on net profit, but we do -- or will have an impact that will be different in 2013 and 2012, which will be the Royal Decrees. But we don't give guidance on net profit for coming years, ever.

Moving on to credit quality and risk, this is a question from Carlos Berastain from Deutsche, Ignacio Cerezo from Crédit Suisse and other analysts about the impacts of the 2 Royal Decrees, basically whether the impact on profit was EUR 6.8 billion, which is what we've provisioned approximately in the year. And can we explain the 90% coverage on that 10% that remains, or how much is still to be provisioned to meet 100% of the Royal Decree requirements in the rest of the year?

Can we elaborate?

Okay, perhaps the figures don't match exactly because there are some additional things over and above what's required by the Royal Decrees. There are some additional provisions with things that are connected with real estate, but not directly covered by the Royal Decrees and which we have decided to also provision and charge to the same item of real estate provisioning, also, some portfolio sales.

So small things, but all of them together, add up to that apparent difference between the requirements in the Royal Decrees, what we've provisioned already, and what we said that we still have to provision, approximately 10% of the total. And so that's what remains to be provisioned in the rest of the year, 10%, about EUR 700 million approximately, which is that 10% that remains.

Okay, there's a question from Antonio Ramirez from Keefe and Ignacio Cerezo from Crédit Suisse about whether we see any risk of a third Royal Decree raising provisioning requirements for real estate and non-real estate risk or where do we think coverage levels should go. Are they at sufficiently a high level, or are we going to need higher levels?

Well, I suppose this question is related to the one that was asked before that I answered already about the influence of the transfer prices for assets to the bad bank and the impact on the valuation of the assets held by banks, net of the Royal Decree. I think I've already answered that.

There's no other reason why we might require other kind of decree because the provisions are more than enough for real estate, so we don't really see any need or any chances of a third decree unless there's an impact from, what we've said, the valuation of the assets to be transferred to the bad bank, but not really.

Moving on and continuing with Spain and the cost of risk, a question from Sergio Gamez, Britta Schmidt from Autonomous and Jaime Becerril from JP, along the same lines, the cost of risk, current and future, in Spain in 2012, 2013. Provisions have fallen in 3T compared to 2T.

Do we think that, that can be extrapolated? And where might the cost of risk move structurally or in the next quarters?

And what do we expect in terms of provisions in 2013, higher, lower or similar-type to 2012?

Earlier, there was a similar question about what's going to happen to the rest of the portfolio because, really, that's what they're asking. What about the other loans?

What about the whole portfolio in 2013? And in the presentation, since this is a question that comes up again and again in our results presentation, there's a table in which we try to answer that question or a chart in which we try to answer that question, and that was a graph with net NPL entries, not including real estate, individual loans, mortgages, consumer finance, cards and business.

It was a very detailed chart, and that's in Page 52 or Slide 52. I hope that's the same number in your documentation.

But in my Page 52, you have a detailed graph with net entries over 90 days for -- in loans to businesses, nonperforming loans over 90 days in individual mortgages, NPLs over 90 days in consumer finance and in cards. And what you can see there is that the portfolio, these 4 sets of loans, so everything except real estate, is relatively stable, slightly up but only very, very, very slightly and basically has remained very stable.

So we don't expect beyond this very slight rise, which probably will continue in 2013. I think probably non-real estate NPLs of the group will peak towards the end of 2013.

So they will rise very slightly in 2013, but really not very significantly. As you see if you look at this period from 2008 with these curves -- it's Slide #27 in the presentation that the analysts -- so I think that really answers that question and any concerns about performance of the rest of our loan portfolio and what we expect to happen in the next year, where our NPLs will rise, but only very slightly.

And then there's a question going into different divisions from Carlos Peixoto from BPI, Patrick Lee from RBC and other analysts, about our outlook on NPL ratios for the different regions. Specifically, they're asking about Brazil, the U.K.

and Mexico, asking about trends in Q3 in NPL ratios and cost of risk and do we expect both provisions and NPL ratios in those 3 countries to rise. So Brazil, Mexico and the U.K., what do we expect in terms of risk quality and in terms of the impact on profit, of provision?

Well, my best forecast for those 3 countries is that in the U.K. and in Mexico, we don't expect any surprises with regards to the NPL rate, just a slight movement up or down, but we really don't expect anything to change much.

There is no driver that could make us think that the NPL figures might change significantly in the next -- in the near future. Now Brazil is a different story.

We come from very high provision and NPL rates, and we have already been announcing that we were in a very comfortable area. And provisions and NPL rates have somewhat leveled off.

The improvement of the economy will help these figures to stabilize because in 2011, there was economic slowdown in Brazil. And therefore, we think that looking forward, the growth of the NPL rate and our provisions, we think that, that is going to be a part of the past and that things are going to normalize from now on.

On Mexico, there is a specific question about provisions. Why have they increased?

Of course, there's the volume impact, but also, there was a release of generic provisions of $30 million, which is, of course, affecting the figures when we compare one year to the next. There's nothing more to it.

Mario Lodos, Sabadell [ph]. What about the selling of our portfolio to Bank of America?

We already reported to the market the data that we had to communicate with regards to possible selling of portfolio, and we also -- there's some of that in the provisions.

Axel Finsterbusch from JP is asking about the selling of repossessed assets. They're still negative in the second quarter in a row.

Can you give more information as to how those sales are performing and what are your expectations in 2013 in the volume of foreclosed assets?

Well, yes, in 2011, the number of repossessed assets fell, the net of entries and outflows. In fact, we started the year with EUR 8.6 billion, and right now, we have EUR 8.3 billion.

And our forecast is that in the last quarter, there will be an additional fall. And our best estimate right now for the year end of 2011 is that, that figure, which today is EUR 8.3 billion, shall be EUR 7.5 billion.

So that will be a net decrease in the number of repossessed assets. And I say net because, of course, there's still some coming in, very few.

So a reduction of the net balance would be EUR 1.1 billion. Now we still haven't drawn up the budget and the details of the budget for the year 2013, so the only thing I can tell you is that it will continue to fall, undoubtedly, but I don't dare say by how much.

Probably, by the end of the year, we can tell you more because we will have the budgets ready for 2013, and we could say much more about this, I'm sure. Also, in January, when we make our year's announcement, earnings announcement, we can say more because we will have more information.

But basically, they will continue to fall, as they have this year.

And to finish with the risk question, there's a question on the restructured loans at Santander.

We already gave some information on this. It's usually about 1% of the total book of the group, and there isn't too much variation there.

There are certain questions from Britta Schmidt from Autonomous, and Rohith from Barclays, and Ignacio Cerezo from Crédit Suisse. Can we say a bit more about the performance of the NPL rate sustained by segments, how they're performing by segments, because you talked about entries with different concepts, but can you elaborate a bit more as to the coverage of the cost of the risk in SMEs, mortgages, consumer loans and corporate?

In the information that you have at hand, there is some of this, there is an answer to this. Perhaps, not detailed by segments as you ask in your question, but there is an approximation to this question on my Page 50, it's my Page 50.

I don't know what page it is in the document that you have. But in any case, there, in this chart -- 26, I'm being told, on your Page 26, in your document.

In that chart that you can see on Screen 2, what we break down here is the NPL rate of the loan book for our real estate purposes and broken down into real estate and non-real estate and then the total. So today the NPL rate is 7.4%.

And in real estate, which is the rest of the book aggregated, not by segments, as the question says, has gone from 3.3 in December 2011 to 3.6 in September 2012, so it's gone up by 3/10. Another approximation, although different, is what I mentioned earlier that you see on the next page, which is new entries of NPLs.

And my remark here is that it's very surprising to see the huge increase in the NPL rate in the real estate portfolio. But I want to put this into context.

Although the percentage goes up from 39% to 42%, the absolute figure falls, because here we have a denominator effect. The NPL rate does not go up in loans for real estate purposes.

It is exactly the same amount -- actually, it's less than what we had. The thing is that the denominator of this ratio falls, and consequently, the figure increases.

That is just a comment on the side.

And now if we look at it by different businesses, there are several questions on the U.K., once again from Britta Schmidt and Rohith Chandra from Autonomous -- Rohith from Barclays and Ignacio Cerezo from Crédit Suisse, on the performance of the net interest income in the U.K.

I think enough has been said about this as to how it is performing and why, and what is the trend for the next few quarters.

Ignacio Cerezo from Crédit Suisse asked about extraordinary items in the U.K., José Antonio mentioned them already in his presentation. If you want, later on, we can pass on the data.

And Britta Schmidt asked about the impairment of the interest margin in Brazil and the outlook for Brazil, if we expect any impact of hedging for 2013 and '14, would you like to elaborate on that?

Well, on Brazil, what I wanted to underline -- well, I have to say, first of all, that there has been a significant drop in interest rates. And of course, that has an impact on our interest income and margin.

But the top part of the statement in Brazil is the one that best compares Santander with the peers, with other large Brazilian banks. We're growing in revenue and net interest income, more, we're growing more than our competitors.

Now it is true that, that better performance might have something to do with the product mix, with our business mix in Brazil, which is a business mix that, that is more focused on individuals. But the truth is -- but that's the truth.

So the growth of the net interest income is very positive. Brazil is doing very well.

And the way to judge whether it's doing well or not is when we compare to our peers. And if we compare to our peers, the net interest income is clearly performing much better in our case.

Also, we must take into account that it's not growing or growing very little, because of the interest rate environment, which as you know, in Brazil, there's been a sharp drop in interest rates.

And now, wholesale banking, there's a question from Sergio Gamez. Why has revenue fallen?

I remind you to think dividends and insurance. The third quarter dividends are not so good, and the revenue, and the selling of insurance also had an impact on these results.

There are 2 questions, or the same question from 2 analysts from Mexico and Fabio Mostacci from Ahorro Corporacion, on the new regulation -- sorry, on the restrictions of the transfer of capital. Can that affect the bank with regards to the [indiscernible] that the regulator is trying to impose?

Do you want me to elaborate or will you?

Well, let me do it. Basically, there is a limit now on the repatriation of capital of more than 25% of the equity.

So these are extreme cases where you need to ask the regulator or the authority for authorization. We hope that this won't affect us, and certainly, we do maintain our commitment, that we said in our IPO, to remunerate the shareholders with dividends.

Two questions to finish, about the U.K. Do we expect to make additional provisions of PPI, as other banks are announcing extra provisions, will we have to do that?

This is from Jaime Becerril from JP. And Antonio Ramirez, a question on deposits in Spain.

Have we rolled out any campaign at 4%? Do we have any volume objectives?

What about the competition for deposits in the Spanish market?

Well, in the U.K., in principle, we don't -- what was the question, sorry, about the U.K.? Oh, yes, about the PPI.

Well, in principle, we don't think that we're going to have to make more provision for the PPI. We don't think it's going to cost us any more.

We don't have any indication that we will have to make further provisions. Of course, there is always a risk that, that might happen.

But we don't have any indication right now that, that can happen. So that's with regards to the first question.

And now, the question on the deposit market in Santander in Spain, we are not trying to compete through price, although, of course, we always have a product, a deposit product. But if you look at our products in Spain, well, we are paying less for our deposits, 1.44.

So our price policy is a mix, really increase in side accounts and current accounts and deposits, and that sometimes are offered with a higher interest rate, but we are not concentrating on a -- more on deposit. And taking into account that we're talking about the cost, not only of deposits, but we also include commercial paper.

So no tricks there. We include all the funds that the bank raises in its network of branches and that generate liquidity, all the liability products, not only deposits per se, but other instruments as well.

Well, I think we've already answered a question earlier by Ignacio Moreno. They're asking about the cost of terminating the contract with RBS, BZ and RSB [ph] in the U.K.

We already answered that question. There is no additional cost in terminating that contract.

More questions, we received more questions as we went to our Q&A session. If we have not answered your questions, please get in touch with us, and we'll try to answer your question.

We finish now. We have no questions from the conference call, so thank you very much, and we'll see you next quarter.