Star zero, and you will be connected to an operator. I will now hand over to your host, Mark Bourke, CFO, to begin today's conference. Thank you. Good morning, or almost good afternoon, and welcome to Novo Banco's half year results. As CFO, I will present the main financials. As effectively the CEO designate, I will also do the initial and end part. Unfortunately, it is only me who will do the presentation. I'm gonna start on page four of the presentation that you have in front of you, and there are five bullet points there. The main point that we would make is, we are delivering in this six months, for the six months, EUR 266.7 million of profit, which translates to return on tangible equity of 11%. This is our sixth consecutive profitable quarter starting in the first quarter of 2021. During this quarter, we also received for the first time a two-notch upgrade, and also Moody's maintained a positive outlook while giving us that upgrade. The second point here or the second note here is in relation to our balance sheet. The principal things to note are that the loan book is expanding and has expanded by EUR 0.7 billion, largely driven by our corporate performance, and our deposits are up by EUR 1 billion or slightly over EUR 1 billion or 3.9%. A solid funding story for the six months. In relation to NII, it is at EUR 268 million. It reflects that balance sheet growth, a defense of our pricing. There is obviously a drag on the other side, which reflects issuance of MREL late in last year, and also the fact that we are placing liquidity at negative interest rates with the ECB. Cost of risk of 15 basis points, we'll talk about quite a bit more in the financial presentation. That is somewhat distorted from a sort of run rate. Our run rate is around about 30-35 basis points when we strip out exceptionals. In that, our NPL ratio is down to 5.4%, and that coverage of those NPLs still at the high level of 73%. Real estate exposure, we are making significant inroads into the disposal of, and all of that is actually very positive from a capital point of view and also demonstrating that the balance sheet is well marked and there are no expected losses contained in that portfolio. The last point, which is probably the one most watched in relation to us, is how are we building capital? In the first half, we built capital by 1 percentage point. If you look at it on a fully loaded basis, it's 120 basis points in terms of capital generation. That comes effectively 50/50 from the capital generative capacity of the underlying business and additional measures that we have deployed to gain efficiency or to realize additional capital through disposals. Page six or page five is just a strip down of the return on tangible equity. On the left-hand side of the page, you are looking at our PBT at EUR 343. We strip out the market results of EUR 82, which we will talk about a bit more. We strip out those specifically the profits in relation to our disposal of a logistics portfolio, which generated a very significant profit. And also some other, as I say, once-off contingency releases, which have fed into that cost of risk but are not really reflective of the underlying performance of the business. All of that takes it down to EUR 160 million of pre-tax profit. On our current equity base with an 11% of equity, we are producing 11% return. It is worth, I suppose noting that we are still building capital, so that rate of return is slightly flattered. If you took it down by 10%, you're probably getting the level at which we would like to run, and that is just attaining the targets we set out in last year in our strategy day, where we set out our ongoing performance targets. Page six is a little bit about, you know, business and delivery of strategy. These are, you know, individual metrics on the delivery of a couple of things. Our retail business, we are implementing an omnichannel delivery where our goal is to understand the needs of our clients by segment and then to serve them simply through an omnichannel approach where delivery across channels is seamless. Those metrics in terms of our decrease in footprint, our adoption of virtual teller machines, our use of digital are all indicators of our continued success, where we have and what we achieved in implementing that on the retail side. On the corporate side, which is not really significantly covered in these, we are also looking to reestablish ourselves as the most effective Portuguese corporate bank, and doing so to delivery of a full suite of the customer's needs. I won't go through the individual ones, but the main points are the adoption of digital, the customer journeys, which we are redeveloping where we have now a much more effective personal loan solution, and we have expanded our online investment offering. At the customer acquisition level, we have really started to activate, reactivate old clients and attract new clients with a significantly better demographic to skew our demographic back towards the younger age groups. The performance in terms of year-on-year on personal loans, non-life insurance and credit cards are all significant numbers, but again, we're starting from a reasonably low base. The important thing is that they denote momentum, and they denote the delivery of the underlying strategy. Having done the CEO introduction, I will now turn to the CFO's job and take you to page eight, so the P&L. I'll walk down through the P&L, but the P&L is essentially showing the business to be pretty much firing on all cylinders in the sense that we're getting the results, and we're getting the momentum that we look for in an environment which is clearly going to improve as a result of recent changes in the interest rate curve. Net interest income, first of all, at EUR 268. As I noted before, that's reflective of those expanding books, reflective of our ability to protect our pricing. Yes, it is also reflective of expensive issuance and the drag of having negative rates in relation to our money markets placements. We will see the effect. We haven't seen the effect of interest rate increases, but we will now see it, we believe, through Q3 and Q4, augmenting that run rate. Fees and commissions, we'll talk a little bit more about, but a good second quarter versus first quarter, and an expectation to maintain that momentum as we go into the second half. Capital markets and other results. The capital markets results of EUR 85 is a positive, but effectively it conceals a negative as it is. It is our hedging against the fair value reserve decreases on our bond portfolio in the first quarter. Our other operating results, though, contains that gain on our disposal of real estate and logistics related real estate. On operating costs at EUR 208, it's a slight increase reflecting a number of different things, but we have a decrease in staff costs. We have an increase in general admin. At an underlying level we are just about flat, which is a good result in an inflationary environment. Lastly, those provisions of EUR 19.8, which have already reflected, we will dissect a little bit later. I think it's a number of different an aggregation of a number of different things. Our overall run rate is probably closer to 30-35 basis points rather than 15. Page nine is a complicated slide, which I will say that everybody except CFOs hate. I do believe it shows you know, on one page how the bank is performing. On the asset side, looking at customer loans, we can see immediately, you know, an advance in the corporate loan book, EUR 13.7 million average to EUR 13.9 million to nearly EUR 14 million average, and at the same time protecting the pricing only moving from 2.35% to 2.31%. Mortgage lending, similarly, we have an average of slightly less, but you'll see later on that the book is flat to very slightly up. An area where again, we have defended the interest rates and now we'll see as repricing, as the repricing profile comes through, we'll see that perform better and better through the Q3 and Q4. Consumer lending, the book is expanding. This is an area where we and indeed all other Portuguese banks are focusing, but we are getting traction, and we continue to have significant ambition, but our pricing is being defended. On the securities and other assets, they, for the first time in years are starting to increase, and as we see that profile of assets coming out for reinvestment, the opportunities to do so at significantly enhanced rates will present itself as long as the curve remains similar to or at current levels. On the liability side, you know, we are at the end of the repricing of the repricing story. We are going to be clearly building MREL as we go forward. There are still for us a number of expensive deposits that need to roll off. We believe, you know, that the liabilities, while they will increase, we will still get a significant opening of the jaws between the assets and liability rates or costs. Our NIM overall at 1.30% is just on the lower edge of the range we set ourselves in our published targets of between 1.30% and 1.50%. We expect that to improve as we see the impact of increasing interest rates coming through seriously through Q3 and Q4. Page 10, fees. For us, if you look at the left-hand side, slide, both first and second quarter, we're seeing an improvement between Q1 at 68.8% and Q2 at 75.6%. The expectation again is that that level or if that level of performance continues, we will have a better second half. Our Q1 was weak. Interestingly, as you look down through the different categories, we see, you know, asset management and bank insurance has done well, which is a significant performance in a market which is, you know, predominantly indexed to a difficult, a reasonably soft corporate market. Payments increasing from EUR 54 million to EUR 60 million reflects increased level of transactions and also repricing in the period. Moving to slide 11 on costs. Our costs of EUR 208.7 million against a prior year of EUR 204 million show a couple of different, let's say, dynamics. One, our staff costs decreasing from EUR 117 million to EUR 111 million, or decreasing by 4.10%. Our G&A increasing on the other hand from EUR 70 million to EUR 77.3 million, and depreciation increasing. The staff costs reducing as we see all of those, the efficiency measures through our redefinition of our branch footprint and through those organizational and automation programs that have been in place for the last two years. At the same time, G&A increasing, but a large percentage of that increase non-structural. It's to do with legacy costs in relation to our Spanish operation and also some external costs in relation to development of both our retail and corporate strategies. You see the number of branches in that footprint redesign story reducing from last year at 350 or 349 to 304. That'll continue down to about 273, and we should be completed with that by the time we get into the early part of 2023. That is basically the information of costs. Turning to page 12 on provisions. Kind of as I said, if you look at last year, we would have had a reported 68 basis points. When we adjusted that for COVID affected sectors, that's 40 basis points. Already within the band below the 55 basis point target that we set ourselves. This result is a bit of a mix in that we have between securities and loan provisions. We have, I would say, a 35 basis point run rate on cost of risk. We have countervailing releases in relation to some old provisions in relation to acquisitions and a revaluation of an investment which is held at cost but had been impaired. Both of those mean that we have a sort of artificially or a flattering 15 basis points. I would expect that to increase back to norm of about 35% as you go into, you know, look into a run rate for the second half. Turning to the balance sheet. So on page 14 is just a summary balance sheet. You know, the messages again are expanding book, where you see customer loans up to EUR 24.3, expanded by EUR 653 million. We see a slight decrease in the securities, but that very much an impact of that loss of reserves that we talked about earlier. Customer deposits, a EUR 1 billion increase, which is not driven by any program to attract deposits. That is just a natural build of liquidity in predominantly our stock of deposits. The capital build is there in terms of the equity, but it needs to be looked at, you know, from a prudential lens, which we will look at later on, further into the presentation. The first part of looking at the balance sheet is, you know, expansion of the book. Going through last year, you know, it was repeatedly the challenge that we were flat or slightly down. We have now started to get some momentum. We have had three successive quarters of generation of about EUR 1 billion in origination. That origination splits between mortgages, consumer and other, about 60%-30%-10% in terms of breakdown. We are beating our amortization, and our amortization, the combination of scheduled and unscheduled, which is not necessarily unplanned, but it is a large part of it is expected, is still running higher than we might have. However, we have built to a EUR 25.5 gross, or a EUR 24.3 net loans level. You can see on the right hand side of the page that jump up from Q4 2021 and a maintenance of the origination profile of approximately EUR 1 billion per quarter. Turning the page, it breaks it down. Net loans corporate EUR 12.7-EUR 13.2 at 4.5%. I think you can basically group other effects than H1 origination. It does include extraterritorial, as in Iberian real estate as well, and some, you know, other European loan book acquisitions. That 1.6 plays against an amortization of 1.2 in corporate mortgage loans, a little bit more flattering than the average balance sheet. We see just a very slight increase from 9.73% to 9.78%, and equally a very slight increase in the gross levels. On consumer, EUR 1.23 billion- EUR 1.26 billion, also building the book by, you know, 0.03 basis points. All of that, as I say, done while defending pricing in, you know, in what remain very competitive markets. Having looked at the asset side of the balance sheet or the loan book side, to look at the NPLs. We have reduced our NPLs to 5.4%. We had hoped that we would have had one more portfolio disposal, which would have brought us down below 5%. But that is actually a portfolio of assets which remain within the CCA estate and requires the permission of the counterparties. And that we haven't achieved that as yet. However, you know, our view of what we do next is that we will go back, we will start to break down between granular and big names. We expect to put together some granular portfolios, and there will be a sort of regular cadence of these in, you know, in an environment where the backstop is fully implemented. We also have in that EUR 1.6 billion or EUR 1.7 billion, we have almost EUR 1 billion in, you know, a top 20 names. Our focus for the next 18 months will be to individually restructure, cure, sell, and decrease those NPL levels because our target now will have to be sort of recalibrated to a European average closer to 3.5%. Turning the page is a little bit more on the quality of, you know, the how good the bad stuff is effectively. The quality of our NPLs. Looking first on the left hand side of the page, you see, you know, the breakdown between stage one, two, and three. Stage one increasing, stage two also increasing, which is very much a function of having a better result post-moratorium than we had modeled. Looking in the breakdown in the middle of the page at stage three, between December 2019, where you can see 41% not overdue to 69% not overdue, and 57 and 81% less than one year in aggregate. You know, the quality of those stage threes is clearly improved. The most interesting part of this, I think on the right hand side, the coverage, when you look at levels of impairment and you look at associated collateral side by side, the total cover of 101% in corporate, 118% in mortgage, and just below 191% in consumer starts to look to us very much like a normalized bank balance sheet equation. On real estate, this is an area where, you know, we were pretty much stable between 2020 and 2021. We were clear that we had marked our balance sheet very carefully, but now that is being proven as we in earnest start into disposals of our real estate. The key numbers to look at, you know, for the half year, we have a EUR 909 million real estate portfolio. That increase on the half year is largely driven by a revaluation, and that revaluation is effectively the revaluation of the portfolio we sold, the vast majority of it. The pro forma, which is what happens when we do recognize the sold portfolio at EUR 701 million, is inclusive of the EUR 77 million gain that we made. Our plan is to continue to look to dispose. Our belief is that it will be capital neutral or capital positive and P&L positive in places. We were, I think, very fortunate to have disposed in the first half that logistics property portfolio because even now, I think that disposal would have had a quite different and less attractive result. If you look at the right-hand side of the page, you see what remains. And the NBV land, EUR 360 million commercial, EUR 230 million being the main parts of that. The coverage levels in land might look quite a little bit lower than you might generally see. When we break down the assets and their both their location and their position in licensing processes, we are very comfortable that they are well marked. We will see further disposals. Not here, but also relevant is we are just concluding a sale of the office we now sit in, which is, you know, prime real estate in the center of Lisbon. We expect that we are past the binding bid stage, and we expect that to have a significant capital generation impact, which we'll see come through in Q3. The transaction should complete by September, but we are already past binding bid stage. We look at that as we look at the capital build towards the end. The securities portfolio then, there are two pages. You see the breakdown, you see the ratings, you see the duration, and the breakdown in a third one on page 21. You see on page 21 the way we've effectively flipped the orientation of this portfolio. The principal points in all of this are we have continued to de-risk. That means we have taken out volatility by moving a big chunk to amortized cost. We have shortened the duration significantly of the fair value through OCI element of this that's marked to market. Those two alone have changed the profile. This is possible as unfortunately our reserves are significantly reduced. We have also adopted hedge accounting in the first half, which was a more complicated process than simply switching to amortized cost. That has given us a capital impact which more or less offset the losses of reserves we saw in the first quarter. I will move then quickly through to deposits. As we already said, our deposits have grown by about EUR 1 billion in the half. That is pro rata the same between retail and corporate. The percentages, 72% and 28% breakdown between retail and non-retail maintained. The sight versus term percentages not significantly varied, and they are not that relevant given that term deposits in reality have only got a sort of three-month life because you cannot penalize beyond that under Portuguese law. Moving to the liquidity position on page 23, you see a loans to deposit ratio decreasing further, and obviously further than we would wish. In relation to our liquidity ratios, LCR is 107 and NSFR 106, all healthy and within and above required ratios. Our liquidity buffer at 13.2 is very significant when we start to look at potential liquidity stress. The position is very comfortable. Our liquidity challenge as we go through the next six months and the following year will be essentially to wean off TLTRO and replace it either by lending on the asset side or building deposits, or ultimately, you know, what would have been much more normal if it was just normal, our normal cadence of issuance, which currently is not possible. Which leads immediately into the MREL slide. On MREL, we made our binding targets at the end of last year. We continued to remain above that target. Even as we see the senior preferred time out in September, EUR 275 million, we would still remain above that target. When you look at what we see as the MREL challenge in pure amounts, it's about EUR 200-250 million. We're looking to make sure that we, you know, we're aiming at being compliant not only with our binding, but also with their linear progression target towards the end of the year. I think that it is all to be, you know, we have to do all of that in a world where the markets are essentially shut to us, despite the fact that we have had that rating upgrade and maintain the positive outlook. From an MREL point of view, as I say, the challenge is another EUR 200 billion, and we don't believe that our binding target is in danger. That's the MREL part. Then the last two slides are capital. It is worth walking left to right across this and then projecting out based on, you know, kind of the run rates. Not projecting or forecasting, but just looking at what is the run rate of the business and what will we have left to do to make sure that we reach the end of the year and are SREP compliant, which is, you know, clearly the target for us as the pandemic reliefs are withdrawn on the thirty-first of the twelfth. We started the year with a Stage 1 phased in at 11.1. That meant we started on 1 January at 10.75. Through the first quarter, we maintained our capital position despite the losses coming through on our bond portfolio with 8.818% loss on that, but also compensated by our first quarter results. Through Q2, our main kind of contributors are Q2 results, 30 basis points. The sale of that portfolio, logistics portfolio, another 0.28, and other effects which, you know, include mainly RWA efficiencies, which are generated through guarantees in relation to lending and the limitations around moratorium removed from our mortgage book. All of those contributed to give us that 1% increase on phased-in and really a 1.2 or 120 basis point build on a fully loaded basis. If you then look at this and I'll go to the next page. Having just noted a 25-35 basis point impact potential from that sale of head office, and you turn the page to page 26 and look at the right-hand side and the capital position. 13.9% is our June total. First remark is we are already above our required capital level, and that is the level, you know, which would have triggered us being in a capital conservation program. We have already reached that and are starting to ease into or build our P2G buffer. If you add the two together, it's 15% is our target. We're at 13.9%. We are looking essentially to a 100 basis points. Going back to the run rate for the first two quarters showed us to have a 15- to 16-point basis point underlying run rate. And then if you take a 30 basis point impact, we are very much, you can see within a 10-20 basis points of that target 15%. Everybody, I think, started the year looking at a 200 basis point gap and how would we piece that together. I think we have certainly assembled a good 80% of it at this stage when we include the sale of the head office, which has now passed binding bid point. That is the end of the financials. I would go back to then page 28, which is, you know, all of this is set in the context of, you know, building our position as a pure play Portuguese retail and corporate. Building out the retail proposition through the omnichannel delivery. Building back to being the corporate bank of choice for Portuguese industrials, where we would own the relationship and all of our targets which are set out on page 28. Expand our book in a controlled fashion between 2%-3% per year. I would always say 1%-3%. Net interest margin, 1.30%-1.50%. Cost income ratio, 45%. Cost of risk, less than 50. An NPL ratio, less than 5%. We are converging on all of those. Our return on tangible equity, which really should be tangible required because we've got to consider it as a SREP and buffered. We are seeing a return which is in that area. We are generating the growth. We are building to a completely SREP position. All of that is prior to seeing any effect or any real effect from interest rate changes, which we will see coming through significantly in Q3 and Q4. On that basis, I will stop and go to Q&A. As a reminder, if you'd like to ask a question on today's call, please press star one on your telephone keypad. To withdraw your question, please press star two. The first question comes from the line of Corinne Cunningham from Autonomous. Please go ahead. Hello, everyone. Hello. Couple of questions from me please, both on the sort of funding through MREL side. First one on the NSFR. Can you just walk us through the deterioration there and what you can do to improve that? Particularly thinking about that in the context of TLTRO, I suppose coming towards maturity. The second one was on MREL. You mentioned, I think, if I'm not mistaken, that you would still meet the MREL if you don't refinance the September issue. But then you were also talking about wanting to issue EUR 250 million. Perhaps if you can just join up those two comments, please. Thank you. Particularly thinking about that in the context of TLTRO, I suppose coming towards maturity. The second one was on MREL. You mentioned, I think, if I'm not mistaken, that you would still meet the MREL if you don't refinance the September issue. Okay. I think the line meant we heard the question twice, but I will take first of all the MREL, and then briefly on TLTRO. It's a combination of liquidity, continued deposit buildup, looking at, you know, the size of the bond portfolio and being ready in terms of issuance when the opportunity arises. Elisabeth will talk a little bit more about that. On MREL, you know, our position is we issued paper at the end of last year. There's EUR 275 million senior preferred. In a normalized market our normal position would be apply to the SRB, have permission, which we do, to essentially pre-fund and then call the note. The position with markets is, that is not actually an achievable end either in terms of volume or pricing at the moment. We have to effectively look around, look past that and monitor the situation. If we get opportunities and if the market normalizes, we will look at potential LMEs, potential exchanges as we go through the remaining parts of the year. Coming back to, you know, what is our MREL target? Our current projected target and the actual level of MREL that we would have to generate, based on our current kind of capital internal generation targets is about EUR 200 million. For us to have MREL, to have either MREL eligible deposits, to answer through management of the balance sheets if and when it becomes possible to look at LME or other partial replacements of EUR 275 would be the way we would think about this and think about making sure that we reach our targets by year end. We will and are putting in place, you know, the permissions and having the discussions with the regulator to ensure we have the latitude to do that. Elisabeth, if you want to just talk a little bit about the TLTRO. Regarding NSFR, on the replacement of TLTRO III, we are managing the ratio through both components by the numerator and the denominator. In the numerator, the required stable funding and available stable funding, we are working with the increasing deposits. We will try to replace ECB funding using retained covered bonds, doing repos or using other type of collateral to increase secured funding. Of course, if it is possible, we will also issue new senior debt. That will also help to increase our NSFR. Regarding the required stable funding, as Mark said, we are selling some assets that also will help to reduce the required stable funding and also will increase our NSFR ratio. Our assumption and our planning does not assume the ability to issue. We intend to Yes. To maintain our position without the dependence on market issues. Thank you. The next question comes from the line of Duarte Rosado from Fincere. Please go ahead. Mm-hmm. Hi. Congrats on your results. Thanks for the- Thank you. For the presentation. Just have a few questions. Just on slide nine. Just looking through, this is a slide where you have the net interest income and the per loan book. I'm just wondering with, you know, given how much of your book is floating rate note and given, you know, your Euribor twelve months, your Euribor six months, even three months start increasing before the end of the quarter. Mm. I was expecting to see higher rates for the loan books. Most of the, you know, mortgage lending, corporate lending, and even consumer loans have actually reduced average rate. What was exactly the cause of this? Okay. I think that there's one specific thing in relation to our corporate book, which is until our corporate book hits a floor, a zero floor, then there's no impact. Now we will see the impact flow through in Q3 and Q4. You know, other than that, we have simply been working in a continued competitive environment. When you look at the mortgage book, it's repricing on the one-month, three-month, six-month, 12-month. If you break that down, it's back-ended, more back-ended than front-ended. 60% of that is probably six and 12, and the first 40%, one and three. You know, there's only a small uptick at this stage, but then you will see that push through in Q3 and Q4. All right. Could there be an element of competition as well on the mortgage lending book? On all of them. I mean, this is a very competitive market, and therefore you haven't seen. You've seen us defend our pricing, but you haven't seen the impact, as you say, of those rates coming through. We're not getting a spread. We're not getting a spread replaced by the curve. You know what I mean? We're not sacrificing. We see a significant run rate increase by the time you get to Q4. You know, in pure sensitivity terms, if everything remained the same on the asset line, you get a 20+ to 30% kick on the NII, asset NII. Now, obviously, we've got to see how that flows through on the deposit side. You know, traditionally, that's a pass through somewhere between 13-40 basis points. The market here is pretty much drenched with liquidity, and there is no pressure as yet. I think the pressure will come on at various points as you hit various thresholds on deposits. Understood. Thank you. Just on the amount under money market placements. Can you just. Again, I don't understand the dynamic there, where it has increased by close to EUR 2 billion, and at the same time, the average rate's reduced by almost 50 basis points. Okay. As you can see, the amount placed to ECB increased around EUR 2 billion. In that case, for that reason, we are paying more minus 50 basis more amount minus 50 basis points. Of course, this is not new. It's the same since ECB maintains the deposit facility rate at minus 50 basis points. As our amount placed at ECB increase, we are paying more, and the interest rate is more negative. Of course, this reflects the customer deposits increase. As Mark said in the presentation, we're rebuilding our investment portfolio, and we do not invest the amount. We are concentrated in the rebuilding our portfolio. We do not do more investments. As yet, we have quite a bit of dry powder in investment terms and quite a bit more coming at us. Should we look at these money market placements as a sort of end of quarter specific situation, and going forward, we should see an increase in the loan book and a reduction in money market placements? Yes. We have here some maturities, some placements with other banks that transactions that mature. For that reason, we have this decrease in the interest rates of the money market placements. One second. In terms of amounts, the amount under money market placements would actually reduce going forward. Yes. Yes. Okay. Thank you for taking my questions. Okay. You're welcome. We currently have no questions coming through. As a final reminder to ask a question, please press star one. The next question comes from the line of Olivier Ducas from Citigroup. Please go ahead. Hi. Good afternoon. Sorry for the delay. Congrats on the results. I have a question. If you could potentially repeat how you intend to bridge the gap between your total capital and the target of OCR plus the P2G at 15% would be great. Also, could you give potentially more information about your NII sensitivity to higher rates? Because it's just the, I understand that you are currently at the lower end of your NIM guidance for the year, but it would be great to have a bit more information about the potential increase you might see in your top line. Thank you very much. Okay. So to walk you across, go back to page 25. I mean, I'll just summarize at a basic level. We've always said this business generates 80-100 basis points of underlying, you know, the underlying performance of the business will generate 80-100 basis points of capital, all else being equal. That meant that as we came into this, we had a 200 basis point challenge at the beginning of the year to build from 13 total to 15, which is SREP. Notwithstanding, you know, there will be some need to buffer above that, but the main thing is to be SREP compliant when the relief is removed. If you look at page 15 or 25, what we're actually saying is we started the year on a phased in basis at 10.75%. Through the first quarter, our results generated a positive 23 basis points or 0.23% or 23 basis points. We lost on treasury, meaning we lost on our bond portfolio. We maintained, however, the capital level or increased very slightly to 10.8%. In the second quarter, you see again a 30 basis point results contribution, and that's the underlying business. 28 basis points as a result of a real estate transaction, which we referred to, which was a portfolio of logistics assets, and we got a fantastic price for that. Other effects are largely driven by RWA efficiency, and the ability to reduce or specifically in relation to, guaranteed lines and, the withdrawal of limitations imposed by the moratorium. That gave us the 11.8, which we start from. What we're left with is a 110 basis points build. Turning the page, you see 13.9 in the middle of page 26 is our total capital number. Our total capital required is 15.01. In looking at the run rate of the business, then in the first half, you saw a 50, you know, 50 basis points. We would say another 50 basis points, maybe 60 basis points, from that. There is an additional point, which is we have reached or are past the binding bid stage of the sale of our head office, which mid-range is about a 30 basis point impact. If we look at a gap to building to SREP of 1.1, then approximately 90 basis points of that is already we can already see through the business momentum and that individual sale. Then we have a number of other both RWA efficiency measures. We have indeed the potential sale of restructuring funds, which is a multi-bank transaction, but is close, I think close to getting completed. All of those are really lining up to cover that 10 basis point difference. You know, from the point where at the beginning of the year, generally people wanted to see the walk needed to be kind of shown. I think we have delivered, you know, 80%-85% of that path and have only, you know, a not significant level of additional capital to generate. We also have three or four ways of doing that. Your second point was what's our sensitivity. You know, we think that based on, you know, the current curve, we have probably the potential to improve run rate and therefore, you know, 2023 and finally 2024 by up to 30, 32, 35%. That's the overall sensitivity. 100 basis points gives you 20%-25% of NII. 100 basis points of interest rates at least give 20%-25% up in NII in 2023. Yeah. Okay. Just the last thing. Can you repeat the action that you plan to implement to bridge your gap for the last 20 basis points? Sorry, I didn't get what it was. The last 20 basis points? Yes. Do you want to repeat that question? I think I may have missed it. No, no. Yeah. Just, like you talked about transaction to bridge the last 20 bps of a gap to reach your SREP requirement of 15%. Okay. As we said, we have a number of real estate transactions which are either running or are slated for second half. Yeah. One significant one has just come through licensing and is already in non-binding offer stage. That is one who's got a potential- Yeah. Probably EUR 30 million-EUR 40 million of impact. The other significant one is the sale of restructuring funds. We have a transaction which has been running for well over a year. It involves a restructuring funds which are held 90% between the three main banks with Santander and Arcenta having the remaining slug. We are very near to getting that transaction to the signing point, and then it will take a number of months to actually get to the point of derecognition. We would expect that to be completed in this year. There are a number of other RWA efficiency areas that we are looking at in and of, you know, effectively a complete examination of all of our models and all of our RWA calculations. The last is to look at credit risk transfer or synthetic securitization. Any one of those has the potential to bridge at least the 10 and possibly 20 basis points, any individual one. Okay. Yeah, you're quite relaxed on bridging the gap because you just need one of them. I've never- To be actually achieved in order to get at least 20 basis points of capital uplift. I think I'm confident, but I'm never relaxed until I'm actually compliant with SREP and building. Well, yeah. Okay. Thank you very much. Thanks. You're welcome. The next question comes from the line of Alexei Lugovtsov from Bank of America. Please go ahead. Hello, Alexei. Hello, Mark, and the team. Thank you very much for a very candid and detailed presentation. I found slide 5 particularly helpful. You obviously had a very good quarter with some non-recurrent things, and it's good that you have a very candid assessment of what you can make as a run rate, 160 for six months. Say EUR 320 million of pre-tax profits annualized. It's very respectable given the size of your balance sheet of about EUR 40 billion. Beyond this number, what can take you higher from the present run rate? I mean, your answer is what would make me better? What can you do, yeah, when you stabilize at this level? Yeah. I think we had part of that answer in the NII conversation we just had. The sensitivity is significant, 90% of the books closing. Once we break through the floor on corporate and reprice even right out to our 12-month Euribor repricings on the mortgage book, then we naturally have a significant increase on that. Now, you know, definitely you have to consider that there will, in an interest rate environment which changes that much, there will be some downside on the provisioning, but we're not seeing any stress there. That, you know, that is obviously the big driver. Continuing to maintain costs, and we then look to making sure that we build very, in a very focused manner on those retail and corporate strategies. To recapture our heartland, to make sure that we are getting more share of wallet for our corporate. Not only should we own the credit, but we should own the lines, we should own the clearing, we should have tailored, develop more tailored products and more sectoral experience. I think those are the kind of strategic. That's the strategic corporate approach and an efficient, digital reorganized, and simplified process with our omnichannel is the secret to making the retail side consistently profitable as we bring in new clients. I think that there are a number of partnerships that we would look at on the consumer side. There are potentials to do small bolt-ons, but we remain a very focused pure play, as I say, retail and corporate. If we do those bits well, I think we have, you know, a very attractive business. For us, for me, it's just maintain focus. What would be your aspiration? Where can this number get to in the next maybe couple of years, 400, 500, given all the measures on You're the analyst. I'm not doing the spreadsheet for you. Okay. I'm giving you the piece. Okay. Thank you very much, and good luck. Thanks very much. Good to talk to you. The next question comes from Jakub Lichwa from Goldman Sachs. Please go ahead. Hi there. Thanks for having the call. Yeah. One question, just on MREL and beyond this year. I mean, are you able to comment if you're having any sort of discussions with the regulators around any sort of regulatory forbearance on this topic? I mean, is there a level, though, on senior where it just doesn't make sense to print because obviously it will be just too high of a hit to your NII. Just wondering how essentially restrictive this binding may be down the line in the context of everything that's happening and in the context of the approval as an approval improvement that you've been showing. Thank you. Sorry. Could you just repeat the very last bit of the question? Sure. I suppose just wanted to know if there is any level, you know, on the senior that you just find prohibitive. Say if you're discussing the issuance with the regulator, I mean, to take it to the extreme, it doesn't make sense to be printing senior at 10% just for the sake of meeting MREL, I suppose. Yeah. is there a level where, you know, the regulator is a bit more understanding of the situation in the context of your broader improvement? Obviously, 10%, I'm drawing a number out of thin air, but you know, just trying to be taking a pragmatic approach towards a bank that has been improving and is not at an imminent risk of facing a resolution, I suppose. Yeah. Okay. I am going to ask Carla to give you more color on this, but my take on the conversation is, you know, the binding target is sacrosanct. You know, anything which would threaten the binding target is a breach and puts you into, you know, what would be the equivalent of close to continuous supervision from the SRB. The linear progression target is something that their view would be you as a bank, we have already given you significant forbearance because you have a 2026 target, whereas others are at 2024. When we have conversations with the SRB, they are, you know, very cognizant of market conditions. You know, they do think about the sustainability of issuance. As in, you know, when we're talking about it, we're talking about the issuance levels, we're talking about what can be done at, and we're talking about the expected pricing. They are considering that, too. They do have an eye to, you know, the sustainability. You know, I would say that they are sympathetic, but they are a regulator nonetheless. You know, they would be very focused on seeing us meet our linear progression targets because in their view, they have already given forbearance. They do get the idea that, you know, self-destructive balance sheet acts are not necessarily, you know, a good thing for the banking system or for us. We've had many conversations with them. They adapt to the environment, and they are open to, you know, new kind of approaches. Whereas in a normal world, we'd have simply taken out the EUR 275, we'd have done it again. Now we have to look at what do we do in their world where we can't pre-issue. There's an understanding that if the market's not there, it's not there, and it isn't there, as in any price conversation. Carla. We have a funding plan. That's what they care for. They want to see the trajectory, but we are not forced to issue and not definitely at this level. We do have a conversation regarding the existing and the replacement of the existing MREL instrument. You know, as there are a lot of other measures that are being implemented at the bank level in terms of capital generation, this will be reflected on the MREL issue as well. There are other ways that we will build up the MREL ratio. Sorry, just one additional point on this is, if we meet our targets, that is obviously, you know, that is what they're looking for fundamentally. There's a second piece of this, which is if you're trying to take out paper, you need to issue paper in the equivalent. Therefore, the net effect would be you are left with a liability which isn't eligible, but which is still on your balance sheet until it actually matures. If you find another way to fulfill your MREL level, then, you know, there is no breach, and there is no difficulty. Okay, thank you. The next question comes from Jonas Solício from Banco Finantia. Please go ahead. Hi. Thank you, Mark, for your presentation, and thank you for taking my question. Regarding the 2023 callable bond, sorry, it was not clear for me. Have you already decided if you're going to exercise the call? We're still looking. The notice period only ends at 15 of August. Basically, we're looking at it from, you know, an economic point of view. It does look difficult, obviously. Market conditions are just not here. Our permission from an SRB requires pre-call. We would have to issue before take it out. We explored the possibility of an extended permission where we would take it out and then issue thereafter, and that is not a runner. You know, it's clear that it would be a very big hill to climb to do an issuance to take it out. What we will do is that moment that call option will probably pass, and then we will look at whatever our options are in terms of exchange, in terms of LME, as we go through the rest of the year, and hopefully the markets settle down. Okay. Thank you. On the MREL topic and given the market conditions, how did you manage to comply with the MREL now? With great difficulty. No, I mean, what we're actually saying is we have a binding target. We have a binding target at the beginning of the year. We remain above that. We will remain above that even as the MREL times out and becomes ineligible within a year to maturity. Effectively our challenge or what we need to generate is EUR 200 million of additional MREL, or we need to actually, you know, change the shape of the balance sheet to the same proportion. Thank you. One more question, if I may. Regarding your differences with the resolution funds, I think they are on slide 25. The differences with regards to some amounts to be paid and also the real estate tax, can you give us an update on these topics please? Update on we had, you know, the left to right on slide 41, so EUR 2.4 billion received. That leaves EUR 485 million. The current position is that we have access to that until 2025. The element which is divergences is the amount claimed in relation to Spain, and the amount claimed in relation to or disputed in relation to valuation of restructuring funds. We have the call for EUR 209 million, which we made this year, of which a significant amount, EUR 116 million, is related to aggravated real estate tax, which we may be exposed to as a result of the residence of Lone Star Funds as our 75% shareholder. At the moment, there are a number of arbitration processes which we will not see come through until 2023. The call itself is likely to go down the same arbitration process. We have applied for a ruling in relation to the tax. If the tax ruling were successful, that would reduce that call of 209 down to 80. I can't do the sums. Ninety something. The position is really unchanged at present. We do all of our planning. Essentially, there's none of this is recognized as capital in the balance sheet. We do all the planning, and all of the capital builds we've talked about, MREL and other things, are all on all of these issues. They assume no positive outcome, and whatever positive outcome will be a result of, you know, effectively the due process which is to take place. Thank you, Mark. The next question comes from Nick Linnane from Sefton. Please go ahead. Sorry to ask questions along similar themed ones already asked. Just to get clear, on MREL, do I understand correctly when you talk about the binding constraint that you comply with, is that the January 2022 number? Yes. After the EUR 270 million ceases to comply, you'll still comply with the January 2022 number, but you wouldn't comply with the January 2023 number, and that. Mm-hmm. That's essentially what you're saying you need EUR 200 million for. Mm-hmm. What actually would happen if you didn't raise the EUR 200 million or sufficiently reduce your balance sheet and you just move into 2023 not complying? That's actually a good question because the reality is we have not breached a binding target in that case. Therefore, we have only breached, now only I say carefully, we have breached the expectation or the non-binding targets. There is no sanction in kind of official terms. If you play this through, the weapon or the, you know, their way of marking us is essentially our, you know, our assessment, the resolution assessment. They would potentially mark us down in relation to that. I think that is the maximum sanction. More homework, more difficulty, more scrutiny, and more close and continuous. It's not, you know, ultimately there isn't a Requirement. There isn't a requirement. Just a second question, if I may. In response to the previous person's question, I think you said you didn't expect resolution of any of the outstanding arbitrations this year. Is that right? I thought there was a chance of some of those getting resolved in the second half. We did think so, but I think it's pushed back to 2023 now. We did think we would get, I think. Okay. It was then the third quarter, fourth quarter, but I don't think we will at this stage. Okay. Last one. You say in your capital planning you don't assume, you know, any additional capital from any of these arbitrations. Are you assuming you have to pay the real estate tax again in the second half of the year? Yes. Yes. Yeah. Yeah. Okay. You still think you build capital? I think that's a irrelevant question because, you know, my forecasts assume that I take whatever mitigation measures I can in relation to the leasing book to convert it to, insofar as possible, to a long-term lending book. Yeah. My estimate would be that I'd still have a EUR 50-60 million potential aggravators, real estate liability at the taxing point, which is 31/12. That's all of that is built around those assumptions. Okay. All of what you're seeing in page 25. Okay. Thanks for taking my question. Okay. The next question comes from Corinne Cunningham from Autonomous. Please go ahead. Not sure if you heard me there, but my questions have actually been answered. Thank you. Okay. I think we should. I think we've run a little bit over. I think we'll call it at that. Happy to take calls or questions by email if you intro Maria. Okay. Thank you very much. Thank you for joining today's call. You may now disconnect.