Banco Bilbao Vizcaya Argentaria, S.A. (BBVA) Earnings Call Transcript & Summary

Good morning, everyone. I'm Patricia Bueno, Head of Investor Relations. Thank you very much for attending this call on the takeover bid to acquire Garanti's BBVA's minorities, with such a short notice. We launched the relevant event only a couple of hours ago, and we are here now to share with you the main characteristics of the deal. I'm joined by Carlos Torres Vila, Onur Genc, and Victoria del Castillo; Chairman, CEO, and Head of Strategy and M&A of BBVA Group. Following the presentation, we will move straight to a live Q&A session. And now I turn it over to Carlos.

Thank you. Thank you, Patricia. And good morning, everyone. [Foreign Language] Good night. And thank you for being with us in such -- with such short notice, also ahead of our Investor Day in just a couple of days. But it is for a good reason. If you recall 1 year ago almost to the day, we announced the sale of BBVA USA to PNC. And I am sure you recall the high earnings multiples of that transaction, 20x price to earnings, 1.3x price to tangible book And the strategic rationale for selling our franchise in the U.S., which had not reached the scale needed to compete in that market. You surely also recall the significant excess capital that we generated with that transaction, more than EUR 8 billion, and what we said at the time, that this provided us with strategic optionality to continue to create value for our shareholders. Through profitably deploying the capital in our core markets, and some of that is what we are announcing today, and to increase distributions to shareholders as we will start doing with the EUR 3.5 billion share buyback recently approved. So today, we announced our intention to launch a voluntary tender offer for the remaining shares of Garanti that we do not own, that is 50.15%, deploying some of that excess capital in one of our core franchises in BBVA. As Onur will lay out in a minute, this is a very attractive transaction for BBVA and is testament to our focus on shareholder value and how that value-based approach guides our capital allocation decisions. This is a very attractive offer for Garanti minority shareholders as well. After this purchase and after the share buyback, we, of course, retain additional optionality for further profitable deployment of our remaining excess capital and for further return of capital to shareholders. And now I turn it over to Onur, who will explain our offer and its impact. Onur?

Thank you, Carlos. And once again, thank you for joining us today. We have a short presentation prepared for you. So we're going to run you through very quickly through that, and then get your questions, if there's -- there are any. So on Page #3, BBVA will launch a voluntary takeover bid for the remaining 50.15% stake that we don't own in Garanti BBVA at a price of TRY 12.20 per share, payable 100% in cash. The voluntary takeover bid will begin once we receive all the necessary regulatory approvals, and we expect to close in the first quarter 2022. This offer is subject to no conditionality, and BBVA will be satisfied with any resulting level of ownership. One important feature of this transaction is that in the event that we surpass the 50% ownership threshold versus the current 49.85% that we own, BBVA would then be able to increase its stake in the future without the need to launch an additional takeover bid. And this is, in our view, an enormous flexibility for us. So we would be pleased to receive the full remaining 50.15% of Garanti BBVA minority shares in the standard process. At the same time, we would also be pleased with any take-up that allows us to pass the 50% threshold. As Carlos mentioned, the transaction is very positive for BBVA shareholders as it is a very compelling deal financially. And from a strategic perspective, it allows us, again as Carlos mentioned, to increase our exposure to one of our core markets through an asset, through an asset that we already know very well. But on the deal, on the very compelling deal on the financials. First, the multiples are very good. So P/E '22 at 3.6x, and price to tangible book value at 0.7x. Second, in the scenario that all of BBVA Garanti -- Garanti BBVA minority shareholders tend to share their -- their shares, the accretion for BBVA shareholders would be 13.7% in 2022 estimated EPS and 2.3% in tangible book value per share as of September 2021, with only 46 basis points of CET1 impact. This capital impact is relatively limited due to the capital treatment of minority interests, which is very important in this deal and which I will explain in a second. We believe our offer is also very attractive for Garanti BBVA shareholders. The price represents a premium of 34% and 24% over the past 6 months and the last month's weighted average price, respectively, and 15% over the closing on Friday. Turning now to Slide #4. Like I said, the transaction would create significant value for BBVA shareholders. In the event that all of Garanti minority shareholders would tender their shares, the maximum price BBVA would pay is around EUR 2.2 billion. However, from a capital perspective, the absolute impact on BBVA CET1 would be limited to only EUR 1.4 billion. This is so because of the punitive prudential treatment of minorities in CET1. Currently, BBVA consolidates 100% of Garanti risk-weighted assets but only accounts for around 70% of the capital provided by minorities. So the impact as a result of all of this would be 46 basis points as of September 30, leaving our capital ratio pro forma after the EUR 3.5 billion buyback that we will be starting after the Investor Day, at 12 72 -- 12.72%. And we meet this capital level obviously, we are well above our requirements in the upper range of our 11.5% to 12% target. The limited impact on capital, coupled with the earnings potential of Garanti BBVA, leads to an excellent returns and impact for BBVA shareholders. As exemplified again on this page on the right-hand side, the EPS '22 and tangible book value per share accretion of 13.7% and 2.3%, respectively. So overall in short, very good financial metrics, which proves the alignment of this transaction with our clear mindset around creating value for our shareholders. Moving on Slide #5. As you all know, we have been in Turkey for quite a few years now, and we continue to believe it has long-term potential. We are obviously well aware of the current macro imbalances, such as negative real interest rates, current account and balance of payment topics, Turkish lira devaluation, the economy's increasing dollarization; we are all aware of those. However, we do think that these short-term challenges are already priced in, and Turkey is structurally a strong economy in the long run. Why do we say that? First, Turkey has shown a very strong growth profile over the years and expected to continue delivering high GDP growth, as you can see at the top on the left-hand side. This is obviously supported by a population of over 80 million with a very positive demographic profile. And also on the left at the bottom, due to its privileged geographic location, Turkey is a global manufacturing hub. Even more so for Europe, which was a destination for 56% of Turkish exports in 2020. And finally, at the bottom on the right, you see that especially household debt is at very low levels, which shows a high potential for further bankerization of this young population. Moving to Slide #6. Garanti BBVA is a bank that we know very well because it has been part of the group for the past 11 years. And with that intimate knowledge in our view, Garanti BBVA is the best bank in Turkey. We are obviously one of the largest of the private banks in the country with leading market shares, as you can see on the left-hand side of the page, in loans, in deposits, in payments. More importantly, we are the most profitable bank among private banks in a very consistent manner in all the years that you can look into. You would see this picture. But in the exact -- for example in '2000 -- in the 9 months of this year, ROE at the bank level is 19.3% versus 15.6% of the private bank's peers. Our digital capabilities, on the right-hand side at the top, are unique. They are even a benchmark even within BBVA, with mobile customer penetration close to 80%, digital sales at 83% of the total sales in terms of units sold. We are also -- as you might know, we are also one of the leaders in customer experience and the reference in the brand power rankings. And at the bottom, you would see that the group's strong commitment and strategic focus on sustainability is also very clear in Garanti. We are the first and only bank in Turkey to join the Net Zero Banking Alliance. Turning to Slide #7. I mentioned before Turkey's macro volatility. Even under these conditions, and I repeat, even under these conditions, Garanti BBVA's performance has been remarkable with a very consistent capacity to generate profits. So on the left-hand side of the page, in current euros, and I will repeat this once again, in current euros, pre-provision profit of Garanti BBVA has shown a trend, positive trend, despite all the volatility locally, even globally during COVID, and despite the steep depreciation of the Turkish lira over these years. Pre-provision profit, as a percentage of RWAs, has also improved from around 3% 5 years ago to nearly 5% in 2020. Garanti has also demonstrated the financial risk management, having lower NPLs and the larger coverage than its peers at 77%; actually including free provisions, 104%, a best-in-class ratio obviously in Turkey. And finally, Garanti BBVA has a very strong capital adequacy ratio, well above the minimum requirements, as you can see on the right-hand side of the page at the bottom. Then Slide #8. In the event that we acquire the remaining 50% of Garanti shares with the additional capital that we would put in, Turkey would represent almost 25% of BBVA's net income versus 14% currently depicted again on the right-hand side at the top. And this comes at no material change in our risk profile. We fully consolidate Garanti BBVA, and as you can see on the left-hand side of the page, risk-weighted assets, they obviously remain the same. Given the full control and consolidation, Garanti BBVA has been fully embedded into our risk management practices, from risk appetite and dissolution frameworks to liquidity planning. And finally, at the bottom of the page, our multiple point of entry stands. Our multiple point of entry limits the potential downside risk to our overall exposure to Turkey, again which continues to be very limited in relative terms. Slide #9, you can observe in this page that the offer that we are putting on the table is very attractive for Garanti's shareholders. As I mentioned before, the takeover bid at TRY 12.20, it represents a premium of 34% and 24% over the past 6 months and the last month's weighted average price, respectively, and 15% over the closing price on Friday. So to wrap up in the final page, we believe this is a great transaction for everyone. The transaction creates significant value for BBVA shareholders; eliminates capital inefficiencies, a very important part of the deal, and it is aligned with BBVA's strategy to grow in core markets. Turkey is a country with strong fundamentals and long-term potential despite the current macro imbalances. Garanti BBVA, it is the best bank in the country, outperforming its peers in all key financial and risk metrics with leading digital capabilities. Garanti BBVA has been part of the BBVA Group for the past 11 years. Throughout this period, we have observed the resilience of Garanti BBVA's business model and financials, even in a very complex environment. Garanti BBVA is already fully integrated into our risk management framework. And finally, BBVA's offer provides an opportunity for current shareholders to sell at a very attractive premium. Thank you, everyone. And now back over to Patricia to open the Q&A. Patricia?

Thank you. We are now ready to move into the live Q&A session. So first question, please?

[Operator Instructions] We take our first question from Benjamin Toms from RBC.

First on capital, the impact to transaction is 46 bps. Can you just tell us if the impact to capital was linear, in line with the proportion of the bank you end up owning? Or is there a capital benefit from obtaining a higher stake? And then secondly, in terms of hedging, are you going to continue to hedge with the same policy in the country? Because you don't know the proportion of shares that you will own. Will you only start hedging once the deal is complete?

Thank you, Benjamin. Onur, do you want to take these 2?

Yes. On the capital, Benjamin, you can take it more or less linear. So the answer is yes, it is linear. There are -- There's fine details, but it doesn't change the overall picture, so you can take it as linear. About the hedging, our hedging policy is long established. As you know, 30% to 50% of the P&L and 70% of the excess capital is hedged. We have done much more hedging this year than our regular policy in Turkey. So as you again might remember from the third quarter, 75% of our P&L for Turkey is hedged for this year, and 100% of capital is hedged. You asked whether we will start -- so the policy will stay, obviously depending on the exposure going up. The amounts would be adjusted along the way. And we will do the adjustment along the way as we get the signals on the take-up and so on.

Thank you, Benjamin. Next question, please.

Next question comes from Ignacio from Exane BNP Paribas.

I just have one question on the capital distribution. And how do you see capital distribution going forward after this deal? I mean obviously, I expect you to give more details on the CMB. But if you just give us a bit of a view, how does the capital distribution been impacted because of the transaction? And secondly, I mean what makes you so confident about the fact that all the negative news flow is now priced in all that short-term range that you flagged on during the call is priced in? We have seen a depreciation of the Turkish lira, which has been sort of like increasing materially the risk perception of BBVA because of these assets. So if you just could give us a bit of comfort on what is the thought process on the acquisition from a cost of equity perspective, that would be good.

Thank you, Ignacio. So as you correctly point out, we have our Investor Day coming up. And we will not give much more color on anything before that, because it makes sense that we today talk about the deal. But what I could say respecting capital distributions is what I said in my introduction. That when we sold the US, we generated excess capital. We very clearly pointed out that this provided us strategic flexibility. Strategic flexibility to invest in our core markets, strategic flexibility to return capital to shareholders. We have the share buyback, which will be coming soon after the Investor Day. And I will leave it there, and we will talk shortly more about it during the Investor Day on Thursday. Regarding the confidence, we are, of course, very well aware of what has been happening regarding the Turkish lira and the imbalances in the macroeconomic situation of the country, like Onur said. We have seen a recurring crisis on spiraling inflation and depreciation of the currency. And we have suffered that in our own skin and meat through the devaluation of our invested amounts. We're very fully aware of what has been happening. And again, given that it has created that OC loss for the bank in terms of the tangible book value, that has compensated negatively. The part of the very, very strong earnings that Garanti has generated in euros. We have had that as a context of our decision in a very vivid way, have no doubt about it. Why do we believe that at these prices, the risks are priced in? Because we run sensitivities. We know the asset well. We've run it for a decade. We've seen how in crises situations, it operates and generates euro returns, current euro of the current year returns. And if we look at the return on investment, return on capital, and we have different metrics, they are very attractive, incorporating depreciation of the currency that are there for all to be seen in the Bloomberg screens. But also if we take sensitivities, very strong; further depreciation, very strong; further deterioration of the macro, you can really go to very extreme scenarios, and you have positive NPVs. So basically, the point is that the entry price matters. And here, we have a situation where we have an entry price in euros, which is very attractive. Coupled with also the possibility that in Liras, it is a very attractive transaction for the minority Garanti shareholders. So this is what drives the thinking that the news flow is priced in. Or the situation, I would say, because news come and go. But the situation is priced in, because the returns are so positive, no? And then the inefficiency in capital is a bonus on that, which is not small. It's really very significant because we are consuming EUR 1.4 billion, which is a relatively small number. We have a capital base of EUR 40 billion, prudential capital base. So we're talking 3%, 3.5% of our capital base. So that's our cost of equity increase, okay, maybe in the 3.5% extra. That's really what we are risking in terms of additional prudential capital consumption. And if you look at the returns, the franchise is generating, over the last 6 years, EUR 1.2 billion, EUR 1.3 billion in current euro. Looking forward given the entry price, then we believe it's very attractive returns.

Thank you, Ignacio. Next question, please.

Next, we have a question from Sofie Peterzens from JPMorgan.

Can you hear me now? So here is Sofie from JPMorgan. So on the fourth quarter conference call, you mentioned that you had no plans of increasing your stake in Garanti, and you were very happy with just with 50% ownership. Now we are 9 months later or 10 months later. I was just wondering what has changed? Why did you decide to go for Garanti now? What has changed compared to kind of end of January this year? So that would be my first question. My second question would be around your minimum core equity tier 1 ratio. Have you discussed the transaction with the rating agencies and the regulator? And do you think that now that you're a little bit more exposed to EM, that your minimum core equity tier 1 ratio could go up further? And then the final question was just a clarification. Could you just remind us how much the tangible book or the book value will be for Garanti [ for ] this transaction? Thank you.

Thank you, Sofie. Onur, you want to take these?

Yes. Sofie, what has changed since the last quarter of 2020, 2 things changed: enterprise in euros; and number two, the treatment of capital. And as I did mention to you, the capital inefficiency that we are eliminating through this deal is an important part. About the exposure to EM and the risk profile and the discussions with others, obviously we will not comment on the discussion with others. But what I can tell you is we are fully controlling and consolidating Garanti BBVA already. So if you look into our RWAs, gross income, gross margin, all of that we are fully incorporating already BBVA. And as I mentioned in the presentation, if you look into our liquidity planning, if you look into our risk appetite framework, it assumes that we are fully managing and then controlling as -- not assumes, it is the case. So the risk profile of the bank is not changing materially through this deal in our view. And your comment on EM versus DM, of course, in the earnings profile as we have put into the presentation, EM's gaining a bit more weight. But again, we have to look into at what price that additional boost is coming to. And as Carlos mentioned, any scenario that you can take and then you run the numbers, given the capital treatment, given the EUR 1.4 billion to be spent to be able to get the other 50%, and given the earnings generation of Garanti over years in current euros we do think at this price it's an amazing deal. Then the book value of BBVA, it's around EUR 3.5 billion.

Okay. Thank you. Next -- Thank you, Sofie. Next question, please.

A question from Carlos Cobo from Societe Generale.

You've already touched on this, but maybe just a follow-up about the way you perceive Garanti as a -- the strategic importance within the group. Is it now changed? Before you always consider all options, right? And you could also think about the possibility of working away under the situation of stress. Is this now changed, so Garanti is now a strategic subsidiary that BBVA is ready to support under any circumstances in the short term because you see value in the long term staying in Turkey and investing in the country. Is that how you see Garanti now? Thank you.

Thank you. Very clear. I think we already mentioned it a couple of times, Onur mentioned it a couple of times. This is making a financial investment in a subsidiary that we already consolidate globally fully. And as you know, we follow a multiple point of entry model. So nothing changes. Absolutely nothing changes with respect to our multiple point of entry model. And the fact that in the extreme most severe scenario one can think of, the capital impact is really very small for the group in that walk away scenario. So nothing changes. Not that we want to walk away. Of course not, but it's the extreme-risk scenario where nothing changes. Our additional risk, by making this investment, is the investment itself, EUR 2.2 billion with a capital consumption of EUR 1.4 billion. That's it. We're doing it at a price which even on the EUR 2.2 billion, but even more so on the EUR 1.4 billion, it's so attractive that we already shared that the metrics are unbeatable.

Thank you. Next question, please.

Question from Carlos Peixoto from CaixaBank.

This is Carlos from CaixaBank. So a couple of questions here. The first one would actually be related with dividends from Garanti in the overall. So I see that Garanti has been paying dividends on a regular basis. My question is relates to how easy it is to expatriate dividends in current days, considering that the pressure, the FX pressure and all of it? So it's just a matter of the spread -- FX spread or whether indeed doing that expatriatation is stricter these days? The second question would actually be a bit picking up on previous questions, but I was wondering if you have some visibility or some color, or if you could share your own thoughts on what type of increase in SREP requirements and overall Pillar 2 requirement, I guess, for the group would derive from having a higher weight of earnings coming from Garanti or from Turkey I mean? Or as you explained before, given that the weighted risk-weighted assets remains the same, whether you think that this doesn't really change any type of regulatory requirements on the back of this as it was already fully consolidated into the group?

Thank you, Carlos. So before turning it over to Onur, I would only comment what I said already, that the increase in weight of emerging markets that you mentioned or the riskiness of our profile. Again, it's EUR 1.4 billion capital consumption. It's 3.5% of the group's equity. That's if we are fully successful and all of the Garanti shareholders tender the shares. So we see absolutely no change in our capital targets, 11.5 to 12. The group is the same. Risk-weighted assets are the same. All the risk metrics are the same. Nothing changes. We're just investing EUR 1.4 billion of our capital at very, very attractive prices. So again, the price, the entry price matters. And on dividends, Onur?

Yes, in dividends, like in every other country during COVID, in the COVID year, the dividends were suspended. Again as well as the case in every other country except Peru. And last year they -- or this year, they came back with the 10%. So the dividend ratio is slowly recovering to where it was before. And we are expecting for the dividend ratio to go up. But in any case, until the repatriation until, the repatriation of those -- of that capital and earnings, we will continue to hedge. So our capital hedging policy, as I did mention to you, is a very strong and long-established one. We will continue with that hedging policy.

Thank you, Carlos. And next question, please.

Next question comes from Stefan Nedialkov from Citigroup.

It's Stefan from Citi, a couple of questions on my side. So this is clearly a capital management exercise, as you said. And you like buying good businesses on the cheap. So you've shown in the past that you are not dogmatic about where you are in terms of allocating capital, for example, the Chile, et cetera. So all that makes sense. I just wanted to confirm that there's nothing additional in terms of synergies, by buying up to an additional 50% of Garanti, either in terms of funding or revenues or anything else that we might be missing out here? And my second question is on hedging. The P&L cost you have spoken about before, around EUR 20 million to EUR 30 million I think you mentioned in 3Q. But the hidden cost of hedging, which goes through OCI, could you tell us what was that impact in the first 9 months of the year, specifically on the Turkish hedging?

Thank you. Thank you, Stefanos. Onur, on the synergies?

Well, we don't -- I mean the valuation or the -- Let me be very simple and straightforward. I mean the other synergies that they would be having would be marginal. Because again I would highlight, we fully control and consolidate Garanti BBVA at the moment. So we do fully manage it. So all the other synergies have been fully -- or in the majority way, have been factored in. The only thing I would -- Stefan, the only thing I would add -- because you said this is a capital management deal. I see it a bit more than that. I would give you 3 other things to put on the table. First of all, it's not -- capital management is underneath obviously, but this is a great value-generating deal, number one. Number two, this is an asset that we know. We have been running Garanti BBVA for 11 years. We do have intimate knowledge of what is in the bank and what is not in the bank. So this information arbitrage, or however you call it, is an important one. It's an asset that we know very well. And related to this, the third one that I would put on the table is again, the fact that in terms of risk management, I'm repeating it but I think it's important, this is a fully consolidated and controlled asset by BBVA. As a result, the risk framework doesn't change for Garanti BBVA. Given all this, given the asset that we know, given the price and the deal dynamics, given the risk management implications, it's a great deal. So it's not simple capital management or capital optimization deal.

Onur, actually I did say it's a capital management and a capital allocation exercise.

Perfect. Perfect, Stefan.

On the number on the OC, we're looking at that. We'll provide you with that number. Thank you, Stefanos.

So next question, please.

We have a question from Fernando Gil from Barclays.

I think all my questions have been pretty much answered. Just a question on the comment on the price that has changed to make this offer. Yes, the price has changed and the Turkish lira has changed. But the things that happened to make the Turkish lira depreciate to these levels are still there. So I'm just wondering, do you feel more comfortable at these levels? Or simply you think it's the right proper thing from now on going forward, and every time the Turkish appreciates further, you're going to be comfortable increasing the stake? But just that, thank you.

Well, I think we mentioned that when we run the numbers going forward with devaluations that are already very strong, the returns are very high in any metric you want to look at. So it's a very positive NPV transaction with the current devaluation. Then we do stress scenarios. And the matrics, you can devalue percentage points more, another 5, another 5, another 5, you just keep going, positive NPV. So this is what we're saying, not that every time it devalues, we want to increase. No, but we look at the price in euros now. We look and the flows in terms of either capital or cash flow and we have the different metrics. And the returns are always very high and positive NPV, even in extreme scenarios. So in the context that we already own the asset, we know the asset. In the context that this is capital inefficiency, which adds additional protection, this is where we think it's a very, very good deployment of part of that excess capital that we generated last year. Nothing more than that.

Thank you, Fernando. Thank you. Next question, please.

Next, we have a question from Britta Schmidt from Autonomous Research.

Actually, just to pick up on that point. I think everyone agrees that Garanti is a great bank. It's more the FX that's the problem. Could you tell us what the worst scenario is that you've calculated for FX depreciation? And also on the return on investment point, I mean clearly as of today, you could have a 40% to 50% return on investment this deal. But in the future with devaluations that can quickly fade, what sort of hurdle rates do you set for a deal like this, versus for example, the return on investment of a buyback, or also the return on investment of investing into other of your core markets? The other question I had was just around the kind of political side of it. The Bank of Spain has flagged all the vulnerabilities in Turkey. You will now no longer have potentially local minorities outstanding. Does that impact how you think Garanti will operate as a large then entirely foreign-owned bank in the country?

Thank you, Britta. Yes, I did mention devaluation as being a key risk, and that's why we do that sensitivity. So also looking back, certainly the currency has devalued. And that has impacted the book value of our stake, and that has been quite damaging for us and for our shareholders. At the same time, if we look at the flow in euros and current euros, Garanti, and I think it's also important to highlight that, has generated EUR 1.2 billion, EUR 1.3 billion in current euros every year on average since for the last 5 or 6 years. So the resilience of the strength, even in the value of the environment, it continues to generate that level of EUR 1.2 billion, EUR 1.3 billion in profits. So that goes to say how strong the franchise is. Now on these scenarios, I'm not going to comment on the most extreme because they're just so extreme that they will be alarmingly extreme. But the returns are really high. We're talking returns that in any scenario are well above our cost of capital in lira or in euro. So we take mid-teens euro cost of equity in current euro for an investment in Turkey. And it's really, really much way above that even in more severe depreciation scenarios of the lira. So that's how much I can comment. On the political situation and how Garanti reacts, so the concerns that the supervisors might have pointed out are the same ones that we have already shared, and have to do with the balance of payments imbalances of the country that recurrently lead to depreciation of the lira and the persistent high inflation with the loose monetary policy. So that circle is one of the vulnerabilities of the macro of the country. And certainly, we're very cognizant and aware of that. But at the same time, Garanti operates and has the management discipline to manage liquidity, manage exposure to FX in a way that survives those bouts of instability in the market quite well. And you can revert to the past maybe as guide as to how Garanti reacts when those things happen. So we had a big crisis in '18, for example, in the month of August, September, you might recall, very negative news flow. Look at the results, pretty good. Look at COVID, what happened. It's really the one franchise within BBVA that delivered even above and beyond what the budget was pre-COVID. So I could go on. But the context is one which has that FX. But given the entry points, given the inefficiency in capital, given the quality of the assets, we -- as we shared, believe it's very, very good for our shareholders. One point we haven't stressed much is the immediate impact on our multiples, which is also very noteworthy. Onur highlighted it, but maybe in the Q&A, it hasn't come out so much. So the deal itself is the reason why we do it, the return, the NPV, the things we just shared. But also if you look at the immediate impact on the BBVA share, we're talking about 13.4% earnings accretion, which of course will immediately lead to dividend increase by the same amount with the same payout ratio. And we'll talk about distributions and our policies on Thursday in the Investor Day. But even if you just keep that constant, we're talking a lift, immediate lift of 13% -- 13.5% in the dividend flow, everything else being equal. And of course, the tangible book also has a meaningful lift of 2.5%. And so those are immediate positive effects for our shareholder.

Carlos, Britta was also asking how does this compare with other alternatives, the buyback and so on. On this one, I will follow-up on your comments. Basically saying that as we promised the market in the past, we look into every single alternative. We look into their -- obviously there are strategic implications, but we look into these projects with their own returns and with their own cost of capital. And in that stack up, we do stack them up. And we look into these alternatives as how -- what are they producing versus the cost of capital for that specific project. This project, in that sense, is a very positive one. So you were asking how do we compare it with the buyback and so on? A very positive project that we are putting on the table. And I would once again highlight what Carlos is saying. I mean the Bloomberg terminal, take the currency, put any scenario that you would like to put, further deterioration or maybe even improvement. You would see that under these scenarios with that sensitivity, you will still see a very attractive project.

Thank you, Britta. Next question, please.

We have a question from Ignacio Cerezo from UBS.

A couple of questions from me. The first one is if you can give us a little bit of information on the structure of Garanti's shareholder base, the 50% you don't own? If there is any kind of more reference shareholders or if it's pure free float? And the second one is kind of probably asking the same question in a different way, but obviously, we all understand that the Garanti's undervalued on a historical basis. And you're kind of trying to be probably opportunistic with the price, but you probably have to have a view about things improving, to be stepping in here. So how patient are you basically in terms of the market giving you credit actually for these investment at these prices? How long do you think the market is going to take to start putting a more normal multiple on Garanti? Which is what's going to make your investment more positive, if you want, thank you.

I would just start by saying that the transaction, our decision is not predicated on a dramatic change in conditions. So it's a very conservative set of numbers that we have used to make good decision. On the shareholder base?

On -- It's pure free float. I mean obviously, it's the largest market cap bank in the stock exchange. So it's the reference stock. You would see everyone in the shareholder base. But it's pure free float, Ignacio.

Okay. So thank you very much. I'm afraid we have run out of time, so we need to end it here. Thank you for your questions and for participating in this call. And let me remind you that the entire IR team will be available to answer any questions you may have.

Thank you, everyone.

Thank you, everyone.

Bye.