Banco Comercial Português, S.A. (BCP) Earnings Call Transcript & Summary

Good day, and thank you for standing by. Welcome to the Millennium BCP 9-Month 2023 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Mr. Miguel Maya. Please go ahead.

Good afternoon. Miguel Maya speaking. Welcome to BCP earnings conference call. As usually, I will mention the highlights of our performance and then Miguel Braganca and Bernardo Collaco will follow, providing additional detail. On the first 9 months, we recorded a profit of EUR 651 million, which clearly demonstrates the quality and capability of BCP's business model to generate sustainable value. Over the past few years, we have implemented a well-defined plan to solve specific past problems to address challenging economic and geopolitical context and to incorporate the advantage provided by technology into business models and processes. The positive results we have, constantly achieved quarter-after-quarter, reflect the quality and hard work of the bank's teams and our firm persecution of the strategy we have defined. Our progress is evident in the performance and the core profit, which reached EUR 1.8 billion, a 38% growth, supported by a 27% increase in core income, coupled with rigorous cost management that allowed us to contain the cost increase by 8.5% despite the high inflation levels in all the markets where we operate. The net income continues to be affected by legal risks in Poland related to the FX mortgage. And until September this year, these risks had an unfavorable impact of EUR 590 million, including a significant increase in provisions due to more conservative assumptions and costs associated with settlements with clients. Despite the significant costs related to Swiss franc, the activity in Poland continues to evolve positively, confirming the quality of the bank's franchise in that market. This was the fourth consecutive quarter in which the activity in Poland had a positive contribution for net income, standing at EUR 100 million this year. It's worth noting that the planned measures in Poland, such as the securitizations carried out and the partnership in bancassurance through the sale of 80% of Millennial Financial Services, along with the capital generation from our high quality franchise, not only accelerated the capital recovery ahead of initial expectations, but also enabled Bank Millennial to issue EUR 500 million in third quarter, which was relevant for complying with MREL requirements in that market. The contribution from the activity in Mozambique amounted to EUR 67 million, in line with the previous years and confirming the quality of the franchise and the relevant profitability of this operation. In Portugal, the activity showed remarkable evolution, having achieved a profit of EUR 557 million in the first 9 months, an increase of 93% year-on-year. These results confirm the strong ability of our business model to steadily generate organic capital. The capital ratios comfortably exceed regulatory requirements with the common equity Tier 1 at 14.9% and total capital at 19.4%, resulting in an increase of common equity Tier 1 by 357 basis points and total capital by 431 basis points in the last 12 months. In the current context, the evolution of customer funds is also noteworthy. On-balance, customer funds reached EUR 76.9 billion, showing a year-on-year growth of 2.3%. BCP has developed specific capabilities that allow for a consistent reduction of non-productive assets. Since September of last year, we have managed to reduce EUR 398 million in NPEs, EUR 149 million in foreclosed assets and EUR 404 million in the restructuring funds. These capabilities combined with sustained business growth have led to a continuous trajectory of a reduction in the NPEs ratio, which decreased from 4.1% to 3.6% year-on-year. Despite the challenges and uncertainties in the operating environment, including the significant provisions related to legal risks in Poland, we have maintained a very rigorous balance sheet management, keeping cost of risk at a level we consider suitable for our business model. The cost of risk stood at 50 basis points at group level and 53 basis points in Portugal, having decreased nearly 5 basis points over the last year. In this quarter, we have achieved a highly relevant milestone that confirms the success of the normalization that BCP has been implementing for several years. After series of upgrades, we obtained investment-grade rating from the 4 major rating agencies. Our customer base continues to grow consistently, having exceeded 6.6 million clients at group level, of which nearly 2.7 million in Portugal, confirming the bank's ability to meet the customer expectations and to attract new clients. The priority we gave to mobile has been fueling its adoption by customers across the group, showing their recognition of the quality of our mobile solutions. Last year, mobile customers grew 11%, with mobile customers already accounting for 66% of the group's customer base and 56% in Portugal, which is a good indicator of the success of our digital transformation journey. Our digital capabilities are also widely recognized by customers, which make us quarter-after-quarter the bank they must spontaneously nominate as the best digital bank. Customer recognition of our digital capabilities is also reflected in the use they make of the app, which continues to gain increased relevance as their preferred platform to interact with the bank. On the first 9 months of this year, customers carried out 29% more transactions through the app than on the same period last year, with a significant growth in the number of transfers and payments. The number of sales through the mobile app have increased 27% in the same period, with emphasis to saving solutions, which increased 30%, and sale of cards, which increased 17%. The investment and priority we give to mobile solutions with a clear focus on customer-centric innovation means that our app continues to lead the rankings and deserves top reviews on the most relevant platforms. We are on the way to closing a year of transition for BCP, a year in which we are already realizing the results of the transformations implemented in recent years. The reference metrics we set in the strategic plan have been generally achieved ahead of schedule. It also highlight the increasing relevance that the bank assumes in Portugal, a relevance that is amplified by the significant strengthening of capital ratios. In Poland, it's worth noting that despite all the adversities coming from the Swiss franc issue, the bank has presented positive results for the fourth consecutive quarter. I also emphasize our efficiency level, which was already distinctive and has been further strengthened by increased revenues combined with our ability to maintain very effective cost control even in a high inflation context. We are on the right track. We're well prepared for the future. Miguel, the floor is yours.

Thank you very much, ladies and gentlemen. In Page 8, we see the syntactical, the summary of our income statement, where, rightly, it shows up that the core income increased by 27.2%, mainly explained by the growth of the margin of around 37%, while the operating costs have only increased 8.5%, which shows a very positive jaws, that then translates into an evolution of the core operating profit of 38%. The other income was, of course, influenced by the sale of the Millennium Financial Services or our insurance broker in Poland to generate capital. So that the operating net income then grows around 52%. The results on modification, which were basically explained by the credit holidays last year in Poland, this year by the absence of credit holidays, improved substantially. And the loan impairments have also decreased due to normal -- progressive normalization of our credit risk charges. The legal risk in Poland is still at quite high levels, at around EUR 482 million. But I would say that the risk is still contained and within the expected values. The net income before taxes is EUR 1.1 billion. So that after tax and minorities, we reached the value that Miguel Maya referred of around EUR 651 million. Looking at the profitability, we see that net interest margin is at a very high level of 3.4%, where, in Portugal, the value is 2.6%, which is a very high value for a mature market such as the Portuguese market, as you know. In international operations, which is basically Mozambique and Poland, the NIM is at 5%. This evolution of the NIM is basically what explains the growth of the NII of 37% year-on-year. The fees and commissions stable, with the market-related fees and commissions due to the turbulence in the markets quite stable. And the banking fees and commissions also at levels very similar to the levels of '22. In Portugal, the growth has been 0.5%; in the international operations, 1.6%. There is also some compensation between the fees and commissions, P&L and the NII, because there were some charges to wholesale customers for deposits and for transactional banking and so on, that now with the demand deposits being as profitable as they are today, do not make necessarily a lot of economic sense. The other income grew very substantially from minus 55 million to EUR 97 million, with an important contribution both of the sale of the Millennium Financial Services and of the decrease in the regulatory contributions. Operating costs contained, with a growth of 3.5% in Portugal, a mature market, and the growth of 15% in Poland. The inflation last year in Poland was around 15%. And there is some, of course, tension in the sales and marketing in Poland. In Portugal, we have been able to compensate the salary increases with efficiency gains. The impairment and provision charges normalizing. So our cost of risk evolved from a value of 55 basis points to a value of 50 basis points with the contribution from both Portugal and the international geographies. Portugal decreased the cost of risk from 57 basis points to 53 basis points, and the international geographies decreased the cost of risk from slightly above 50 basis points to slightly above 40 basis points. The credit quality showing high resilience in spite of the economic challenges, I would say, in the world due to geopolitical risks and to the inflationary risks. The NPEs decreased year-on-year around 16%, around EUR 400 million, most of it in Portugal. So that we are now with an NPE loans ratio of around 3%. And if we consider off-balance sheet exposures and securities, our NPE ratio in Portugal is already 2.2%. In the international -- in our international operations, the NPE ratio of EBA also considering securities is already at 2.6%. So all in all, a very positive evolution in these values. In terms of customer funds. Here, it has been an area that is slightly below our initial expectations, before this more restrictive monetary policy started. This more restrictive monetary policy reflected itself on volumes, mainly in Portugal. The total customer funds in Portugal decreased very slightly, so around 2%. Right now, they are quite stable and they are -- and our forecast is that they will continue broadly stable until year-end. In our international operations, on the contrary, there was a very buoyant growth of around 12%. Loans to customers. Here also being affected, I would say, by both our efforts to reduce the NPEs, which is positive, and the more restrictive monetary policy that we are all living. Right now, it is stabilizing, but it decreased around EUR 1 billion in Portugal and EUR 270 million in the international operations. In the international operation, there was also here a movement of a more restrictive, I would say, and disciplined capital allocation due to the effort that we were doing in Poland to meet successfully the capital requirements. In terms of capital ratios. A very strong quarter in terms of capital ratios, exceeding even our own initial targets. So we have grown to 14.9% of capital. This was explained by some factors. So besides the just mentioned factor of the reduction of the credit portfolio that was more focused on, I would say, higher RWA clients mostly in Poland, but also in Portugal, we had an authorization to use a new IRB models in terms of LGD and EAD, which is responsible for more or less 20 basis points, and we also have the impact of the securitization in Poland, which was -- where most of the work occurred in Q2, but the settlement was already in Q3, which is responsible for around 13 basis points. Leverage ratio very comfortable. I'll not enter into it. MREL. With the issues that we have been doing, a comfortable position, as we know. Already doing a pro forma with the issue that was performed, we are above 30%, 31.6%, which compares with the mandatory MREL requirement for the 1st of January of '24 of 28.15%. We are also meeting the MREL requirements in Poland, as was publicly announced by our bank there. Liquidity ratios. In spite of the restrictive monetary policy, very, very comfortable. As you see, the net stable funding ratio at 160% and the liquidity coverage ratio at 244%, with our eligible ratios -- eligible assets in Portugal in excess of EUR 24 billion. Our eligible assets in Portugal are higher than the amount of uninsured deposits. So this gives us a very strong resilience in terms of liquidity risks. I will pass now the floor here to Bernardo.

Okay. Thank you, Miguel, and good afternoon, ladies and gentlemen. Starting on Page 25, which is related with Portugal, net income increased 93% from EUR 288 million to almost EUR 557 million. This positive evolution was driven by stronger net operating revenues, that went up more than 27%, and still the strict cost management, that went up just 3.5% compared with the first 9 months of 2022. It should also be noticed the positive contribution to net income arising from the reduction of 15% in total provisions. On Page 26, you can find detailed information about the NII evolution in Portugal over last year. And at the end of the first 9 months of 2023, NII stood at EUR 1.1 billion, meaning 64% up year-on-year or EUR 427 million above the same period of last year. The favorable performance of NII in Portugal largely reflects the higher income generated by the loan book and the positive impact from securities that more than compensate the impact on the remuneration of deposits and the higher costs supported with the bank on wholesale funding. Moving to Page 27, which shows the evolution of fees and commissions as well as other operating income and trading. Banking fees and commissions were flattish year-on-year and market-related fees grew 2%. Total fees and commissions were EUR 2 million higher than 1 year ago. Looking to other sources of income and starting with other operating income, were almost EUR 5 million above the first 9 months of last year. And this positive evolution is explained by the reduction on mandatory contributions. Regarding equity earnings and dividends, the contribution was EUR 46 million in the first 9 months of this year, which is a similar level than last year. In terms of trading, results were much lower than in last year, mainly driven by lower results from sovereign debt trading activity as well as the negative impact from sales of NPEs. Going to Page 28, regarding costs. And as I commented, banks continue to apply a strict policy in terms of cost management, and total costs grew 3.5% compared with the first 9 months of last year and at a lower pace than inflation. It should also be noticed the non-recurring costs that includes mainly the compensation for the temporary reduction of remuneration in the period of 2014 and 2017 that reached the final reimbursement in the first half of this year. So this should be considered as a one-off that will not be repeated. Moving to Page 29, which refers to asset quality. And as highlighted before by Miguel, there was a significant reduction in NPEs. NPEs reduced 22% year-on-year, meaning more than EUR 340 million in just 1 year. In the first 9 months of this year, there was also a reduction of almost EUR 170 million. And this clearly shows that the bank is still committed with the reduction of the NPEs. As you can see on the top left chart, year-on-year reduction occurred both on 90 days past-due loans as well as in other NPEs. NPEs as of September this year stood below EUR 1.2 billion, that compares with EUR 1.5 billion 1 year ago. And as it was also mentioned by Miguel, the cost of risk stood at 53 basis points, that compares with 57 basis points, showing once again the convergence of the cost of risk to the normalization. Let's now move to Page 30, which looks at in more detail to NPE coverage. As you can see, total coverage of NPEs stood at 138%, NPE coverage by loan loss reserves above 80%, and total coverage for individuals with high levels of real estate collateral stood at 100%, and for companies above 150%. On Page 31, which shows the evolution of foreclosed assets and restructuring funds, there was a reduction year-on-year on both of them. The net value of foreclosed assets stood at EUR 117 million. That compares with EUR 265 million 1 year ago, meaning a reduction of more than -- of 56% or a decrease of almost EUR 150 million. On the first 9 months of this year, there was a reduction of more than EUR 60 million. Regarding property sales, there was a significant reduction in the number of transactions compared with the first 9 months of last year, which was somehow expected due to the reduction of the portfolio. Regarding restructuring funds, and as we mentioned several quarters before, I mean, the reduction of 50% is explained by the transaction that happened at the end of 2022. Now moving to Page 32. Total customer funds with a slight decrease of 2.28%. Total deposits went down 1.7% and off-balance sheet products decreased 4.5%, and once again, still influenced by market conditions and the significant maturities of insurance products. It's worth mentioning the stability of deposits on the Portuguese operation that were established -- that were flattish compared with the previous quarter. In terms of gross loans, there was a decrease of almost 4%. Loans to companies went down 8%. And somehow this is influenced by the reduction of the NPEs -- remember EUR 340 million -- and some early reimbursement of credit lines that were provided by the Portuguese government under COVID. Remember that BCP, by that time, had a much higher market share than its natural market share on the first wave of COVID lines. Loans to individuals were almost flattish year-on-year. Going to Page 33, analyzing the evolution of the performing loan book by segment and the recognition of BCP as the main bank for Portuguese companies. Performing loans in Portugal went down 3%, loans to individuals were stable year-on-year, and loans to companies due to the interest rate environment went down almost 7%. And it can be explained by the factors that I already mentioned. Let me also reinforce the leadership of BCP in the SME program for the fifth consecutive year as well as the Inovadora COTEC program for the third consecutive year and the recognition as the best bank for companies from Data-E. Now moving to international operations on Page 35. Results were still impacted by specific effects related with Bank Millennium. Although it's important to highlight that Bank Millennial registered for the fourth consecutive quarter positive results after several quarters with losses. Net income of Bank Millennium stood at EUR 100 million. That compares with a loss of EUR 276 million 1 year ago. So with regards to Mozambique, contribution were more or less at the same level of last year. In summary, contributions from international operations stood at EUR 94 million, which compares with minus EUR 96 million in the same period of last year. It's also important to remember that in the first half of last year, it was registered the impairment of the goodwill related with Bank Millennium with an amount of EUR 102 million. Excluding these specific effects from Poland, as I mentioned, costs related with FX mortgage, the sale of 80% stake in Millennium Financial Service and the goodwill impairment, contribution from international operations would have stood 40% higher than last year. Now on Page 36, which refers to Bank Millennium. Net income in Poland continued to be impacted by costs related with CHF mortgage loans. It's important to highlight once again that Bank Millennium had positive results since the fourth quarter of last year. In the first 9 months of this year, NII in Poland stood -- net income in Poland stood above EUR 100 million, which compares with a loss of EUR 276 million in the first 9 months of last year. But it's also important to highlight that excluding specific effects, net income would have stood at almost EUR 500 million, 44% above the same period of last year. Net operating revenues, excluding the impact of credit holidays on NII, increased 32%. Operating costs, excluding mandatory contributions, went up 14%. And if you consider the reduction of mandatory contributions, total operating costs went down 10%. In terms of capital, as mentioned before, in Poland there was a strong improvement and the CET1 stood at 13.5% and total capital at 16.6%, which are comfortable levels above the minimum requirements. On Page 37, some detailed information about Bank Millennium. NII increased 16% to EUR 867 million. That compares with EUR 745 million 1 year ago. And it's important to mention that NII on the third quarter of this year was higher than the second quarter of this year. NIM improved from 4.36% to 4.72%, which is also aligned with the level that was presented on the previous quarter. Fees and commissions with a slight decrease of 2.4% to EUR 129 million. And other income was strongly impacted by the positive result coming from the sale of 80% of Millennium Financial Services in the first quarter of this year. That was mostly booked on the trading line. As mentioned before, mandatory contributions in the first 9 months of this year were much lower than last year due to the activation of the recovery plan and the one-off that was registered last year related with the institutional protection scheme. Moving to Page 38, related with asset quality in Poland. And still taking in consideration that the environment -- there was still an environment with high interest rates and high inflation, the cost of risk stood at 44 basis points, which is a lower level than was initially projected by Bank Millennium for this year, taking into consideration market conditions. Non-performing loans more than 90 days past-due ratio steady year-on-year at the level of 2.2%. Coverage by loan loss reserves of non-performing loans stood at 153%, meaning an increase of almost 10 percentage points compared with last year. On Page 39, customer funds grew 9%, with a significant increase in deposits as well as to what regards to off-balance sheet funds. In terms of loans to customers, gross book stood at EUR 16.6 billion, 6% less than 1 year ago. But it's important to highlight the significant decrease of the mortgage in foreign currency, that, deducted by provisions for legal risk, went significantly down. On Page 40, regarding FX mortgage portfolio. Let me start that Bank Millennium have continued the efforts to reduce the weight of the FX portfolio -- of the FX mortgage portfolio. On a yearly basis, there was a reduction of 15% and 4% quarter-on-quarter. At the same time, Bank Millennium increased provisions against legal risk, and at the end of September, reached an amount higher than EUR 1.5 billion. It's important to mention that during 2023, Bank Millennium made some extraordinary adjustments on the provisioning methodology, incorporating more conservative assumptions on the methodology. Most important is that by the combination of the creation of these provisions and the decrease of the loan book, Bank Millennium brought the ratio of total provisions against legal risk versus the gross mortgage book to 73.5%. At the same time, and as I mentioned before, Bank Millennium continued the efforts to reach amicable settlements with clients, and in the third quarter of this year was able to achieve almost 870 extrajudicial agreements. Now moving to Mozambique. We can say that even under a challenging environment, Bank Millennium bim continues to provide an important contribution for the group. Net income stood at EUR 67 million, meaning a small reduction compared with the same period of 2022. Net operating revenues grew more than 6%, and operating costs were 13% higher than 1 year ago. Capital ratio stood at a very comfortable level of 34%. Moving to Page 42. NII went up 7.5% year-on-year to more than EUR 150 million, which compares to EUR 141 million 1 year ago. NIM stood at 8.6%. That compares with less than 7.9% in September 2022. Commissions went up 13% to almost EUR 30 million from EUR 26 million, and other income decreased 11%. Operating costs went up 13.5%, influenced by an increase of 3% on staff costs and by more than 15% on other admin costs. Moving to Page 43. Non-performing loans 90 days past due stood at 4.9%, which compares to almost 10% in the same period of last year. Coverage by loan loss reserves of non-performing loans 90 days past due stood at 79%, and the cost of risk decreased 14 basis points year-on-year and stood at 167 basis points at the end of the first 9 months of 2023. Regarding volumes on Page 44, you can see that customer funds registered a small reduction of 2% and loans to customers were stable compared with the first 9 months of last year. So let me thank you very much for your attention. And before we move to Q&A, I will return to Mr. Braganca for some final remarks.

As we always do because we like to show our commitment. Around 3 years ago, we had approved a strategic plan with the target that we are seeing in Page 46. We have basically met those targets or overachieved those targets 1 year in advance, at least most of those targets, of course, with some tailwinds linked to the normalization of the interest rate, but also with much more regulatory or political risk difficulties in Poland. So -- but we have surpassed these challenges. And as I have commented in our last session, we are intending to review our strategic plan during our planning process of next year and come up with a new strategic plan next year with more ambitious targets than the ones that you are seeing here for 2024. And at this moment, I think we will engage with the investor community in what will be BCP for the next 4, 5 years. Thank you very much.

[Operator Instructions] And your first question comes from the line of Maks Mishyn from JB Capital.

I have 3. The first one is on the NII. You look to be on track to outperform your guidance in Portugal. And I wanted to ask you to please update us on your expectations for 2023 and 2024. And it would be very helpful if you could touch on both customer spreads and your expectations for volumes. The second question is on costs. There were several articles in Portuguese press on your negotiations with labor unions. I was just wondering if you could tell us what kind of cost inflation this could imply for BCP in 2023 and 2024. And then the last one is on capital. Do you see any headwinds for your CET1 ratio in the coming quarters? And if not, could you please share your view on which options could you consider to eventually deploy it?

Effectively -- I will start with the cost question. What we are seeing both for this year and for next year is a low- to mid-single digit increase in the costs aligned with what we are presenting right now, so nothing new in this aspect. In terms of the NII, I had commented we have been positively surprised by the dynamics in the market. Last time when I was here, I commented that the '22 margin was more -- I would say, a more steady-state margin. And we had to compare both '23 and '24 with '22. And I was pointing up to an extraordinary, so to say, increase in the margin in this year of '23 that then would be partly compensated in '24. So I pointed to a growth of high 30s in '23 and low 30s in '24, relatively -- both of them relative to '22. Right now, due to the dynamics in the market, we are revising this guidance upwards. So for '24, which I'm saying will be a more normal margin, we would expect a growth in the margin relative to '22 in the low 40s. So instead of low 30s, low 40s. And in '23, we are expecting a margin on the high 40s-plus, around 50. So that's what we are expecting right now. This means that this process of normalization of the margin to '24 will imply a slight decrease from the extraordinary margin that we have in '23 to the normalized margin in '24 in the mid-single digits. In terms of volumes, our volumes until the year-end, we are expecting them to be broadly constant between now and year-end. And for next year, we are expecting volumes to grow on the low-single digit. In terms of capital, what we have always said is that we want to affirm ourselves as, I will say, a bank of excellence in Europe in several dimensions. We want to be a bank of excellence in Europe in several dimensions. And being a bank of excellence means having the right rating, having the right capital ratios and also having the right distributions to shareholders, so to say. And that's our goal. When we presented our last plan -- and that's why we are showing this slide right now, the Slide 46 -- our target was we will be normalizing the bank up until '24. We are broadly in the process, we are broadly there. So what we would expect is starting in '24, we will be a normalized excellence bank in Europe. So the way we will approach the question -- and there will be times for approaching the question and one of the important times will be within our strategic planning framework -- is that we will look at what investors want -- there are several types of investors -- and we look at where the reference banks in Europe are both in terms of capital ratios and in terms of distributions to shareholders. That's what we are going to do. In terms of -- and based on this, we will come to the market. We'll say, "Look, what we want to have is this amount of capital ratio and what we want to have is this type of payout ratio," keeping in mind that it will be very difficult for us to find in Europe and in the geographies in which we are interesting growth opportunities that will imply a growth of a little 5 -- than 4% or 5%. So the remaining, in principle, unless we find other opportunities -- the remaining, in principle, once we get to the capital ratio where we want to get, it has to be or should be distributed to shareholders. That's the way we would like to approach it. Regarding '23, we will take the decision in the beginning of '24. What we have always said is that '23 was a transition year. Effectively, as we are all seeing, our performance is better than what we are expecting. We will have -- by the beginning of next year, once we prepare the decision of the General Shareholders' Meeting, we have to see where we are in terms of capital ratios, where our competitors are in terms of capital ratio. There is also an important point, that is we have the maturity of an AT1 in January. And it's important to know, I mean, whether it makes more sense to refinance this with AT1 or to, so to say, fill the gap with capital. And it will depend on the AT1 conditions in the beginning of the year. And we will take this decision in the beginning of the year, keeping in mind that we want to be a reference bank in Europe. We don't want to accumulate excessive capital, but we want to have the rating and the access to the market and the reputation that the other reference banks in Europe have. So decision beginning of next year.

And the next question comes from the line of Noemi Peruch from Mediobanca.

Noemi, could you please speak up because the sound is not very good?

Yes. Can hear me now?

Better, better.

Okay. So I have a few questions to better understand how you look at your capital position. So firstly, what do you consider a surplus? Is it whatever is above a certain common equity? As of now, your target is 12.5%. Or whatever is above total capital requirement plus a buffer? Or above -- whatever is above MREL requirement plus a buffer? My second question is on capital still. You are now on a really strong position in terms of common equity. And do you see the sizable buffer over MDA as an opportunity not to reissue AT1 [ at all ]? Or to boost capital remuneration on top of dividends? Or to fund growth in the future, both organic and inorganic? And last but not least, ECB recently launched the preparation phase of its own CBDC. What do you see as risk and as opportunities of the digital euro implementation?

Okay. Starting with the last question. I think everybody in Europe is taking digital euro very seriously for the impacts that it may have in our relationship with customers in the beginning and with -- in terms of fees and commissions basically linked to transactionality in terms of the information that it provides in terms of credit quality. So what -- our key priority here is to maintain the front end and the mind share of our customers. And we are doing everything in this regard that we can. Of course, we are not, I mean, the rule makers here. We will try to preserve as much as possible our franchise and our relationship with customers. We think that as a bank that is customer focused and where we clearly have a preference of our customers, we are the bank by far with the most, for instance, package accounts in Portugal and the customers value our service quality. We think we are particularly well positioned. We also think that this is an additional motivation to outperform in terms of customer service so that we preserve the relationship and the customer loyalty at the end of the day. In terms of the opportunities that this may have, I think the main opportunity is that any large challenge, I would say, creates a bias in favor of the competitors or of the banks that are -- that have more capabilities. And without wanting to sound arrogant or complacent, we think that as a bank we are particularly adaptable and we have very good capabilities in terms of systems, in terms of customer interaction. So this will be a differential value for us when you compare ourselves with the other competitors. But there is not a silver bullet here. There is not a strategy that we can announce very quickly here. It's more a marathon, I would say, with a lot of small measures than a very large measure. In terms of capital, as I commented before, in principle -- starting with the issue of AT1. In principle, over the cycle, we think that we should fill the AT1 bucket with AT1 and not with capital, because generally over the cycle, AT1 is cheaper than capital at the end of the day. So the investors of AT1 demand a lower return on capital than the investors on common equity Tier 1. At least this is what the series says. So over the cycle, this is what makes sense. So we will want at some point in time to issue AT1, okay. But then there is an issue of timing, whether we will issue AT1 in January or whether we will fill the record in January with common equity Tier 1. This is a decision that depends on the relative prices of AT1 and capital that will be in the market in January. So this is something that we have to look at, at the moment based on the specific prices. But over the long term, this is not what is more relevant, because over the long term, we will not fill the AT1 bucket with capital. We will use this bucket to -- so to say, we will not freeze, so to say, capital in this area. In terms of the way we look at the CET1. First, we are a bank with the appropriate governance processes. And this is a collegial decision with a lot of checks and balances and with a lot of judgment and input from the different stakeholders and from the different Board members, where the independent Board members which represents, I would say, in general, the market and all the stakeholders, where the Board members that represent the largest shareholders are present and so on. So this is a decision that will be a shared decision within the Board. But what -- and will be properly announced once the decision is taken. What I can tell you is what I had told to Max before is that our process will consider the value of the CET1 and the real values and the ratios of the reference bank in Europe. So if the reference bank in Europe have a lower capital ratio, we will not try to have a higher capital ratio just because we like to have a higher capital ratio. So we will look at where the reference -- where the benchmark is, where the reference banks are, and we will take a decision based on the market, based on what investors want, based on what shareholders want. And typically, these values are explained, of course, by the regulatory minimum plus a buffer. And so we will take a look at where we are, what are the normal buffers that the market really values, the different, I would say, stakeholders in the market, including shareholders, bondholders, AT1 holders, et cetera, and we will take a decision with all these inputs. So this is the way we will approach the problem at the appropriate time. But we have not any type of prejudice, either one way or the other.

And your next question comes from the line of Carlos Peixoto from CaixaBank.