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

Good afternoon, Miguel Maya speaking. Welcome to BCP's conference call. As usual, I will begin with the highlights of our performance being followed by Miguel Braganca and Bernardo Collaco, who will provide additional detail. The first half of this year continued to be shaped by a complex global environment marked by a persistent geopolitical tensions and their impacts on energy markets, international trade and inflation. These dynamics have weighed on global economic growth. Despite this backdrop, the Portuguese economy has maintained a solid trajectory. The Polish economy continues to grow at a robust pace and the Mozambican economy also showing clear signs of normalization. Against this challenging context, the group delivered another quarter with a strong set of results. Net income reached EUR 565.8 million in the first half and a 12.7% year-on-year increase. This performance reflects the bank's sustained capacity to generate value and the resilience of our business model as outlined in our strategic plan. In Portugal, we achieved a net income of EUR 470.2 million, an increase of approximately 11%, reinforcing the profitability trajectory of previous quarters. This performance was driven by strong growth in net interest income, underpinned by the strength of our commercial franchise, disciplined cost management despite continued investment in digital transformation and effective balance sheet management in an evolving interest rate environment. Turning to our international operations. Net income increased by over 25%, reaching EUR 183.5 million. This was notably driven by Bank Millennium in Poland, which recorded a net income of EUR 167 million, representing a nearly 39% increase compared with the same period last year. For this significant improvement contributed the nearly 65% reduction in charge associated with the Swiss franc mortgage loan portfolio, which stood at EUR 96.7 million in the first half. The CHF mortgage portfolio continues to run off rapidly, having declined by 47% year-on-year, while accumulated provisions for CHF mortgage risk now represents 173% of the remaining portfolio. While recent developments regarding FX-related litigations have been positive, some uncertainty remains in the broader banking operating environment. Bank Millennium demonstrated a strong commercial momentum with corporate lending growing by nearly 32% and customer funds expanding by approximately 70%, carrying out key priorities of our strategic plan for this market. In Mozambique, although Millennium profitability continues to be impacted by provisions associated with sovereign risks, the underlying business performance remained positive. The adjusted net income reached EUR 48 million, an increase of over 18% compared with the same period of previous year. Customer funds grew by over 10% and lending expanded by nearly 12%, confirming the franchise strength and its positioning to benefit from the natural gas projects. The bank maintains a robust position with a capital ratio above 40%. The quality of our relationship banking model is evident across all our core markets. On a consolidated basis, customer loans increased by 8.3% year-on-year to EUR 65.2 billion, while total customer funds grew by 9.8% to EUR 116.7 billion. In Portugal, loans grew by 8.6% and customer funds by 7.2%, reflecting the trust that families and business continue to place in Millennium. We continue to operate with a very strong capital ratios. Our common equity Tier 1 stands at 15.1% and total capital ratio at 19.3%, comfortably above regulatory requirements and including just 10% of the first half net income according to the current distribution policy. At the same time, balance sheet quality continued to improve with nonperforming exposures declined by EUR 187 million and the NPE ratio falling to 2.2%. The cost of risk remained well contained at 32 basis points, both at the group level and in Portugal. Turning to our customer base. It continues to expand, underpinned by the quality of our teams and our distinctive digital capabilities. At group level, active customers grew by 4% over the last 12 months, reaching 7.4 million, of which over 2.9 million in Portugal. Mobile customers continue to grow at 8% per year, now accounting for 75% of the group's total customer base and 67% in Portugal. These figures confirm that the customers are increasingly choosing Millennium as their preferred bank, and our service continue to be recognized with several important distinctions, including the Consumer Choice Award for the sixth consecutive year and the recognition of the new corporate website as Product of the Year 2026. Moving on to our mobile platform. It continues to deliver a complete and innovative value proposition with superior user experience, and this is clearly reflected in a consolidated upward trend in both interaction and sales. In the first half, the Millennial app recorded 1.7 million log-ins per day, an 8% increase year-on-year with customers accessing the app an average -- in average of 34x per month. Sales through the app grew 8%, highlighted by a 32% increase in credit card sales and a 23% rise in personal loans origination. Transactions increased by 9% with international transfers growing by a remarkable 68%. Our digital penetration rates remain at industry-leading levels. In Portugal, 95% of stock market transactions, 90% of savings products and 76% of both investment funds subscriptions and personal loans are now conducted through digital channels. In mortgage lending, we continue to redesign and digitize the entire end-to-end process with 89% of approval letters already signed digitally, 66% of proposals submitted through digital channels and 36% of these appointments booked digitally. Interactions with customers through BCP Group's digital channels allow us to compete on an equal footing with neo banks with the advantage of having a physical network of proximity, which allow us to know much better the communities we serve and having a human face available when the clients need. This symbiotic relationship between technology and physical presence, which gives trust to the clients in an unpredictable and complex world doesn't condition the high operational efficiency that we present quarter after quarter. In a challenging environment, we once again delivered a very robust set of results. This performance demonstrates not only the quality of the direction set out in our strategic plan, but also our strong execution capabilities across business performance, operational efficiency, risk management and disciplined capital management, attributes that the market has increasingly come to recognize in BCP. We remain confident in the strength of the value proposition we offer to our customers and in our ability to continue enhancing it through technology with a particular focus on artificial intelligence. This will allow us to further improve our offering and the quality of the service we provide while also reinforcing operational efficiency and risk management. Miguel the floor is yours.

Thank you very much. Here in a scientific view of our income statement, the more detailed view you can see in the annexes, including as per requested by some of you, a quarter-by-quarter evolution. You can see this in the annex. What you see is a very healthy pattern of growth in terms of the main items of our income statement. The net interest income growing in spite of the fact that in Poland, the interest rate came down, the reference interest rate came down by almost 2%. So we were able to maintain the NII in Poland broadly stable with a very important growth of 11% or more than 11% of the NII in Portugal, which is attributed to our consistency in commercial dynamics and pricing discipline. Commissions growing 6%, which is also a very healthy growth in the present context, mainly taking into consideration the competition of neobanks. Operating costs growing mid-single digit as commented before and core operating profit because of growing 3%. I would like here to highlight the positive evolution and the consistency in these dynamics. The profit before impairment and provisions because of some one-offs linked to recoveries grows slightly more around 6%. And when we convert to the profit before income tax, we benefit from the important reduction of the Swiss franc charges of more than 60%. We have guided to a value that would be this year, in any case, more than 50%, and we are overachieving this target with a value of more than 60%, which means that at the end of the day, our net income has grown almost 13%. But I would like to comment the consistency of these key metrics that are very much linked to shareholder value creation. So our book value per share and dividend per share growing year-on-year almost 20%, and our RoTE and earnings per share growing almost 15%. Going forward, we see these dynamics continuing, and we see some consistency in these values at least until the end of the year. Our view is that the value by year-end most probably will be above these values in terms of RoTE and earnings per share, except if something extraordinary happens in geopolitical terms. In terms of group profitability, we see here in terms of NII, the main item of the income statement, as you know, the growth of 11% with a growth of the net interest margin and international operations, the possibility of the resilience of the net interest margin in the context of strong reduction of interest rates. Here, I would make a strong tribute here to our commercial dynamics and volume growth. So we are growing, and this is very important. We are growing more than what we had envisaged before. We see that in terms of customer funds, we are growing in Poland, as you will see, more than 17 -- around 17%, 17%. In Portugal, around 7%, which is also a very important growth rate for Portugal. And in credit, both in Portugal and in Poland, growing credit book around 9%, 9% in Portugal, 9% in Poland with a different composition. In Poland, due to our strategy, basically growing more than 30% in terms of corporate and SME, 32% corporate and SME. And in Portugal, more based on the corporate growth more than 10%, around 11%. So Portugal, more mortgages, around 11%. Poland, more corporates as per our strategy around 32%. And this growth, together with the evolution of interest rates is what explains the evolution of -- and together, of course, with pricing discipline is what explains the evolution of our NII. Going forward, the guidance that we have given for Portugal was in the beginning of the year, we're expecting mid-single-digit growth. In our last conference call, we raised this outlook to high single-digit growth. At this moment, we think we feel comfortable with a low teens growth aligned with what we are saying here in terms of the first -- the second quarter of this year. Fees and commissions also very resilient, growing around 6% in consolidated terms, of which 5% in Portugal and 8.3% international operations. There is some compensation here, of course, between the margin of the savings and the fees on the investments. Of course, when the markets are more volatile and when the retail investors, I would say, less bullish, they tend to invest less in funds and preferred deposits. The reverse happens in other situations. Right now, of course, one part, we are benefiting more in terms of deposits, but still growing around 5% in Portugal, aligned with what we said before of growth of fees and commissions between mid-single digit and high single digit. We are closer to the mid-single digit here for the reasons I just explained. In terms of other operating income, we had some extraordinaries this year in Portugal that we explained in the last results presentation linked to assets received in the context of credit recoveries that we have sold realizing capital gains, the remaining relatively stable. Some growth in terms of mandatory contributions because, as you may recall, last year, we benefited in some quarters of a recovery of a previously paid contribution that the courts have reversed. Operating costs, we are investing. We are investing in AI. We are investing in cyber. We are investing in requalifications. And in the context of these investments, we have been able to grow only 5.4%. As I commented before, our guideline here is to try to maintain a top level cost-to-income ratio, trying to be one of the most efficient banks -- retail banks in Europe with our business model. And within this context, we have been able to maintain this cost to income of 37% and at the same time, continue to invest, which is also attribute to the prudence of our strategy. Cost of risk stable. We are not seeing any -- yet any relevant signs of the geopolitical turbulence creating credit issues for our corporate and for our retail clients. Up to now, of course, we cannot be complacent. But this is basically what explains this low cost of risk. Of course, I mean, the future is uncertain. We -- I mean, every week, we hear a different piece of news of what may go on in Hormuz, in Ukraine and so on. So we cannot guarantee that we will maintain this cost of risk forever. But as far as we see it right now, we are not seeing any additional early warning signals that would lead us to review our guidance in terms of cost of risk. And this, of course, is linked to the reduction in terms of NPEs. In spite of the fact that we already have a low level of NPEs, the normal NPE loan ratio on loans is already at 1.6% in Portugal. So it reduced furthermore from 2% to 1.6%. And the NPE ratio as calculated by the EBA with securities and with off-balance sheet items is already at 1.3%. In the international operations, this is slightly higher, but also in reduction mode. I would highlight here that in Poland, as you know, our business model has much less corporates and has much more consumer loans that typically have a higher NPE loan ratio. Business activity, this is the piece of good news that I had anticipated or the growth of around 10% in terms of customer funds. And I would highlight here the growth in the international operations of 15%, of which around 17% in Poland. Also a consequence of the strength of our franchise and of the fact that we have a really differentiated quality service proposal to our customers. The loan portfolio also growing in a healthy way. In spite of the reduction of the NPEs, we have grown the total loan portfolio 8.3% in a very balanced way between Portugal and the international operations, both of them around 8%. In terms of capital, the capital ratio decreasing for next year because, of course, we have distributed dividends, as you know, but stable vis-a-vis last quarter. And as you see here in Page 22, we were able to generate before dividends, dividend accruals and share buyback accruals. As you know, we are accruing a 90% payout, including dividends and share buyback. So this means that before this 90% payout, we have been able to to improve -- to generate 55 basis points of capital per quarter. As you may remind, what I have commented in the last session is that the normal organic capital generation before distributions should be around between 55 and 60 depending on the growth. In this case, we have been growing more so for a good -- mainly in Poland. We also have grown in terms of credit in Portugal, but most of the growth in Portugal came either from guaranteed loans, mortgages, as you know, or from loans and commercial paper that had already committed lines. So they did not increase materially the RWA. MREL position, very, very comfortable. We are in the process of executing our plan. As you know, we have issued EUR 500 million of senior preferred in February and another EUR 500 million of Tier 2 in June. So clearly aligned with our plan and comfortably above the minimum ratio. Pension funds, I would say, a very cautious ILM management considering the liabilities that are typically fixed rate because this is -- our liabilities are basically the pensions that vary with the salaries and which present value also varies with the long-term interest rates, so around the 12-year interest rate. So we were able to deliver a 4.2% profitability that compensates part of the liabilities decrease. So that this means that our excess between the pension fund and the pension liability even increased vis-a-vis June of last year at a level of EUR 300 million. I would highlight here that this excess is like a capital buffer. So it is what would have to be consumed before any type of impact on capital would occur. Liquidity, very, very strong liquidity position, and this is important. We would like even to have a slightly weaker liquidity position because this means that we will be growing more in terms of credit. So -- and we are expecting, so to say, to allocate a part of this liquidity to genuine customer business so as to normalize somehow this liquidity position. But in any case, this liquidity position is what enables us to be more comfortable in terms of paying term deposit rates. So because we don't need funding, we can afford mainly in terms of these term deposits that are less franchise driven, both in Poland and in Portugal, we are able to deliver a higher margin of deposits. I will pass the floor here to Bernardo, who will focus only on some of the slides.

Okay. Thanks, Miguel, and good afternoon, ladies and gentlemen. As I did on the last earnings presentation, I'll briefly go through some of the slides for each geography, and I will not follow the full presentation as you already have seen it. So starting on Page 27. Portugal delivered a strong set of results in the first half of 2026. Net income increased by almost 11% year-on-year to EUR 470 million supported by 11.5% increase in net operating revenues, which reached almost EUR 1.1 billion and revenue growth continued to outpace the cost growth with operating costs increasing by a moderate 5%, reflecting ongoing investments while maintaining cost discipline. Impairments and other provisions rose EUR 100 million, mainly driven by a prudent risk management approach. Overall, in this slide, as you can see, the business continued to generate robust profitability and positive operating leverage in Portugal. On Page 28, net interest income increased by 11.3% year-on-year or if you want, more than EUR 74 million, reaching EUR 733 million in the first half of 2026 despite the low interest rate environment. Growth was mainly driven by the positive contribution from higher loan volumes, which more than offset the negative impact of lower market rates. Additional support came from improved deposit pricing dynamics and lower wholesale funding costs. It is also important to highlight, as we did in the previous quarters that this is the seventh quarter with consecutive increase on NII in Portugal. So having said that, the bank maintained a resilient net interest margin, which improved from 2.12% in the first half of '25 to 2.22% in the first half of '26, reflecting the strength of its commercial franchise and balance sheet management. Moving to Page 29. Fees and commissions continued to show a solid performance, increasing by 5% year-on-year to EUR 322 million. Growth was broad-based across the main business lines, but more significant variations were recorded in bancassurance, asset management and securities operations. It is also important to highlight the growth on commissions related with loans and guarantees, reflecting the sustained customer activity and the strength of the bank's diversified franchise. Market-related fees increased by almost 11%, supported by higher investment product activity and assets under management. Net trading income increased from EUR 7 million in the first half of '25 to EUR 41 million in the first half of '26, and this was mainly driven by gains from the disposal of legacy assets stemming from the recovery of nonperforming loans in the first quarter of this year. Other operating income moved from minus EUR 21.6 million to minus EUR 38.3 million, driven primarily by mandatory contributions, which in the first half of '25 have benefit from the partial reversal of the solidarity surcharge and additionally by some effects related to earn-out that occurred in 2025. Going to Page 30. Operating costs increased by 5.4% year-on-year to EUR 361 million, reflecting continued investment in the business while maintaining a strong focus on efficiency. The increase was mainly driven by higher admin costs and depreciation as staff costs registered an increase of around 2%. Despite this cost growth, as I said before, revenue expansion outpaced expenses, allowing the cost-to-income ratio to stay at 33% at the end of the first half '26. At the same time, the bank continued to streamline and to modernize its distribution network. Number of employees decreased slightly and are currently below 6,000 and branches also showed a small decrease from the first half of last year. These actions contributed to efficiency gains while preserving the bank's strong commercial presence in service capabilities across Portugal. And as I said now, if you want, we will -- if you don't mind, let's keep some slides and move straight to Page 34, which shows volumes in Portugal. So on this Page 34, regarding volumes, the bank continued to deliver strong commercial momentum in Portugal with both customer funds and lending recording solid growth. Total customer funds increased by 7.2% year-on-year to EUR 77.5 billion, meaning EUR 5 billion more -- meaning an increase of EUR 5 billion year-on-year. This was supported by growth across all major categories in terms of customer funds, including demand deposits, term deposits and off-balance sheet products. This performance reflects customers' confidence in the bank and sustained success in attracting savings and investments. At the same time, gross loans grew by 8.6%, representing more EUR 3.5 billion year-on-year, driven by strong activity in both the corporate and individual segments. Mortgage lending increased by 10.8%, while corporate lending recorded a healthy growth of 5.4%. All in all, the expansion of both deposits and loans highlight the strength of the bank's franchise and its ability to support customers while delivering sustainable balance sheet growth. Let's move now to Page 37. And here, this slide shows the contribution from international operations, and it's important to highlight their important contribution to the group's results. with earnings attributable to the group increased by more than 22% to EUR 95.6 million in the first half of '26, and this is after deducting minorities. This performance was mainly driven by Bank Millennium in Poland, whose contribution rose by almost 39% to EUR 170 million, reflecting the resilience of its business model in a more challenged interest rate environment. The result of Mozambique subsidiary remains conditioned by the financial situation of the country. As a result -- and now if you don't mind, as results of Bank Millennium were already widely known, I will skip also some slides related with Bank Millennium, and I'll propose to go straight to Slide #41. And in the year, on Page 41, regarding volumes, Bank Millennium continued to deliver strong commercial growth with both customer funds and lending expanding significantly during the period. Customer funds increased by 16.8% year-on-year, representing an increase of more than EUR 5 billion in just 1 year. This performance reflects the bank's ability to attract new customers and deepen existing relationships with competitive market environment. Gross loans to customers grew by 8.8%, which represents a growth of more than EUR 1.5 billion. Growth was particularly strong in the corporate segment, where lending increased by almost 32%, while the mortgage portfolio remained stable and continue to represent the large share of total loans. Overall, the continued expansion of both deposits and lending demonstrates the strength of Bank Millennium's franchise and supports its sustainable growth and profitability perspective. On Page 42, regarding FX mortgage portfolio, Bank Millennium continued to make a significant progress in reducing its legacy CHF mortgage exposure. The mortgage portfolio decreased by 47% year-on-year, reaching just EUR 700 million at the end of June '26 and representing only 0.6% of the gross loan portfolio after legal risk provisions. This reflects the combined effect of settlements, court resolutions and the natural amortization of the portfolio. At the same time, legal risk coverage continued to strengthen with cumulative provisions reaching 173% of the outstanding CHF mortgage portfolio. The number of individual lawsuits declined by 38% year-on-year, while new inflows of litigation continued to trend lower. As a result, CHF-related costs fell sharply by 65% from EUR 275 million in the first half of '25 to just EUR 97 million in the first half of '26. In conclusion, these trends demonstrate the substantial derisking of the CHF mortgage portfolio and its progressively lower impact on bank's earnings -- on Bank Millennium earnings. Turning to Page 43 about BI in Mozambique. Profitability remained affected by the challenging operating environment. But if you adjust the net income, I mean, it increased almost 20% year-on-year, demonstrating the underlying resilience of the business. Net operating revenues grew by 4.5%, while operating costs remained broadly stable. Asset quality remains robust with the NPE ratio at 5% and capital above 40%. I will conclude here my presentation. And before we move to Q&A, I will hand the floor to Mr. Miguel Braganca for some final comments about the evolution of the strategic plan on Page 28.

As you know, we are -- in every quarter, we present exactly what is our evolution vis-a-vis the targets that we have presented to the market around 1.5 years ago. As you see, we are clearly progressing very well towards the targets. We are clearly overachieving the targets. And as you -- as I commented and I have been commenting also in the last in the last sessions. The guidance that we are giving both today and in the last session already leads us to believe that except if something extraordinary happens, we will clearly overachieve the target that we have presented to the target -- to the market in '28 with the consequences that we expect in terms of shareholder value creation. Thank you very much. We'll open the floor to questions.

[Operator Instructions] The first question comes from the line of Ignacio Ulargui from BNP Paribas.

I have 2 questions. The first one is on lending growth. There has been a bit of a slowdown in lending growth in the quarter. I just was wondering, Miguel, when you upgrade the guidance for NII in Portugal to double digit, I assume it's largely driven by margins, but how should we think about loan growth and loan demand in Portugal and which segments are you seeing best for growth? The second one is about capital and capital generation. How should we think about it in the coming quarters? You were pointing in 1Q that there will be some measures taken in the second half to try to improve RWA optimization so that you get a bit of closer to the 90% payout ratio. I just wanted to get a bit of your thoughts on how should we think about the payout and whether you think that 90% is at risk or not? And how should we think about the organic capital generation?

Ignacio, thank you very much for your questions. Lending growth in Portugal and in Poland. In Poland, we feel comfortable with the maintenance of this type of lending growth, probably looking forward, probably a little bit less in corporate that was really extraordinary, 30% year-on-year extraordinary and a little bit more on mortgages. On the other hand, in Portugal, what we expect also is probably the lending growth in mortgages to decelerate somewhat because 11% is also very high. So we expect it to decelerate somewhat. But it is possible that the corporate and SME growth also picks up a little bit. In any case, when I speak about low teens or low double digit, low teens, low double-digit NII growth. It is not very sensitive because in the last 6 months of the year, as you might expect, it will not change a lot my guidance. So when I speak about low teens, growing 1% more or 1% less when we are speaking only about 6 months and the average balance that is generated, this does not influence the guidance of -- that I'm giving of low teens, by the way, for '26. And in principle, if the interest rate behaves according to the forward rates also for '27. So we are also expecting a low teens growth in this moment in this scenario of interest rates also for '27. In terms of capital generation, -- our main objective is shareholder value creation. Our -- and we think that to achieve the shareholder value creation, we have to generate value, generate value through customer business, and we have to be disciplined on capital. But the discipline on capital is not an objective per se. Of course, it is important to be disciplined on capital. What I want to say is the payout is not an objective per se. The payout is only relevant to the extent that it reflects a discipline in terms of capital and it is associated to shareholder value creation, okay? So when we say that -- and when we have presented our distribution strategy, we were very clear on that, presenting a table where the share buyback would be a function of the ratio before distributions. So if we increase our RWAs with genuine customer business that creates shareholder value and because we are allocating capital to genuine customer value that generates value for our shareholders and so on. And because of this, we need capital, we -- I mean, this has a consequence in terms of shareholder distribution. On the other hand, if we do not need the capital, the objective of the distribution, we have presented a ratio that somehow commits us to distribute this additional capital. So this is the logic. So the 90% is not an objective per se. Our objective is to create value for customers and shareholders. I think this is important. Having said that, in terms of evolution of our RWA, as I commented in terms of our organic path, what we are expecting is around 55 to 60 basis points per quarter. This is the organic part. In terms of inorganic part, I was commenting that we were working on some securitizations that probably we will try to close in this quarter, but the impact in terms of ratio will only occur next quarter because they are subject to authorizations and so on that we are expecting something in the order of magnitude of around 20 basis points. If you do the numbers, you will see that we are really very close depending on the evolution of our credit portfolio, we are very close to the 90 or to the 80. We are more or less on the tipping point. So it is very difficult for me to commit at this point to say whether it will be 90 or 80. What I can tell you is if there are genuine and value-enhancing opportunities, to grow our portfolio in our business areas. We will not restrain ourselves from doing so just to distribute 90% instead of 80%. So the 90% already is a consequence of our strategy. It is not an objective per se, okay? But at this point in time, having said it, at this point in time, it will depend. It will depend. We will do our most to generate value. We will do our most to be close to our customers and to grow a healthy credit portfolio. And then the consequence -- the output will be the output.

The next question today comes from Alvaro Fernandez of UBS.

I have one and also one follow-up. So first, on the low teens NII growth for '27, what interest rate assumptions are embedded in that guidance? And also related to this, do you still expect a flat NII in Poland in '26 and what to expect in '27? And second, loans in Portugal are growing at 9%, so above the market. The industry is growing at 8%. But deposits are growing below 5% versus the industry at 7%. So what's driving the gap? What's your strategy here? What would trigger you start becoming basically more competitive on the deposit front?

Okay. In terms of our -- we make our projections and we give our guidance based on the latest market implicit forward rates. So what I'm saying is based on our latest projections and our latest projections are based on the market implicit forward rates. If you do the calculations, you will get exactly what is the assumption behind it. Having said that, we are not too sensitive. So our NII is not too sensitive to interest rate movements. Of course, if we have a 200 basis point movement and it happens in Poland, it is relevant. But the 25 basis points movement is not so relevant. As I commented, typically in Portugal and in Poland, the sensitivity of our NII to a 1% change in interest rates is typically between 2% and 3% of the NII. So it is a low sensitivity and the 1% change in market interest rates is a lot. So a 25 basis point change, you can do the numbers. We will have a 50 basis points impact in terms of evolution of the NII. So we run a very, very conservative balance sheet from an interest rate perspective. So having said that, we feel quite comfortable with this low teens, except, of course, if we enter in a broad recession in Europe and if interest rate goes down 1%, of course, this will have the impact of around 2% less of NII. Of course, this is strong. But this is not our scenario, and this is not the scenario that is implicit in the market. In terms of the evolution of deposits and the evolution of credit in Portugal and so on. So we are in such a situation in Portugal of excess deposits over credit that really -- I'm not envisaging any scenario in the next 2 or 3 years that will drive us to pay more because of necessity in terms of balance sheet. So this is not the logic. So it is not because -- and more so, if you take a look at the total customer funds, the total customer funds are growing very much aligned with the loans. And one of the reasons is that on the margin, I would say, the most -- some of the most rate-sensitive customers are investing probably a little bit more in money market funds or in bond funds so that the total customer funds are more or less aligned. And we are, I would say, so comfortable from a liquidity standpoint that this will not be the trigger. Of course, our trigger is really to be -- to have a good offer to our clients to make sure that we serve our clients, of course, in a segmented way, being comfortable that we are -- what we offer to our clients our best-in-class offers, our best-in-class products, making sure that we also differentiate between, of course, private banking clients and mass market clients and so on because this is part of our business. But this is the key issue. So if you ask me what could trigger us paying more is much more the market dynamics as a whole. And if somehow the market dynamics change, then we needing funding because of the dynamics of the gap. So yes. What is good news for us is that if the market starts paying much more, we will have to start paying much more. It is nice. We are in a competitive market.

The next question today comes from Maksym Mishyn from JB Capital.

Two from me, please. One on the fee revenues. I was just wondering if you could update us on the guidance for Portugal now that we leave the second quarter behind. And the other question is on other provisions. This line has increased compared to last year. I remember that 2025 was abnormally good. Should we assume EUR 13 million a new run rate? And also, what is the rationale to keep increasing NPE coverage given it is above 100% already?

Okay. Okay. In terms of fee coverage, I mean, as I commented and as you've seen, a large part of our fee comes from asset management products or investment products, including unit-linked and bancassurance products and so on. And these products are substituted to some extent mainly on the low-risk part of the products are substituted to some extent for deposits, so to say. And the evolution is also, to some extent, also linked to the degree of risk appetite of the retail business, so to say. So if the markets become much more bullish, people -- the retail market will tend to invest more in equity funds. As you know well, it's also your business to some extent. If the market become more conservative, they tend to invest more in deposits. So that's the way. On the other hand, what we all see is that the business model of banks is also being challenged, I would say, by low fee providers in the market. So we cannot -- I mean, there are risks to the franchise. If we increase prices, we start giving genuine value to our customers. So that we have to be very careful in terms of having a strategy where we really offer genuine value for our customers. Taking all of this into consideration, the guidance that I gave was a mid- to high single digit, okay, with a lower guidance in terms of NII. I think that also the guidance that I would like to maintain is the same mid- to high single digit, but it's an interval. If you ask me right now, probably we will overachieve more in terms of NII. And in terms of fees, we will be closer to the mid-single digit. But of course, it will depend on the market movement and on the risk appetite of the clients. In terms of the other provisions, the other provisions are a little bit like trading gains. The other provisions have a degree of volatility on a quarter-over-quarter basis that are difficult to anticipate. Another provision may be a provision for a litigation or a provision for a tax issue. So to say, there are a lot of small events that contribute to this. So it is difficult in the same way that I cannot, I mean, give you some type of comfort in terms of the evolution of trading gains. For me, it's difficult to give you a fixed value that will be always the same on a quarter-by-quarter basis. However, expecting these values between EUR 10 million and EUR 15 million per quarter on average, but with some volatility as the trading gains is reasonable. If you take a look at what happened in the past is something that's reasonable. In terms of the impairment models, I mean, the impairment models, we are having some overlays in our impairment models because of the situation that we are seeing in geopolitical terms. So we do think that right now, the environment is uncertain. And as long as we are with this cost of risk in Portugal, slightly above 30 basis points, we don't see, I would say, we think it's prudent to maintain a degree of overlays because in spite of the fact that we are not seeing any early warning signal, any relevant early warning signals linked to the geopolitical risk, I mean, we cannot be complacent. So for the moment, we think that it is not necessarily in the best interest of the bank and of its shareholders to go below this low 30s cost of risk. If then they prove, if after all rules is solved and if after -- I mean, the tragedy in your country is solved, we come to the conclusion that they are not necessary. Of course, they will not be necessary, and we will revert them.

Our next question comes from the line of Sofie Peterzens from Goldman Sachs.

This is Sofie from Goldman Sachs. So one follow-up question on capital. Could you also just remind me if you have any capital tail or headwinds that we should be mindful of going forward? And also what the sensitivity is to a change in the pension discount rate? And then I was also wondering, there have been some press articles around Fosun potentially considering selling the stake in BCP. How do you think about kind of M&A opportunities? And kind of what would it potentially mean for BCP if Fosun was to sell the stake? And then maybe just a final one on Mozambique provisions, how should we think about this going forward?

Thank you very much, Sofie. I will start probably with the latest question regarding Mozambique. Mozambique is one of the countries in the world with the largest gas reserves. As we all know, the gas does not need to flow through the Red Sea or through Hormuz. It's becoming more and more important in geopolitical terms. There have been many new announcements in the country. It's a large country, both in terms of geography and in terms of population. So we are structurally bullish in terms of the country. I think this is the first point that I would like to highlight. The country due to issues that we know faced some social unrest around 2 years ago. This social unrest is broadly solved, but it left issues to be addressed in terms of government debt and in terms of public finances stress. okay? So this means that we have to reclassify the debt in Stage 2. We only hold domestic debt. But we also think that also from a prudency standpoint, what makes sense for us is last year and this year to have a net income that is close to breakeven, so slightly positive. But we think it makes sense for us in spite of the fact that we do not hold any foreign denominated debt. We think it makes sense for us in spite of the fact that at the end of the day, probably the local government debt will not face a difficulty in being paid because, I mean, the Central Bank is local. They have their own currency. We think it is in the interest of the bank to keep the funds there and to have a prudent approach to provisioning. And so last year and this year, we are close to breakeven. Looking at next year '27, we don't think that it will be already the steady state, but it will be a progress towards the steady state. And what we would expect is '28 to be very close to a steady state. So that's the way. So we will provide this year something to maintain the bank slightly above breakeven as we are seeing here. Next year will be a progression towards a steady state and '28, we think, in principle, will be the steady state, of course, with all the uncertainty that we are living in the world right now with all the caveats that we have to say there. In terms of Fosun. I mean, we are in the market. Fosun behaves a lot like a professional institutional investor as some of your clients also behave. The relationship that we have with Fosun is a relationship where we speak about financial issues, where we speak about ROE, where we speak about shareholder value creation, much in the same way as the way we speak with other investors. I mean we know that they are satisfied with their investment in BCP. We know that also that there are -- they don't hold a controlling stake. So it's not an M&A issue. They hold a 20% stake. So we know also that there would be other investors, fortunately, because of the story that we -- of the equity story that we have some institutional investors that probably would be available also to invest in BCP. We see a lot of interest in BCP Securities. So we see that Fosun continues to be interested in BCP. We see that they are satisfied with the invest in BCP. However, our job is to generate shareholder value and to make sure that we are an attractive equity story for everybody. And if for whatever reason for their idiosyncratic reasons, if they want to invest elsewhere instead of BCP, we have to make sure that we deliver value and we are an attractive equity story for other investors that we think are available, by the way. So we don't see this as an M&A catalyst. In terms of the sensitivity to the discount rate. So if the discount rate goes down by 25 basis points, this is more or less linear, the impact on the liabilities of the pension fund is around EUR 86 million, okay? And the reverse occurs if it goes up. But I would like to highlight that we have an excess of around EUR 300 million. So the first EUR 300 million do not have any impact in terms of capital. So broadly speaking, I mean, the interest rate would have to go down by around 1%. I'm only speaking about the discount rate, there is some ILM on that -- would have to go down by around 1% for it to start to have an impact in terms of capital, okay? Because the first part is basically a consumption of the excess between the assets that are already in the pension fund and the liabilities of the pension fund. So the first 1% do not have any impact. After the first 1%, the impact on capital is broadly EUR 86 million for its 25 basis points. I mean, broadly speaking, and assuming that this is not compensated by the portfolio, which it is partly because we do some asset management and a large part of the evolution is compensated in the portfolio. So it's not -- I would say, it is not a material risk to our equity right now, I would say.

Our next question today comes from Miruna Chirea from Jefferies.

I had a follow-up on Portugal. If I'm looking at the year-on-year growth rate in your corporate loans in June versus March, this has slowed down going from 5.7% -- sorry, 5.7% in June versus 7.6% in March. Whereas at the system level, we haven't really seen a slowdown. So just wondering what's going on there? And then the second one was, I just wanted to have a clarification on Poland. Have you taken any provision this quarter related to consumer loans post the ECJ's ruling? And if so, what are your expectations for this type of provisions going forward?