CaixaBank, S.A. (CABK) Earnings Call Transcript & Summary

I think we can get started. Good morning, and welcome, everyone. Welcome to the Investor Day, and welcome to CaixaBank's presentation of the strategic plan for 2022-2024. So we are pleasured to see so many familiar faces, particularly after having been locked down for such a long time and social distancing. It's the first event of this nature that we hold in person. I would also like to extend this welcome to the members of the Management Committee of CaixaBank, who are here with us, and to the CEO of BPI, João Pedro Oliveira, who has joined us, as well as people who are watching this event live in streaming. Let me run through today's agenda. We prepared 2 presentations, one from the CEO, Gonzalo Gortázar; and another one from the CFO, Javier Pano, followed by a Q&A session, during which we will take questions from the room and also remotely via streaming. Note that we need to finish the event by 11:30, but we will also have the opportunity to chat outside with some light refreshments in the hall. And with that, let me hand over -- let me take to Gonzalo Gortázar, the CEO.

One day, I'll pronounce your surname in Spanish, "olokiyan." Anyhow, good morning, everybody, and thank you for your time. Thank you for being here. Special thanks to the Management Committee for joining us today. And I'll try to go immediately into the substance, with a few comments on where we are. Most of you know well where we are, but I think it's worth just having a brief summary before we get on to what we want to do, which is obviously the core of the presentation today. Where we are is we are clear leaders in retail banking in Spain through organic growth and integrations over the last decade. We've moved to a clear leadership position. You know well our market shares. We have also changed the weight of our businesses in the sense that capital allocated to noncore businesses has been reduced from 24% to 2% during this period, so we become much more of a pure play over the last decade. We have grown internationally with the integration of BPI. I have a few words later on, on BPI, but clearly, a very successful acquisition for the group. And then we have also changed dramatically the balance sheet. Remember what it used to be at the end of 2013. Our nonperforming loans have obviously gone down in a major way. We're now at 3.5%. We have reinforced capital, almost double the levels that we had a decade ago, and we have also reinforced further our liquidity levels, with over EUR 170 billion of liquid funds, which is obviously very significant. Beyond that, we have, over the last 6 quarters, really announced and then closed and then done most of the integration of Caixa. This is 95% of the employees that we had expected to leave have left the group, 95%. This is just over a year after closing the transaction. And we have also integrated 90% of the branch closures that we were planning to. So it's not finished, but we are almost there from that point of view. We have done it. It's always difficult, a large integration. We're very happy that we've done it, not only very fast but also reasonably well with minimal disruption. You can see how we have been growing our relational client base over the period. And I can say that our internal Net Promoter Score, our quality levels at the end of April, are again, not just at but above the levels that we had preintegration. So bank integration done. And then just final consideration on what we've done during these years where negative rates have been a big problem for retail banks. We've actually managed to increase the weight of fees and insurance income as a percentage of total revenue from 1/3 to 44%. So we have reengineered the business. And obviously, you're all familiar with the success of that part of our business, long-term savings, protection, but the reality is that our business is very different today than what it was 10 years ago. We're much better positioned. But at the same time, we still have the sensitivity to the interest rates and, hence, the value of our franchise, of our zero-cost deposits, which are obviously very significant. The value of that franchise is going to be really materialized, and we're going to make the most of it as we expect over the next years to regain positive rates. And we'll have the best of both worlds. All the reengineering we've done on -- of the business to offset that negative rates, together with the fact that now rates will not be negative. So we'll have, I think, tailwinds on both wings. So with that, I'll get into the priorities for this period, which is the main core of the presentation. We have selected 3 big priorities. The first one is growth. We want to see this business as a growth opportunity. We are used to look at the banking business in the last decade as a business that has to retrench, restructure and be more efficient. And yes, we want to be more efficient, but we want to grow the business. We think we are in a position to grow the business. Second is, obviously, we want to make sure that we provide the right customer service model to our clients. And we do that in an efficient way but also that we make sure we have happy clients with the way we serve them. And then finally, sustainability. We want to become -- or consolidate our position as a real benchmark, not just in Spain but in Europe. I'll make a few comments on 2 what we call here enablers that are critical for financial institutions, technology and obviously, people. So growth, growing the business. We have a leading financial supermarket. I would not extend myself on that because you know it well. And during 2022 to 2024, we think we can do 2 things. One is increase the penetration of our products in our customer base. Obviously, the integration of Bankia is a big opportunity for us. And second, we think we can improve the offering and take another leap in terms of the build-out of ecosystem. So ecosystem is a word that is much used. I like provide you with a few examples during the presentation on that front. So to start with, we talk about our customer experience. And we have -- over the last 4 years, this is more internal language, but I think it's appropriate to share it today like this, how we see the products and services we offer to clients. And we talk about retail. When we talk about retail, we look at 4 customer experiences. As you can see, pensar en el futuro or think of the future, where we group all our savings and retirement investment solutions, all the advisory business. The customer experience of dormir tranquilo, sleep soundly, it's our protection business. Disfrutar de la vida includes mostly our consumer and mortgage business, but all the solutions, so products and services that we have built around creating that real ecosystem, and then the day-to-day, which includes the basic transactionality and payment experience, which is so important for clients and, obviously, a key to get loyal clients that are operating with us on a daily basis. You have some statistics on the level of penetration we have on this customer experience along our customer base, very significant. Then we obviously have all the business we do with businesses and corporations, which I will discuss as well. So let's start with the first one, very well known, our very strong position in the long-term savings market, pensar en el futuro. What do we have here? First of all, very strong starting position. Scale, EUR 227 billion of AUM, with a very significant growth. You can see 10% organic growth over the last 7 years. Second, we have segmented our business. You can see on the right hand of this slide how many premier customers we have, 2.8 million, 200,000 private banking customers, 6,000 of them in the wealth business and a pure advisory model. So very significant segmentation. Scale and segmentation, absolutely critical. Third, we have a big focus on advisory. We have 30,000 of our employees certified in advisory, as you can see on the page. A good example of that is our market share in managed portfolios, where we're really offering the highest value add for this part of our clientele. Our market share there is 43%. It's a good indicator of how much we have emphasized advisory. We have a very broad product range, obviously, our own products including naturally long-term insurance solutions, which are very complementary with other investment products but, obviously, also have significant distribution of third-party products. We have launched and we'll continue to launch sustainability-related products and services. You can see how 35% of our mutual funds now are now Article 8 and 9, according to the Sustainable Finance Disclosure Regulation, even more so on the long term. So these are, I would say, the tools we have today, including, by the way, our largest roboadviser in Spain, which is growing fast for us and being very complementary to our overall product base. This is where we are. Now let's look at what the opportunity is. The opportunity, despite the fact that we're very large and we have exploited that opportunity to a large extent, is still you should look at long-term savings as a proportion of total household savings. We're at 29%, even lower than that in Portugal, obviously, well below the levels of the euro area. That's a macro sort of top-down consideration. Bottom up, look at the difference of proportion of clients that own a product between CaixaBank origin and Bankia origin, and you see the tremendous opportunity we have to make that convergence. And certainly, we are in the process of doing it. How are we going to do it? We're going to continue to focus and push discretionary management products with explicit charges or really putting in value our advisory capacities. Developing new products, I mentioned some of them, sustainability-related. We have a huge opportunity in the retirement market. I'll discuss that later on. We're going to keep growing our private bank in Luxembourg for the top end of -- or the private bank is offering good solutions as well and, as I mentioned, continue to developing digital automatic solutions like our roboadviser Smart Money. Over these 3 years, we expect to gain market share. We have put a target of 70 basis points of market share and, certainly, would like to not only meet that target but also exceed it if circumstances allow us to do. So that's the first one, long-term savings, pensar en el futuro. Second big customer experience is protection business, dormir tranquilo, where we include life-risk and nonlife. Again, where we are, if you look at the left-hand side, life-risk, we multiplied by 3 over the last 10 years, the gross premiums. Nonlife risk, we multiplied by 2, with market shares over 10% now. Success of MyBox has been critical in the last years. You can see how, in 2021, basically 2/3 of our new premiums were under the MyBox wrapper. Just a brief reminder, MyBox is a 3-year product with a flat monthly rate, which allows for a higher level of coverages and for bundling different nonlife or protection insurance product. It is allowing us to basically increase per capita sort of average premiums, and it's also allowing us to have a substantially higher retention rates, which is obviously a critical part of how you create value in an insurance business. So that's where we are, great success. Still great opportunity if you look at where we are with penetration versus the euro area. On the life-risk, it's particularly a cycle. We're still at half the level of the euro area. We're also well below the euro in nonlife. And again, same picture comparison of penetration for CaixaBank customers with Bankia customers is indicating that we have a lot of room to grow, and life-risk is almost double penetration we have for one category of clients. In health, it's actually 7x. In auto, it is 3x. Clearly, we have here a low-hanging fruit. Well, it may not be so low, but it is certainly reachable during the next 3 years. And Javier will discuss how we see those revenue synergies accruing in the next years. How do we do it? More MyBox is a tremendous success. More products for seniors and for business, we will extend our offering there. And as I said, the synergies -- revenue synergies with Bankia. We think we can achieve 9% of revenue growth in the protection business, which is obviously very significant as you compound it over 3 years. A brief note, as I said, on the protection -- sorry, on the senior ecosystem, mentioning long-term savings and protection, which are 2 experiences that we certainly offer to our senior business -- to our senior citizens, our senior clients. And the comment I would like to make here is this is a growth market. We have currently a 44% penetration of people that are over 60, 43% if we talk about over 70. These are customers that have their income coming into our accounts, 60% of them, as you can see. And actually, of a good level, 30% on average are premier customer. So this is a great client base. It's not a client base that is being reduced. It's quite the opposite. We have more and more people above 60 years every year. We have a great position. We are, by far, the leaders. And here, we're offering things that other people are not offering. When we look at our over EUR 30 billion of business we have in annuities on VAUL, which is Valor Activo Unit Linked. But again, it's a product for the seniors planning inheritance, succession, giving wealth protection, combining it with life protection as well. We have created a number of solutions for our seniors that include a bit more sort of work behind but actually solve client needs in a way that other people are not. And this business is not finishing, in my view. This business still has a lot to go in the next years, and we are in a great position. We will develop new products. We mentioned here retirement, care, what we call the [Foreign Language] in Spain. There are great opportunities. This also allows us to grow our revenues, but it also requires us to invest. We mentioned in the -- as we presented the first quarter results that we are going to invest EUR 50 million in measures related to supporting our senior clients. As you will see, when we discuss the plan, we find plenty of revenue opportunities, but we need to invest in to make sure that we materialize some of them. At this point, we are -- or we want to be benchmarked, the reference for our senior clients -- for senior clients in Spain as a bank to go. And it means that we want to give them the best customer service that we can. And that obviously implies some associated costs. Third experience, enjoy -- disfrutar de la vida or our lending -- retail lending business, comment on the mortgage side, MyHome ecosystem. This is working very well for us this year. You see in the center of the slide, how we have managed to double new production in the months of April and sort of April -- no, March and April. And actually, we're doing similar rates in May as well. And again, some of the products and services that we have, you can see on the left hand. This is a real ecosystem where we're not talking about the mortgage product but about house appliance, electronics, home insurance, alarms, solar panels, et cetera, et cetera. This is the way we look at our business. Increasingly, we cannot just offer a product but develop a solution, offer solution within an ecosystem. We expect to increase mortgage production by 50% in these 3 years versus the previous 3. And again, as you can see, from the first months of this year, we are on the right track. Consumer lending ecosystem is very notable. You can see here how we do direct financing, but we offer mobility-related products, what we've done in WIVAI, which I will get into some details. Our offering of buy now, pay later for our clients through MyCard, where we have already 7 million of our customers with MyCard, which basically serves as a multipurpose card debit, charge credits and, certainly, gives the opportunity for clients to decide to defer payments when they want during the process of acquisition of services and goods. We have a very good business with mobility, as I mentioned. We have been selling our 20,000 cars in what we call [Foreign Language] in Spanish, leasing, a good strategic agreement with Arval on that front. And over the last 5, 6 years, we call it a select place because rather than a marketplace, we are having a select portfolio of products, which, we think, combine the right characteristics to be offered to our clients. We expect to produce over 30% more during these 3 years than what we did over the last 3. Obviously, last 3 were affected by the pandemic. But certainly, even in today's environment, we think that there's a lot we can do. And you can see on the right how the trend started to move again upwards in March 2022 versus the fall after the pandemic. A few details on WIVAI, the select place WIVAI. We have it operating. Last year, we sold 0.5 million products through WIVAI. So this is not a plan. It's not a PowerPoint presentation. Only, it's a reality. We are planning to multiply that by 2.3 in the next 3 years to reach 1.2 million units sold. The EUR 110 million revenues that we had associated to this business in 2021 are, obviously, expected to grow accordingly. The business is going to move increasingly from sort of retail physical distribution to digital. Our expectation is that over 50% of sales will be digital in 2024. That's what we're working for. So scalability is obviously much more efficient from a cost point of view. We have the offering, electronics, home appliances, urban mobility protection, many others that we're thinking to add. We have a large customer base. We have a very good, and I will refer to that later on, very good analytics and data so we can understand well what is the propensity and the likelihood that certain clients are going to be interested in certain products. And hence, the business is, again, growing fastly -- growing fast. You see how over the last 6 years, it's been actually multiplied by 5, and we expect more or so. We will be investing in WIVAI, but we will be collecting revenues from that as discussed. And then finally, the fourth retail experience is what we call the día a día, the relational-based strategy, basic transactionality, account payment. Obviously, it's a key element for clients to be with us. Clients need to be satisfied on how they work on the day-to-day banking. Otherwise, they will certainly move away from us. We see how relational clients have been going up. And just to be brief, but this is the core of our business. I mean some data we have over 9 million of clients that have income with us, be it payroll or pension. Every day, we have over 5 million of payments with our cards and more than 4 million accesses to our digital platform. Clients are with us. They are operating. By the way, they are operating. This is going to have implications also when we look at what happens to the funds that they have with us when interest rates go up because they are operational funds in a big way and have no sensitivity to interest rates in a very large part. Moving on to businesses. That's a lot of information, apologies. But anyhow, it's a long presentation also to be using as a reference of what we want to do over -- and where we are and what we want to do over the next 3 years, no? On the business side, we have a tremendous track record because we are so often associated to a retail bank, our very large market share. Sometimes, we forget what we have achieved, and it's very impressive. You look at the last decade in terms of market share, moving from 9% to 24% with 7% organic growth in business lending without any meaningful accident. We've done that growing the portfolio, growing our clients but with a very low risk. We have specialized increasingly our offering, our customer service in verticals like food and drinks, pharma or feel-good, health-related matters. And we still have a big opportunity here. We have 60% penetration in Spain, but only 27% as the primary bank. And very importantly, we have a huge investment, 164 business centers throughout Spain, 164. Another 87 business store centers. Over 4,000 employees fully dedicated to serving our businesses, which obviously no one else has in Spain. And we're convinced that this is going to continue to bring very good results and growth for us. There are some other opportunities, you know them well, including next-generation EU funds for growing the business. And this is something where we think we're going to be doing very well in the next 3 years. A few words on CIB and also on our international strategy there. CIB has been a growth story. You can see there over the last 3 years, moving from EUR 19 billion to EUR 54.8 billion. Obviously, in the last year, the incorporation of Bankia has helped. But even if you are -- if you leave that aside, the basic decisions we took to reorganize and reinforce the business realigned our customer coverage through sector and product lines has yield fantastic results. We have also developed gradually, and we will continue to do so, gradually and prudently, our international banking investment. You see we are, as I mentioned, in a number of European countries, be it London, Paris. We're opening now in Milan a full branch, Frankfurt, Warsaw. Obviously, a big presence in Portugal. To grow this business again from 20 -- the EUR 7.7 million, we have to approximately double the international portfolio by the end of this 3-year period. What we are doing here is basically lend and work with investment-grade corporates that have a presence already in Spain through their subsidiaries where we have a great operating relationship already and where we obviously have a natural sort of a step-up in providing financial solutions to parent companies. So this process is not a process that is starting today. It's a process that started a few years ago, and it's been gradually gaining some traction. And today, I thought it was worth mentioning. Again, low risk, focus on no-accident asset quality is an absolute priority here. But we have already achieved over 10% return on tangible equity on this activity. And as we see the next few years, this will continue to have a slow but consistent growth. Slow in terms of the overall dimension of the group, obviously very relevant for the unit, which is doing extremely well. And to finalize this section, a few words on Portugal. We have João Pedro here. You can have the opportunity to speak to him after this event. I think BPI is in -- as you can see on the right-hand side, is in a virtuous circle. It's growing its businesses. It's growing clients, growing revenues, fees. NII, even more so, because it has a similar sensitivity than us on interest rates. And this is allowing BPI to invest more and invest more in actually gaining more and more market share. Over the last 5 years, it's been approximately 200 basis points of market share gains. In some parts of the business, even more. This is accelerating rather than slowing down and is a result of a fantastic team, a fantastic bank in Portugal and also a very significant investment effort that we made -- started to make 5 years ago, and that is continuing. Obviously, the evolution of the cost-income ratio speaks by itself. And as Javier will mention later on, in this 3-year period, we expect that BPI will completely converge towards the efficiency and profitability levels of the group. So a great story. Second area I wanted to address is the customer service model. And I'll try and not extend myself much, but we have clients that operate with us in different ways. I would start with omnichannel that basically operates with the relationship managers and actively use our digital channels. This is 29% of our customers. The next category is the people that we have served through inTouch, and this is the projection by the end of the year after we do a number of changes we're doing as a consequence of the integration of Bankia and CaixaBank. 22% people that actually are digital and interact with us through a remote adviser but do not normally go to the branches. When we have imagin, the mobile bank, mostly focused on young people with an offering that is actually financial and nonfinancial, where we already have 19% of our customer base, obviously, younger customer base. But you can see both inTouch and imagin our new sort of customer propositions that -- in terms of how we interact with them, that 5, 6 years ago, we didn't have, and they now account for 41% of our client base. Then we have our purely digital clients, and obviously, our pure physical clients and then some specialized services. When we look at all these interactions, these type of clients, we want to be making sure that we offer them sort of the best service through the channel they choose. And obviously, depending on their behavior, we are directing them towards one service model or another that suits them better. imagin, brief comments, 3.7 million in the community now, which 2.1 million are banking clients over 18 years old, 22 years average age. As I said, this is a financial and nonfinancial offering, including products and services outside the banking world, like leisure and entertainment, sustainability-related ones, and it's basically a lifestyle community, with a differentiation between what we call kids up to 12; teens, teenagers; and then the main imaginers. It's been growing very fast. You can see it on the page. Obviously, a lot of it has to do with us transferring these type of clients onto this customer service model. But it also been attracting clients, great customer satisfaction. And importantly, it aims to be the main bank of our clients. This is not the second bank you have to do some fancy things here, and there like some other new banks. It's the main bank. You see 50% of customers have their direct deposits of the recurring income within the bank. And obviously, digital onboarding is gaining traction. A few figures, 30% growth in users. Over the last 3 years, we expect 40% growth -- sorry, 30% growth -- not over the last few years -- 3 years, but for the next 3 years over the life of the plan and even higher growth of banking clients over 18 years old. This is going to be achieved, obviously, by continuously attracting clients and by increasing the product offering services that we have in imagin. You can see we have an active portfolio pipeline here with mortgages, Smart Money, some of the saving solutions that we offer in a simplified manner that we are rolling out during this year and more solutions that will be coming on 2023 and onwards. So I would say it's been a period of heavy investment into imagin, and it is coming of age now. And as we see the next 3 years, I think you're going to like what you see. One of the figures I have here is the gross income, which we expect to move from EUR 100 million to EUR 250 million, a 2.5 increase over 3 years. Obviously, there will be some impact here from interest rates because this customer base, again, has a very large deposit base with us. inTouch remote service for digital channels with a personalized relationship manager, it's, again, growing very fast. We have 2.4 million clients at the end of 2021, and this is going to almost double by 2024 to 4.6 million. Here, obviously, there is some transfer of clients as a result of the integration of Bankia, which is happening in 2022. That's why we have this very big jump between '21 and '22 here, scaling up the business, growing it and, obviously, focusing on the customer experience, the simplicity, the convenience. It's a very efficient model, as you see, our managers can handle 3x more customers. And besides that, business volume and gross income per customer are also higher. The retail branch network, we expect to have around 3,850 branches by year-end. This is post the integration. Importantly, 40% -- well, 39% of them are rural branches. So when you look at our branch [ network ], you have to -- and compare it to most of our listed peers, you have to take into account that we are competing in a market where they have a minimal presence and where branches are very important. That's why we have this differential number of branches on top of having, obviously, a very large market share. And this differential number of branches is not a problem. We want these branches. We like these branches. We make money in these branches in rural Spain, and we plan to make more. So again, we have basically concluded the big transformation of the branch network. We are not anticipating any other restructuring of the branch network that will be obviously the normal evolution business as usual. Importantly, obviously, when we look at branches also, the omnichannel customers, on average, are 3x as profitable as the customers that are not omnichannel. Store branches and our approach to urban centers or urban centers, yes, is known to you. We'll continue to grow the store format, so that in 2022, actually, we already have 50% of our business volume in the store branches, 835. It's allowing us to provide a specialization, extended opening hours, a better customer experience, a focus on advisory services and, I think worth mentioning, a very big reduction in low-value transactions. You can see how ATM and digital absorbed over 99% of the operational transactions at the store center. So basically, we are achieving what we wanted. And it's not just about increased productivity, which we obviously have, but also about quality. You see our NPS mark at 59% is actually well above the average of the bank. So we have really a model that is working very well. And it's close to completion. Again, we expect to have the store branches that we need by the end -- in both numbers by the end of the year. Rural network, I will not mention other than what I said. It's light in terms of people, average people. These network are 3 employees per branch. As you can see, actually, in many cases, we have 2 or 1 employees, almost half of these branches. And the business is a good business in terms of the customers that we have, the income, the premier banking part of that business, which is obviously more profitable. We plan to continue investing in the business. We want to maintain these branches. And actually, we are making good money, certainly, above the cost of capital and in line with the rest of the bank. A few words on digital. Our leading position, 43% of our clients -- no, not of our clients, sorry, that's over 70%. I'm saying 43% of digital clients in Spain bank with us. And we have -- yes, this is a core part of our business. We have made a lot of progress in terms of the functionalities, what can be done digitally and sort of third-party conducting and study and how we rank vis-à-vis European banks. We see -- we are 80% ahead in individuals, and SME, in terms of the number of functionalities, we're also 27% ahead. We have a strong digital capabilities, and we have, obviously, very importantly, scalability, no? The reality is that in November last year, we increased the number of operations or customers, et cetera, by 50%, and it worked seamlessly. Digital sales, you see on the right-hand side how they account for a very important part of certain customer experiences, and we will continue to invest on that. And quality is a key area of focus. We want to be the best retail bank in Spain. We want to be the largest retail bank in Spain but also the best. We need to make sure that we provide the best quality. We have reengineered the way we measure quality to what we call this near real-time NPS, which allows us to measure the satisfaction of clients immediately after providing them a service as they receive a message from us, and they basically answer a big simple question: would they recommend this bank to someone else, no? And obviously, when they do not recommend or they have an issue, it allows us to, that same day or the next day, immediately have the relationship manager calling on the client, trying to understand why he or she was not happy with us and how we can actually make him or her happy. This is changing the speed at which we can manage quality, which is in line with, let's say, other businesses, other sectors and something that is actually, I think, our competitive advantage in order to make sure we address quality as a key mission for the organization. And we've seen actually when I mentioned that NPS levels are above preintegration benchmarks is -- this tool is clearly, absolutely an essential one, no? To finish with the strategic priorities, ESG sustainability. I think we're well known because of our origin for our social commitment. Our leadership in microfinance is worth mentioning. We have the largest micro bank -- microfinance institution in Europe. We've been the largest bank in terms of issuance of ESG bonds in Europe. We've been carbon-neutral since 2018. I think we have a great position to build on that because this has been achieved not because someone told us that we had to do this because this is the right thing to do. This has been now because it's part of our DNA. Now we have to build on that, and we can. Looking at ESG considerations, we want to, on the environmental side, basic name of the game is to assist our customers in the energy transition. So we're going to be funding them and helping them in that transition, on social impact on financial inclusion, and we want to be also a sector benchmark in governance. On the environmental front, we expect to channel EUR 64 billion of sustainable funds over the next 3 years. We have many, many initiatives on this front, increasing our product offering to refer -- to include the appropriate range of ESG products, raising awareness, providing advisory to our clients, providing training internally, externally. We have, as I said, been carbon-neutral for now 4, 5 years, but looking at Scope 3. So looking mostly for us, in our case is the missions of our clients when we lend them money, we've been signatories of the net-zero carbon alliance and expect to provide some detailed decarbonization targets for the carbon-intensive sectors during this year towards the fourth quarter. On the social side, I mentioned what we're doing. In the interest of time, I will not get into the detail. And on governance, again, I think we have made a great, great progress over the last decade, and we feel very well and very good about what we are. We're going to have to continue to integrate ESG criteria to continue, obviously, focusing on transparency, accountability. All the reporting that we have to do on sustainability is a big effort for us, but we do want to be a benchmark and be at the top and at the front, looking at how the world is becoming much more sensitive to this consideration. Again, I think it plays to our strengths, and we certainly plan to keep making inroads on this front. Two final words before I move on to the financial targets, technology. I wanted to discuss or, at least, make a few points about technology. We all know it's extremely important. Many of us know that there's a lot of things we do not know about technology because it's a big technical complex world. I think, at least, I would say some things that I do understand and, I think, are easily understandable. We have a single core-banking platform in Spain. This is very important. We have the largest operation in Spain. It obviously needs the appropriate support from a technological point of view, having, after so many integration, just one core-banking platform is critical, provides us also with a very high functional coverage. It's 200 billion transactions a year that we do through our systems. And at peak time during an hour, we do 25,000 transactions per second during an hour. Every second, 25,000 transactions. This is not small. It's not easy to create a fintech with this kind of scalability. It works very well, and it was tested in a big way in November because we had to increase by 50% its capacity. And it happened without any noticeable disruption, no? So we feel very good about what we have, no? Now we need to evolve from where we are, but certainly, it's great to be in a very solid position from that point of view. Where do we want to evolve? I would say, first AI, analytics data at the core. We made a lot of progress in the first 3-year plan I presented back in 2015. We said we had a single data pool already, no? It was quite remarkable at the time. And in fact, we have been working on that now for 7 years. We made great progress in 3 big areas. One is commercial. Our approach to clients is completely different. We now very often know which clients are likely to want which products. And obviously, that is a huge advantage because we will spend much less time calling the wrong client on the wrong product, and we'll get to the right client at the right time. Over the last 3 years, it's over 184 million commercial impact. So this is not a small -- it's not a small thing. Our people in the sales network, our advisers, our relationship managers have the tools to understand who needs what. And obviously then, you put onto that the human touch, and that makes a big, big difference. Risk management. Our risk scoring models have been improved greatly over the last years, thanks to precisely what AI and machine learning can offer in terms of modeling. We have also improved how we manage the NPLs in the branch network by knowing which situations require action and which situations will resolve by themselves. And then the control areas, it's been a huge help. And it's, again, compliance, audit, monitoring or what is happening in the bank in terms of payments behavior through AI tool, makes a big difference. Having said these, been working for 6 years, I think we're only looking at the tip of the iceberg in terms of what we can achieve here. And this is, I would say, the #1 priority for the bank in terms of technology. We now have 1,500 people using informational systems in 35 functional areas across the bank. And obviously, this is growing, and we intend to keep it growing. Second big priority from an IT perspective is the cloud. Cloud absorption, we want to move from 21% to 32%. Beware of comparing this with other financial institutions because it is calculated in very different manners. We're just providing the one that we think, for us, is most useful. But we want to continue moving to the cloud, but at the same time and as I said before, we have actually, currently state-of-the-art IT that we want to keep -- we need to keep working asset. [ That's ] currently very well. So this is a long-term process but one where we need both the right speed of this journey but also just making sure that what we do, what we are on this journey continues to be absolutely top, no? The cloud is going to improve time to market, gives us more flexibility, gives us more capability to integrate with third parties, to adopt Software as a Service, where that is the right strategy. And it's also going to increase the computational capability of our AI models, particularly when incorporating sort of nonstructured information and others that require computational capabilities that go beyond what is reasonable to offer on-prem. So very important priority for the organization. And again, one where we will make a significant progress over the last -- sorry, over the next 3 years. And then people, just looking backwards, I'd say it's been a very significant change. I'll say a few things, specialized workforce. I discussed this last plan, 3 years ago, how important it was to continue to specialize people moving from generalist positions, where actually we're going to have increasing excess capacity, to specialized functions, basically almost double over the last 3 years in terms of sort of relationship managers, premier, business, private banking, CIB, inTouch, quite a lot of works that are perfectly prepared to face the future. Talent assessment has been critical for us during the integration. Everybody was assessed by an independent third party, and all difficult decisions that we needed to take at the time of the merger were taken on the basis of meritocracy. In fact, we reduced management levels from -- approximately by half. 48% of the merger -- structure is compared to the number of managers that we had if we added the 2 organizations, the number of managers we have today, it's 48%. So we've gone beyond what was the pure integration to rationalize and simplify our corporate structure. We've reduced the number of layers in that corporate management structure from 7 to 4. We have made significant inroads in terms of diversity, with women in management positions above 40%, much more to go but, clearly, in a very well -- a very good position at this stage. And we have made great efforts to more and more work as one-firm firm as they would say, with the right collaborative tools, agile models where appropriate, et cetera. Substantial change in the last 3 years, I have to say. More has to come. But this is not allowing me to go beyond now. [Technical Difficulty] Okay. Sorry for that. It's also -- probably, it's a signal that I am sort of being too long and boring today. So my apologies. It's quite a lot of content. I -- but it's a style of the house. We rather provide a lot of content. I haven't commented on all of it. But anyhow, I'm sure we will provide for discussions after this day, and we're at your disposal from that point of view. To finalize, people. What do we need to do? Obviously, is complete the final phases of the integration. We're almost there, but we're not there yet. What is relevant is to make sure that once that's done -- and for the majority of us, it's done. It's just make sure we focus on business, on our clients and growing the business. That's absolutely critical. No distraction. That's how we've always been, how we certainly are. Intensify upskilling and reskilling of clients. This process that I mentioned about, the specialization, is going to continue, and we want to help our people and help ourselves on that front and promote a close and motivational leadership. This is obviously very relevant, not just about the top management, but obviously, people these days need to be motivated in a different way than in the past. Fortunately, we have been making that evolution over the last years. But we need to continue always to focus on how we motivate people. It's -- everybody says that, but it's a reality, no? They are the secret of our success. So with that financial targets, just one page, refreshing. Just one page, and we're done. Well, no, then we have Javier. I know I am being a [Foreign Language] for Javier, but I don't know how to translate [Foreign Language], but for Q&A, maybe. Okay. Well, sort of -- these are our targets, profitability. Profitability, return on tangible equity above 12% in 2024, cost income below 48%. Expect revenues to grow at 7%, mostly aided by NII and as a result of growing revenues and costs that are going to be flat because of the synergies that we have to deliver and we will be delivering and will offset other initiatives. Hence, with that, revenue is growing 7% and cost being actually below 0. Then we get to plus 15% in preprovision profit. This is obviously big numbers, no question. But I hope that all what I said at the beginning of how does this sort of where we are now with this change in negative rates being or disappearing hopefully from the planet is no surprise. This is the consequence of where we are today. Obviously, as a result of that, we will be generating quite a lot of capital. It's around EUR 9 billion, and this capital includes the buyback we are announcing today, EUR 1.8 billion. The cash payout for this year is 50% to 60%. For the next year, we're saying above 50%, but we're not putting a limit on that. The Board will be deciding on an hour basis like it has been decided in the past. And obviously, we will be generating capital depending on that payout policy over and beyond the 12%, which we have as target, given where market levels indicate we should be. So the addition of all that is EUR 9 billion, and it's obviously, as you can see, is available for distribution, and it will be distributed. Cost of risk, expected to be below 35 basis points on average for the 3 years. Bear in mind that we have obviously a large unused COVID reserve, also for Ukraine. So we will be using that on top of it and as Javier, I'm sure, will elaborate. And we expect to actually reduce the level of nonperforming loans and maybe counterintuitive given what's going on in terms of the macro risks and the fact that we are at 3.5%, we're pretty convinced that we can do that. And I think we have the tools to be able to manage nonperforming loans from that point of view much more actively and obviously expect to be below that 3%. That's why we're committing to it at this stage. And that's really it. And apologies again for the long speech here, and your turn, Javier.

Okay. Thank you very much. And well, first of all, thank you for joining us today here. And also, I would like to say hello to my colleagues in the -- of the Management Committee, João Pedro. And well, first, let me give you a brief summary on the main assumptions for this strategic plan in terms of macro volumes and, obviously, rate projections. In terms of macro, we have already taken into account the new circumstances, the impact of the high inflation situation, the impact of the uncertainty from the war in Ukraine. You know that several weeks ago, we already downgraded our GDP growth forecast for 2022 to 4.2% from 5.5%. And also, we have revised it the following years. But in this case, it's economic recovery. It's in line with the figures we had before the pandemic crisis. So we expect the economic recovery to continue, and the signs we have as of today are as this. In terms of inflation, something very important, our main assumption is that inflation will gradually converge towards the targets of the central banks. Here, you may see core inflation, which probably measures better the long-term trends, converging towards 2%. Well, on volumes. Here, we are making quite conservative assumptions in our view. On performing loans, this positive growth by 0.5% CAGR. On customer funds but, more importantly, for our business, long-term savings, also, we are making a conservative assumption with no contribution from market valuation, expected to grow by over 3%. We have done better in the past. And in terms of interest rates, clearly, there is a much different backdrop. We have a base case scenario, which is the blue yield curve. Actually, it's the yield curve in -- by the end of the month of March. We also have run the numbers for a more conservative scenario. And as you may see, currently, the yield curve at the short term is at the same levels but steeper at the long term actually. So let's go to the details. In terms of financial targets, this is the same slide Gonzalo has just commented. This target for ROTE over 12% by 2024, this clearly results into a much higher capital capacity distribution. It's EUR 9 billion, cumulative for the 3 years. This major step today of this EUR 1.8 billion share buyback announced and also a normalization in terms of asset quality and cost of risk, with cost of risk expected to be below 35 bps on average. And we want to keep reducing our NPL exposure. We have updated our CET1 target between 11% and 12%. And this is a comfortable position. Now let's go into the details. This journey from 7.2% ROTE last year to over 12%. You may see that the main drivers are revenues. And on that front, I would like to remark an important contribution of circa 1 percentage point from lower contributions to the resolution fund and the deposit guarantee fund from 2024. And we have this, pretty clear, will be the case. Then it's about the rest of revenues with strong growth on NII, cannot be another way, but also fees and other insurance revenues. Costs are going to have a neutral impact as we are expecting that the cost base by 2024 will be slightly below the cost base in 2021. And then that normalization on cost of risk, that will have a negative impact of circa 1 percentage points. We have other impacts mainly related to high capital distribution. Among those, today's announced share buyback, that is adding 70 basis points. With this much higher profitability, we expect the cost to income to come down by more than 10 percentage points to less than 48%. And at the same time, in Portugal, as Gonzalo was commenting, we expect that BPI will fully convert in terms of ROTE and cost to income to the ambitions at group level. Let's have a look to revenues now into further detail, but let me first draw your attention to the right-hand side chart, where you may see that our preprovision profit has been pretty much stable in recent years despite being operating into negative rates. So we have had a strong NII headwind, but during those years, we have been able to build up businesses in order to diversificate our revenues. And what clearly there is a key business in banking, which is customer loans and deposits that actually was an engine that was not firing on all cylinders, no? And now mainly by returning to positive rates, this is a very powerful driver of our profitability. Actually, you can see this on the left-hand side chart, where precisely customer loans and deposits will grow in revenues by circa 12% CAGR during the next 3 years and then also keeping a strong focus on long-term savings and protection, growing those revenues by circa 5% and 9% CAGR, respectively. We have that extra boost from lower contributions to the resolution fund and the deposit guarantee fund. And also, we have other headwinds, the main one being that the TLTRO funding benefit goes. So we need to absorb that during the next 3 years and also the change, as you know well, in our stakes. So with this, the ambition for revenues for 2024 is EUR 13.5 billion. This is a 7% CAGR growth. Looking at it by the breakdown in the P&L, that is NII growing by circa 8% and fees ex deposit fees, you know that we have a part on fees about negative rates that actually are accounted as fees, expecting to grow by 3% and other insurance revenues by 11%. Some further details on the key engines. First, long-term savings. Our ambition is to reach balances of EUR 250 billion by 2024. That's more than 3% CAGR growth, at the same time, gaining market share by more than 70 basis points. It's -- in terms of revenues, we expect those to grow by circa 5%. We have a very well-established record on this business. You know that we have done really well in the past. Obviously, that chart also includes some inorganic growth. But organically, we have been growing by 10% CAGR. On protection. On that front, our ambition is to reach EUR 1.7 billion in revenues by 2024. That's a growth of 9% CAGR, the main driver being life-risk insurance. On that front, this is also supported by the acquisition of Bankia Vida that will result into growth of circa 17%. But even not including the inclusion -- or acquisition of Bankia Vida, growth is circa 10%. Our credentials in this business are also really strong and, as you may see also, a growth of 17% organic during the last 6, 7 years. On loans -- on the loan book. Here, the message is quite simple. So we expect that lending dynamics from now on will trend towards the prepandemic mix. So remember that is strong growth on consumer lending, business lending but, this time, much softer deleveraging on mortgages. So we expect our consumer loan book to grow by more than 2.5% CAGR, our business lending by more than -- business lending book by more than 1.5%. And we expect that the market share of the new business on mortgages to be circa 20%. That is more than 5 percentage points to -- compared to our recent market share. And this will still result into some deleveraging on that book. You know that is light [indiscernible] book with a strong seasonality. And this deleveraging will be reduced to circa 1.5%. And now let me talk about rates because, obviously, this is a major change in the situation. And well, we have quite a specific differentiated situation in terms of the structure of our balance sheet. And let me give you some details. So here you have on the left-hand side chart the breakdown -- a simple breakdown of our rate-sensitive balance sheet. You may see that on the asset side. We have a very large pool of floating rate assets. That's mainly our mortgage portfolio that is at floating, and also, other loans are floating. And then there is a minor part that is at fixed rate, basically some fixed rate loans, obviously, but also the fixed income portfolio. But the most interesting part is on the liability side. On that front, you may see that we have a small part at floating. This is basically wholesale funding and money markets. And then we have a very large pool of client deposits with very low sensitivity. Those are very stable and highly granular deposits. Actually, you know that as rates go up, to some of those deposits, we will have to start paying some interest. But due to this stability and granularity, there is a very large part of it that actually will have zero cost. So as you see in this balance sheet structure, there is always a larger part on the asset side at floating compared to the liability side. So this is highly gearing us towards higher rates. The situation is pretty much similar in the case of the balance sheet of BPI. And as I said, this is quite a unique situation. So according to our internal research, we have 78% of our deposit base with -- that are retail deposits, that this is individual clients plus very small SMEs, and this compares to 61% the peer average. So this is quite a unique difference. And in order to give you some more details about the characteristics of this deposit base, circa 60% of our total deposits are from relational individual clients. It's circa 10 million clients with an average balance per deposit of approximately EUR 20,000. So this is actually the liquidity buffer of those households. And those deposits are highly operational. So we have more than 9 million deposit payrolls and pensions, and this results into a EUR 14 billion deposited monthly into sight deposits. Moreover, in recent years, we have increased or those -- actually, it is the clients that have increased the exposure out of deposits. So we have now long-term savings according to our definition. This is life-risk -- life insurance -- savings insurance, sorry, and mutual funds, et cetera, represent 37% of our total customer funds. So from now on, clients will have a lower willingness to be paid for deposits because they are already used to save by other means. It has been a long time since we have not had an interest rate cycle in the Eurozone, actually, you need to go to 2005, '06. And we may have some insight. Obviously, circumstances may be different, but we may have some insight on what happened in the U.S. from 2016 to 2019. There -- back then, rates went up by approximately 200 basis points. And you see the cumulative beta of deposits back then reached approximately 30%. So in the current environment, it's an environment with excess liquidity. So we are not expecting that the central bank will start draining liquidity and reducing the size of the balance sheet for a while. And with rates that are expected to be between 1% and 2%, our estimates, and we think that is a conservative one, is that the percentage of deposits that will have a cost will reach between 30% and 35% in our base case scenario. Now let's see what happens to our NII after -- with different impacts on the yield curve having this balance sheet structure. So here, you have 3 different yield curves. So the blue yield curve is the yield curve of the base case. We have a lower rate scenario that is -- actually, the yield curve that was, at some point -- we had at some point during the month of February, once the ECB already made clear that they were planning to hike rates. And then you have the year-end '21 yield curve. So on the base case, so figures that you already know, as we have said, NII, expected to grow by circa 8%, and this results into an ROTE over 12%. As I commented on the previous slide, the percentage of deposits with costs between 30% to 35% and a percentage of the pass-through to deposits around 70%. This is the percentage of the market rate that is actually paid to the client. And it's lower than 100% because actually the reference rate for start paying to deposits is not 12-month [ Euribor ] but is the ECB deposit facility or [indiscernible]. And there is always difference between those 2 rates. On the alternative lower rate scenario, you have NII growing by circa 5% and ROTE over 10%. In this case, the percentage of deposits with costs is estimated to be lower, between 20% and 25%, as we are in a lower rate environment. The pass-through is estimated to be the same. You have also plenty of details about NII sensitivity. So we have been talking a lot recently on this. So this is the sensitivity to a move of 100 basis points on interest rates. On the base case scenario, it is circa 20%. And on the alternative case with lower -- the percentage of deposits with costs is circa 30%. Remember that always to estimate the sensitivity, you need to look at what happens to rates the year before because you always need a full year to reprice all the portfolios in the balance sheet. Let me remark here that in order to estimate 2023 NII, you should be using the 30% sensitivity because in 2023, we are still in -- with lower rates and then the percentage of deposits with costs is still lower. Well, in this situation, we expect to have an expansion of our customer spread to circa 250 basis points and -- well, with this structure of the balance sheet, there is still potential for further NII growth, should rates go beyond the base case scenario. The ALCO portfolio. So we have been talking recently about opportunities on the ALCO portfolio. You know that for several quarters, we have been on hold, waiting for better market levels. Now we have better market levels. But it's not only about market levels. It's also about something more structural. So you may see below on the left-hand side chart, this trend towards lower loan to deposits, actually, clearly below 100% for Eurozone banks. And comparing to peers, not only in Europe but also in the U.S., you may see that the percentage of the fixed income portfolio as total assets is, on average 15%, clearly, over that figure in the U.S. So over time, our ambition is to reach, under those circumstances, an ALCO portfolio of a size of approximately that 15%. This is EUR 90 billion. Clearly, it looks like we will be able to build this portfolio at much better levels than at any year in the recent past. We are expecting to grow this portfolio but also to diversify this portfolio while maintaining a very prudent risk profile. And I think that finally, on revenues, an update on our revenue synergy plan. The key message here is the revenues that we were targeting by 2025 when we announced the merger with Bankia remain the same. So we are now estimating EUR 220 million net. We were estimating EUR 215 million back then. But we have identified more synergies, and also, we have identified some negative synergies. Also, we have identified synergies beyond 2025. The main drivers are long-term savings and protection insurance as before, the convergence of the penetration rate on those products for Bankia clients. But also, we have identified new synergies on payments, consumer lending and some others. Also, we have identified some negative synergies. We already commented on those on our last first quarter results presentation. We have identified negative synergies basically related to the convergence of loyalty programs. And now let me -- let us move to costs. But before going into the detail, let me stress the following. So the new rate environment further underscores the value of our omnichannel network. We saw, a few slides before, the high importance of those very large pool of retail deposits at very low cost, the major part of them at zero cost. This is thanks to our relational clients. You saw that 60% of those with relational clients. So that means that to keep our deposit gathering capacity intact, what we need is to keep investing into the business. And we need to keep improving our commercial capabilities. We need to do so in order to continue being the one-stop shop for financial services in Spain. And here is what this connects to -- with this cost bridge, where you may see that we have identified EUR 300 million of incremental IT and strategic initiatives. That precisely is what we make -- do we need to invest. We need to do so to make our positive jaws sustainable. At the same time, we have cost synergies, net of inertia, there is some embedded inertia during the 3-year plan. Actually, it's circa 2% only. And the combination of both those savings of EUR 400 million and those incremental IT strategic initiatives, EUR 300 million, I will go into the detail on the following slide. This results into negative growth of our cost base by circa 1% CAGR. But then we have some nonorganic impacts. I would say that the main one being the impact on costs of higher rates on credit facilities for employees. But actually, this is compensated with more NII. So actually, in terms of net income is neutral. And then also we have an impact from the amortization of intangibles related to Bankia Vida. So considering everything, our cost base is expected to be circa EUR 6.3 billion by 2024 compared to 2021 at EUR 6.4 billion. This will allow us to keep widening our operating leverage. You may see here our preprovision profit growing by circa 15% and, at the same time, increasing our profitability -- our productivity, sorry. In this case, you see here different KPIs with a clear improvement across all of them. The details about those EUR 300 million and those specific initiatives we have identified. And I think that the CEO has been pretty clear on the revenue opportunities we have. It's about spending on -- improving our long-term savings and protection platform, our consumer and payment platforms, including the WIVAI and buy now, pay later initiatives, our attention model, including imagin and the renewed focus on seniors and, clearly, on CIB and our international expansion and also, obviously, on BPI. In terms of IT, it's the evolution of the cloud program and of our omnichannel platform and the deployment of artificial intelligence and machine learning. CapEx will remain at high levels, EUR 700 million, EUR 750 million by 2023, 2024 but circa 70% of this CapEx on IT. And I think that now finally on the P&L, a few words on the cost of risk. The starting point is quite strong. We have this 63% coverage ratio, with that at the beginning of the year, EUR 1.4 billion unused COVID reserve that is expected to be used during the horizon of the plan gradually. And this will result into a cost of risk, on average, below 35 basis points. Not including the use of this COVID reserve, cost of risk could be below 45 basis points. At the same time, we expect to continue reducing our NPL exposure. Our target is the NPL ratio to be below 3%. And well, you know that in the past, we have a good record on NPL management. And for the next 3 years, clearly, portfolio disposals will be a key part of the program. Let's move now to the capital plan. On that front, here, you have the CET1 bridge. There is capital accretion during the next 3 years of circa 335 basis points. That would result -- well, that includes organic capital generation and other regulatory impacts, among those, the impact we estimate on IFRS 17. And after this capital accretion, we would reach a year-end '24 CET1 ratio before distributions of 16.2%. And from there, it's capital available for distribution. So up to our upper bound target of CET1 at 12%. So we have this first step taken today with this EUR 1.8 billion share buyback that has a negative impact on CET1 of 83 basis points. Then we are guiding today for a cash payout over 50% -- 50% to 60% this 2022 and then 12% being the thresholds -- the threshold sorry, for considering further buybacks. This 11% to 12% CET1 management target is a comfortable MDA buffer between 250 and 350 basis points. A key driver of our organic capital generation is the fact that we are not expecting much risk-weighted asset growth. We are expecting organic growth by approximately EUR 5 billion. This is the result of the change in mix of our loan book, basically. And then we expect negative impacts or, let's say, a reduction of risk-weighted assets by approximately EUR 3 billion, among other things, thanks to our lower capital consumption from DTAs. Beyond 2024, the only major regulatory impact expected is Basel IV. But in our case, that is not much material, and we are estimating a negative impact of circa 10 basis points. So to wrap up, higher profitability, over 12% ROTE that results into a strong capital generation. So combining share buyback announced today, the more than 50% cash payout ratio and any excess over 12% for potential additional distribution, this results into a EUR 9 billion distribution capacity through cash dividends and buybacks. This is circa 40% of our market cap as of today. At the same time, we are expecting that the tangible book value per share plus dividend per share will have a positive evolution of circa 8% on an annual basis. And to finalize from my side, a few words on MREL and liquidity. The message on that front is that we are aiming to maintain an ample M-MDA buffer and a high level of subordination. Actually, we are already complying with this. This M-MDA, as of today, over 350 basis points. We have a comfortable wholesale funding maturity calendar, and that includes potential call dates for callable instruments and a funding plan for the next 3 years of EUR 17.5 billion across, I would say, all asset classes, EUR 2.5 billion already issued. So this is approximately between EUR 5 billion and EUR 6 billion per year. We are aiming to continue our currency diversification in terms of funding and also with our -- with an intention to issue ESG bonds on a regular basis. In terms of liquidity, you are very familiar with our ample liquidity situation, but I would also like to stress that after the redemption of the TLTRO, our liquidity position will continue to be very ample. And here, you have some pro forma figures by the year-end on the liquidity coverage ratio and the net stable funding ratio that will -- would be circa 200% and 145%, respectively. So that's it from my side. Thank you very much. And probably, we have some questions.

Sure. I'm sure we have some questions. So thank you, Javier. Thank you, Gonzalo. We'll take some questions from the floor. And remember, we also have people who are viewing this remotely. We'll try and switch between one audience and the other. And I'll just start from the left and gradually move my way to the right. So could we get this gentleman a microphone? Daragh, yes.

It's Daragh Quinn from KBW. First question would be maybe just on costs and inflation. I know you focused maybe with a good economic background on core inflation, but the reality is for employees, and I'm sure the heads of the unions, they're looking at headline inflation. And I know there's a wage agreement set out at 2023, but there's now such a massive gap between that wage agreement and inflation. At what [ stage, a ], will the unions kind of say, look, we need to revisit that agreement? And what kind of assumptions are you assuming for underlying wage growth? I might just ask a second question as well, if that's okay. Just on capital distribution. So you've very clearly set out what your policy is on dividend for this year and the share buyback. But maybe just if I could ask for a little bit more color about what happens next. Are you looking at a total payout ratio, split between cash and share buyback depending on circumstances? But maybe just your thoughts around what that total payout ratio could be and how quickly do you want to reach the 12% CET1 level?

Thank you, Daragh. On the first point, obviously, we have thought through our cost base in detail for the next 3 years. And this time, we have this uncertainty around inflation levels. But I would like to think that the worst time for inflation perceptions is now. Not me, but economists talk about inflation peak already. We expect that maybe core inflation will continue to go up, but certainly I will show some numbers on core inflation for 2023, where it goes from the 4% level to just above 2%. We'll see what happens, obviously, because I think people that are much more authorized than us have made sort of very wrong assessments of inflation over the last 6, 10 months, both in Europe and the other side of the Atlantic. So I will not claim to have the crystal ball on what inflation would be. But I think we need to take some time and expect that the very clear actions of central bankers are going to take -- are going to have an impact. When our wage agreement, the 5-year agreement expires at the end of 2023, I think the environment may be quite different. And we will obviously have a discussion. We will always be open to listen on to what unions want to say to us. But at this stage, we have an agreement signed up until the end of next year. And I think it is then when we have to discuss 2024. Time will tell. I don't think it's in our interest now to discuss the details of the dynamics of that potential negotiation in 1.5 years for obvious reasons. But we feel we've made a reasonable assumption of -- reasonable and not overly optimistic assumption of what will happen. But again, we're looking at an environment in which we think inflation is coming down, maybe still above 2%, so we just -- it's not only that we want inflation down. We want inflation down to a level below 2%. But certainly, the dynamics that we expect to have at the end of '23 and '24 will be different. Bear in mind that these agreements tend to take a long time to negotiate. And very often, they're not signed until well after the deadline. Last time, I think we signed over a year after the expiry of the previous agreement. So it will take time. In terms of capital distribution, if I may, clearly, we're saying a number of things. First is the capital that we're going to generate over and above 12% is for shareholders. We've been saying that for a while, and there's absolutely no difference this time. That is very clear. Second, we're saying -- we're actually saying it's a large amount. It's EUR 9 billion, including the EUR 1.8 billion that we're going to be paying back. It is a large amount because the dynamics of RWA and profitability are leading us to be there. Now how do we split that capital generated? There is a minimum payout plus 50% plus something, okay? And then the rest is going to be a decision for the Board between raising payout, share buybacks or a combination of both. At this stage, the Board prefers to retain that flexibility, and I think it's the right thing from that point of view. Obviously, there's pros and cons from dividends versus share buybacks, and different shareholders prefer different payments. Some of them would prefer them to sort of very low stock price where share buybacks become more attractive, while when the stock price is at different levels, it may become less. There's pros and cons. And we are retaining -- we meaning the Board is retaining some flexibility for '23 or '24. It is my expectation that it will be a combination as we're introducing today that share buyback, and this will not be the last share buyback that we do certainly. That's my expectation. And at the same time, how do we finally present capital distribution between one method or another is to be decided in due course.

Okay. Thank you. We'll take one from Carlos, the gentleman just behind.

Carlos from SocGen. A couple of questions for me. One is a follow-up on this one. There's some sense among the investor community that Caixa runs on a high cost inflation momentum. And on the other hand, you have a sizable capital surplus, as you just discussed. Are you ruling out any usage of that capital for capital -- sort of cost optimization in the future? Based on what you said, it's not in this plan, but long term, is this something that you envisage or not? And the other one, 1 second. Yes, the MyBox strategy, could you please explain how it matures and how the strategy to roll that over is going to be applied? Is there any execution risk on that? Or it applies to mortgages, and therefore, people will probably take the new product that you offer?

Maybe I'll answer the first one and leave Javier for the second one. On the cost side, again, what I think is for us most relevant is to say we believe in the business. We think we can grow the business, and we think we need to invest in the business. I think these simple 3 statements are not necessarily shared by everybody. And because we believe in the business, we're going to have to invest in the business, not in every part of the business, not to sort of throw money away. Invest selectively and with big prioritization. But when we find places like Wivai, like imagin, like seniors and many others, AI, cloud, cyber, we want to invest. We want to invest. And that's part of what's happening now. We feel we have the right size now. I have to say 5 years from now, we'll have to see. I don't like one to just discuss this for such a long time horizon. But when we have a look at this plan, no, we do not see any cost restructuring during this period. We have done it now. It's over 6,500 people that have left the group. It's 1,500 branches being closed. It's not a small thing. It may happen to be perceived as a small thing because we've done it in 12 months, and kind of it's done. But it is actually a huge effort. Through this huge effort, we've prepared ourselves for the next 3 years. And hence, we're not seeing that during this time period. Javier?

Yes. On MyBox, well, MyBox is -- the wave from the new production of insurance products is increasing. So we are now at approximately 60%, 65%. And that pace is expected to continue or even increasing gradually over the years. And actually, if you look at the stock of premia on our insurance business, still those premia originated with the MyBox bundled offer is expected to reach more than 45 -- 50% by the end of 2024. But the key aspect of this product is that it significantly reduces the churn. So you know that the client is committing for a 3-year period. So what we have observed is that the cumulative churn during the 3-year period is well below in the case of those clients with MyBox insurance product compared to the non-MyBox. And I was consulting some figures on this. And actually, for example, for home insurance, the churn is like 24 percentage points lower, on auto, it's like 16 percentage points lower, and on life, it's like 10 percentage points lower. We have now started to have some maturities on this product because we started like 3 years ago. And what we are observing is that the churn is in line with our expectation -- with our initial expectations. So on the contrary, we are quite upbeat of this commercial solution. You know that is one of the key drivers of our growth on insurance products. And we expect that over time, let's say, the portfolio effect of this product is one to be substantial. And as I say, the weight of the part of insurance premia originated by MyBox to keep gaining weight on the total portfolio.

Okay. Could we have a microphone over to this gentleman over here, please?

Maks from JB Capital. I have 2 questions. The first one is on loan portfolio. Given your share in payrolls in Spain and the current market share in mortgages, I was wondering if you could provide more color on why you don't want to accelerate new production more than just to 20% of total? Do you see more competition or you simply see more returns in other segments? And then the second one is on the ROTE target. I was wondering if it includes the complete repricing of the loan portfolio given your base case assumption for interest rate curves. And if not, looking beyond 2024 and assuming all the revenue synergies you expect beyond 2024, what would be the longer-term going-concern ROTE ambition for CaixaBank?

Second one is higher, isn't it? Maybe you wanted a bit more detail. I'll let Javier discuss that, but I don't think we're prepared to give you a number. We're moving from 7.8% to over 12%. We're doing enough of sort of a step-up to think beyond that level. But certainly, the trend hopefully will allow us to continue on that front. On the new production of mortgages, I'd love to do more. We'd love to do more than 20%. And I'm not saying that it's not possible. But what happens when competing in the mortgage market is there are many more players than -- offering to sort of provide the product. At the time someone decides to get a mortgage, and people tend to compare, not everyone, but the people tend to compare. So having as much as 25% market share in new mortgage production is particularly complex because it's not just your natural share of people that come and say, "Do you have the right product? Okay," in which case we will have -- certainly aim to have that market share or higher. It's these people or part of these people at that time are comparing you and are looking at price, I would say, with strong interest. And obviously, in that moment, I think capturing 20% is ambitious enough. But we do have the best offering, and we have the best offering not on the price of one single product but the whole service that we do. And I'd love to see that our market share is higher than that. I don't think we want to set targets that we feel are excessively ambitious or not conservative enough, and that's why we did it at that 20%.

Well, I'm glad to see that you are so bullish on rates. But well, we have done some numbers, but let me first comment the following. So you saw that the percentage of deposits at cost grows, our rates go up. But this, at certain level, stops because at the end of the day, you have still a very large pool of deposits, so then we'll have -- that are paid zero, whichever is the level of rates. So with a slightly higher percentage of deposits at cost, that probably will be the case in case rates were even higher. We have run some numbers, for example, because you know that the yield curve during the last week or the last 10 days has come down a little bit. So at the highest, we saw like 10 days ago, our NII would grow by over 9% CAGR, so just to give you a little bit of sensitivity. And this is already assuming, to some extent, some slight increase in the percentage of deposits to be paid. But well, we have gone to 2024. Beyond this, you saw when I presented that balance sheet structure that we will always have a larger proportion of assets at floating compared to liabilities at floating. And this always results into gearing towards higher rates.

Okay. We're going to -- Alvaro, we'll take you afterwards, but we're going to try and get a question in from some of our remote viewers. Operator, can you please put a question through?

Question is from Andrea Filtri with Mediobanca.

Just a couple of questions. So the first is actually a detail. We spotted a negative 8% CAGR for nonlife insurance. What is the negative impact here? Given your bullish stance on interest rates, how do you reconcile that with the 17% CAGR in life-risk insurance? And then finally, a question on digital euro. Over the course of the plan, the digital euro could become a reality. How are you seeing this potential transformation of the industry? And how are you getting ready for it?

Thank you, Andrea. I'll start with the first -- the second one and let Javier deal with the first one. On the digital euro, obviously, we follow very closely how it is evolving. And I'm certainly -- we think it is one likely to happen in the second -- very relevant for us. I don't think that during the year of this -- during the period of this plan, we're going to have the digital euro. I have to say, in my view, it will take some time. And hence, it's not going to change much the next 3 years, but over time, it's relevant. I personally think that there will be a limit in terms of how much people can hold in digital euros with the ECB so that the banks will be protected from deposit flight. I think that's kind of a given. And then once that happens, then it's a great means of payment for many people. And to what extent it coexists and other people develop alternative mechanism to protect the business or to stay ahead of the game is something we will see. But I think it's more the second half of this decade when this is going to have an impact. I think certainly, it will facilitate inter-European payments to start with, which other initiatives do not seem to manage to really accomplish properly. We will follow that very closely, Andrea, and we want to be obviously at the forefront of any development on that.

Well, on protection, to have all the figures clear, so we are expecting revenue growth of 9% CAGR. Of that part, it's 17% from life risk, and then the nonlife part has a lower growth. On that part, you have -- you can break it between what is accounted in fees. On fees, we are expecting nonlife in fees to grow between 3% and 4%. And then on equity accounted, we have a negative impact because you know that on the SegurCaixa Adeslas, the profitability of the company is on year-on-year impacted negatively because SegurCaixa Adeslas is paying for the compensation with the agreement with Mutua, remember. So you have this slight negative impact on equity accounted but then growth on fees between 3% and 4% and life risk 17% and overall 9%. So this is the summary.

Okay. We'll go back to the room. We have a question over here. This gentleman over here, please.

Alvaro Serrano from Morgan Stanley. Two questions, please. One on loan growth, it's kind of a bit of a follow-up but maybe on the non-mortgage side. Even using core inflation, you've got 6% average nominal inflation -- nominal GDP growth. And I think in consumer, you've got 2.5% CAGR in loan growth and 1.5% in corporate. Can you just talk a bit sort of your thoughts on the general growth environment? Is it your high market share that limits? Or are you -- just given the current environment, you think loan growth will be a bit lackluster considering the nominal GDP growth? And second, on costs. You obviously have that EUR 6.3 billion number for 2024, and you've also got the 48% cost-to-income ratio. If we think about sort of what-if scenarios of rates, then you don't have the full sort of rate hike that you're baking in your base case. Maybe I'm thinking about that alternative scenario. Should we also think that you're going to modulate costs as and when sort of the revenues sort of unfold? Or is that EUR 6.3 billion a hard number? How should we think about the flexibility or how you're going to deploy those investments?

Well, first one, we are not expecting to lose market share. Certainly, Javier can elaborate. But on consumer, we're taking a conservative approach, not on our ability to produce but on what is the market likely to do. But I think as in many assumptions in this plan, there is an upside scenario, which the market and ourselves do better. On costs, I would say there's always flexibility. We were asked the same question in last plan. We were presenting a 3% growth rate, compounded annual growth rate probably by you, Alvaro. You're saying -- you had -- and probably we said, well, we want to do this because we were so fixated. The reality is the world changed and we actually delivered a 0% growth rate, which over 3 years is a 9% gap, is very different. So certainly, if the environment changes, our strategy will be to adapt to that, and we will have to revisit what we're doing. There's no question. So yes, there is some flexibility on that. There has to be.

In the alternative scenario, the flexibility [indiscernible]?

No, only rates.

It's a pure sensitivity case because obviously, many other things could change.

Okay. Could we take a question behind the gentleman?

I'm Pamela from Crédit Suisse. So I have 2 questions around the revenue outlook and then a follow-up on the capital distribution plans. On the revenue part, you were talking about -- earlier about the preference of your customers to allocate part of the savings into investment products. But now we're looking at different interest rate environment. We've been living in a very low long interest rate environment. How are you thinking about the potential migration away from assets under management and into bank deposits? Is that embedded in your fee 2% CAGR expectation? Or how should we think about that? Another question around revenues is you were talking about the strategy, reiterating your intention to grow the ALCO portfolio to EUR 90 billion eventually or gradually. Is that already the benefit of putting the excess liquidity into now higher-yielding securities? Is that benefit already embedded in your 8% NII CAGR? And then lastly, on your capital distribution plans. We now know that the intention is to consider excess capital at anything above a 12% CET1 ratio, but the management target is still 11% to 12%. How should we think then about that buffer? Is it for a rainy day? In that case, you're talking about very limited risk-weighted asset inflation, a very limited Basel IV impact at only 10 basis points. Or is that buffer potentially leaving you flexibility or room to explore maybe more M&A? Would you be willing to be looking at something maybe in Portugal? How should we think about that buffer?

Thank you, Pamela. Maybe I'll start with the third question and leave Javier. On capital distribution, I think having that range is, you call it for a rainy day. It is -- the difference basically between what our own internal analysis says in terms of the sort of expected losses and expected losses we may have, the stress test we do, where do we feel very comfortable internally. And that obviously has to be the 11%. That's why we're saying we want to be above 11%. Above 11%, we are -- with the internal information that we manage with our risk models, we have enough buffer to withstand whatever degree of severe stress that you can apply on us in exercises of this type, and we're very comfortable. When we look at the outside world, the market for some reason has taken for a bank like us and others 12% as a magic number. So we say we feel comfortable above 11% from our own internal point of view. We think beyond 11% and 12%, we're in a zone of comfort. And we would not necessarily be taking any decision to distribute between 11% and 12% because while we're comfortable, not every market participant -- or somewhat a certain consensus would feel that we are not being prudent enough, at least as of today. Things may evolve in the future, and above 12%, and we have a clear view, both internally and externally, that is a clear signal for capital distribution. That's the way we feel. There's absolutely no sort of M&A hidden reserve here. If at some point, we were to do something, which is, I would say, fairly unlikely, we're certainly not contemplating anything on the M&A front along this plan. I've always said and we've always said that if at some point, there's a transaction that has merits, then you have to do it on a market basis. And if capital is needed, then look at your shareholders and see if they are willing and able to provide it. And otherwise, it means that it doesn't make sense. But given our position, again, in Spain, obviously, we have a very large market share, and we are present where we want to be in terms of various capacities and skills and segments. And in Spain, we have a lower scale -- sorry, not Spain. In Portugal, we have a lower scale but pretty good scale. We have moved from number fifth to number fourth in the market over the last 2 years. And I said and I mean it, we have a virtuous circle of profitability and growth. If BPI has grown its market share as it has in the last 5 years, I think when we look at the next 3, it will be in a position to continue doing that. And that is certainly what is most value-enhancing for shareholders. So a long answer for that, but no hidden reserve here.

Okay. Well, from my side on off-balance sheet products or long-term savings, well, first thing is that rates are going to go up but still at a very moderate level. So rates between 1% and 2% are not that high. So this is not like 2005, '06, '07 when rates were at 4%, 5% or during the sovereign crisis, 2011, 2012, when we had a deposit war and we had to pay 4% for deposits. So it has nothing to do. We firmly believe that with that level of rates, the pace towards long-term savings will continue. So actually, the plan is assuming like EUR 7.5 billion per year into long-term savings. We have been done in the past like EUR 5 million, EUR 6 million per year. Now it's a larger size. We have the synergies from Bankia. And we think that we are pretty conservative from our assumptions. So this is not a level of rates that will make clients rethink about the process into long-term savings. Even more as -- actually, we are going to be the last bank in town to start paying for deposits. And why? Because we have a very large liquidity situation. So we don't need to pay for deposits. And on top of you know that this very large pool of deposits comes from mainly traditional clients that do all their banking business with us. So actually, this is like the operational account, the household buffer, et cetera. So it's not like -- well, we need to start saving through deposits. So no, at this level of rates, for sure, the pace of inflows into off-balance sheet is not going to be affected. On the ALCO, yes, there is an assumption about asset purchases. But look, actually, in terms of accretion on NII in 2024, there is not that much because actually, short-term rates are already expected to go up vis-à-vis deposit facility by 2024, approximately between 1.25 and 1.5. And if you look at sovereign bonds around, so yields are pretty much at the same level. So in terms of accretion, you are not adding that much with the ALCO portfolio right now. So we will need an even steeper yield curve or wider spreads in general, not only in the sovereign but also at corporate level, in order to have an accretive effect in terms of NII in 2024. By investing the ALCO portfolio by now, what we are doing basically is to lock the current market rates. But you are not adding much extra value if at the end of the day, rates -- forward rates end happening, which is our expectation. But yes, there is an assumption basically on sovereign bonds. I mentioned that we were willing to diversify the portfolio, and diversify means towards lower risk, not towards higher risk. We want to reduce the weight of the ALCO portfolio into Spanish government bonds, into economy bonds and also into corporate bonds. This is basically the plan.

Okay. We're going to take a question from a remote viewer again. Operator, could you please put a question through?

Your next question is from Borja Ramirez with Citi.

I have 2 quick questions if I may. The first one is a follow-up on the mortgage market. I would like to ask, what are your views on the potential competition for new mortgage production going forward? And so any potential evolution of the spreads? And then my second question would be regarding the eco-loans. If you could provide more details on assumptions regarding the default rate of the moratoria that is ending this quarter.

Thank you, Borja. In terms of the mortgage market, I think it will stay as a very competitive market and that the spreads obviously, I think, are unlikely to increase. A different story is the fixed rate mortgage that the rate there will obviously have to follow in due course what sort of fixed rates are doing in the market. But I would -- and we assume it's going to stay as a competitive market. With respect to eco-loans, I would say, and maybe Javier would like to complement, we continue to see eco-loans performing very well. During this month of May, we have had already 50% of the expiries of the principal moratoria that we had a total of EUR 6 billion expiring in May, the sort of the bulk of what remains to expire in terms of moratoria, and half is 50% actual nonpayment or late payment because it's not been produced. It's 1.5%. So the impact has been very low. We need to be prudent because obviously, this has not finished. But now we have a very relevant part of these loans that again are starting to behave as we had seen with the moratoria in mortgages and consumers and really paying very well. We'll have to see how this trend consolidates over the next few months. But in any case, pretty good news there. Javier, anything you'd like to add?

Just to add that on that eco portfolio, we have, as you might know, as we have commented in the past, approximately 1/3 of that portfolio classified in Stage 2. So we have already taken one step in terms of products into that front. But as Gonzalo is commenting, we are quite upbeat on the evolution.

Okay. Let's go back to the floor. We could take a question there. Down here, please, the lady next to [ Jesús ]. Thank you.

Yes. It's Britta from Autonomous. I've got 2 follow-ups on capital and one on cost of risk, please. On capital, Gonzalo, you said that whole EUR 9 billion will be available for payouts. But on the slide, there's a little bar that says excess capital. And if the chart is to scale, it isn't that small. Why is that still left on the chart as it is? And also a follow-up on the organic impacts. If I try and reconcile the 16.2% pro forma pre-distribution CET1 ratio, am I right in assuming that's about 50 basis points of other in there? And maybe you can give us a little bit of hints as to what the other capital impacts are that we should include? And then coming to the cost of risk, you obviously see a cost of risk increase due to a weaker macro, I presume, the less than 45 basis points that turns to less than 35 with the COVID provisions that you intend to use. Can you give us a little bit of an insight as to what are the biggest movers there? What should we assume as normalized cost of risk, underlying if you didn't have the COVID provisions in there? And how is that going to change with the change in loan growth assumptions that you said versus the past?

I think, well, Javier, I'll leave it to you, but the EUR 9 billion is the number. I don't know about the...

No, EUR 9 billion is the number. What Britta is asking is that on the chart, the excess capital over 12% is narrower than the more than 50%. So that's right. Well, we are assuming that the amount actually paid with a cash payout ratio over 50% is going to be more in euro terms, that the capital left over 12% available as a share buyback. So that's right. But as Gonzalo was commenting before, it's an open option, so we'll decide in due time. You mentioned impacts on this -- on that chart in terms of accretion of capital. One is that we have probably not commented in too much detail previously, is the impact that we estimate on IFRS 17. We're expecting up to 20 basis points of maximum impact. This is not yet finished 100% because it's actually really complex. But this is our estimate as of now, so no more than 20 bps. Where does this come from? You know that currently, under the current rules, there is what is called like liability sufficiency test at consolidated level where you can compensate in sub-portfolios at the insurance company level some excesses in some portfolios with some deficits in others. With the new norm, this goes, so you can no longer compensate excesses with deficits. So we need to register a deficit of one of -- some of the portfolios. This is an impact on reserves and on OCI combined. That will result also into a slight lower risk-weighted asset consumption because you know that the insurance company is weighted at 370%. And the net impact of all this is going to be no more than 20 bps. Well, you know that this does not affect actually the economic value of the company. So the future cash flows are still there, completely unchanged. You know that on that front, there are other changes in terms of the breakdown of the P&L. I'm not going to go now into the detail, but there are changes in the sense that NII from the insurance company will move to a specific line on the P&L for insurance revenues. Also, fees from unit-linked will move to that line, and also costs estimated to generate the business also will have to move from costs actually, reducing the cost base to that line. But this is actually not having an impact on net income, so there is no expected net income impact. But we have this upfront impact from 2023 that is already included into that capital accretion on the chart. And then you mentioned something else. Actually, there is not because as I -- there is not much because as we have been commenting in recent quarterly presentations, we have still some pending regulatory impacts, positives and negatives, but that our view is that will be broadly compensate each other. But we don't know exactly the calendar, what will land into 2022, what into 2023. It's either remodels in Portugal, it's about the removal of some limitations in internal models, it's the amortization of some other internal models, et cetera. Broadly neutral, I mentioned, I remember, during the last call that if it's, at the end of the day, negative by no more than 15 basis points. So that's the message and nothing else. Remember that there is the AT1 coupon also deducted into this capital generation.

There was a question as well on cost -- somewhere in there on cost of risk.

On cost of risk. Well, the normalized cost of risk, it's always a good question with our risk people. But we have said that in the past that is between 30 and 40 basis points. And you see that excluding the use of this COVID reserve, it's going to be less than 45. So actually, it would be in line with a normalized situation.

Okay. We're going to move back to our remote viewers. If we could take another question, operator, please.

The next question is from Benjie Creelan-Sandford with Jefferies.

Just 2 quick ones for me, well, one quick one and one broader strategic one. The first one was just a follow-up on the last comments on the RWA waterfall. I'm just wondering, within the kind of pending model approvals, whether you have assumed any recovery on the low risk portfolio that was a material drag on CET1 in 2021. So I was wondering if there's any model approvals still coming there that could have some capital relief. The second question was a broader one. Just looking at Slide 27 on imagin, very broadly, imagin represents about 2% of the group's deposit base, but it's only about 1% of the group revenues. I was just wondering, do you think there is a challenge to turning some of these digital channels from a funding acquirer into more of an asset growth driver in their own rights? So perhaps you could just talk a little bit more about the loan and revenue growth opportunities that you see there and the challenges relative to the traditional bank.

Sure. Javier, you want to start...

Yes. With risk-weighted assets, well, you saw that there is expected growth of circa EUR 5 billion. This is actually a mix effect as we are going to grow in segments with a higher risk-weighted asset density. This is SMEs, corporates and consumer compared to a situation where still the mortgage portfolio, as you saw, at a much moderated pace, but still we'll keep deleveraging somehow. So there is a mix effect actually that results into this approximately EUR 5 billion in terms of organic growth. And then we have some reduction in terms of risk-weighted assets. I mentioned on the presentation a lower consumption from DTAs. This is basically lower time differences that you know that are risk-weighted at 250%. And then we have the impact I mentioned on IFRS 17 that results into lower risk-weighted assets from the insurance company as this is risk-weighted at 370%. And then what I just mentioned on the previous question, we have ups and downs or plus and minus in terms of risk-weighted assets due to different impacts on internal models but, at the end of the day, will be not that significant.

Sure. On imagin, obviously, imagin is a key part of the business. But because of the nature of its customers, average 22 years, we cannot expect that to be contributing proportionally to the profitability of the group. Every -- well, I think every financial institution but certainly ourselves have been investing heavily in the past to make sure that the kids and teens and all these generation get familiar with Caixa so that eventually continue with Caixa when they become sort of the 25 on and then become real clients. And we really go and accompany that client through its life cycle, and that is the effort. So imagin logically has to have a small contribution compared to the rest of the bank. But as the customer base of imagin grows, not just in numbers, but they grow in age and in income, it will become more and more profitable. We are aiding that by adding more and more products and services to imagin. And obviously, when we look at revenues being multiplied by 2.5 over this 3-year period, that gives you an indication of the growth on -- marginal growth on revenues, imagin is going to become quite a significant contributor. So that's the way I would look at it.

And Benjie, and just to add to Javier's point, the RWA release related to the model approvals you were referring to is already included in the plan. Okay. All right. We go back to the floor now. We have a question here at the end from the gentleman with a pen in his hand.

Francisco Riquel, Alantra. The first question is about the target of 8% growth in tangible book value per share and dividends that you have said. If you can help us reconcile with the 12% ROTE target. I understand AT1 coupons deduct probably 1 percentage point, so there is still a gap. So I wonder if you are leaving room for another early retirement plan and some restructuring costs that could be charged or market headwinds. But I also see that you have a short-duration portfolio, so you should be able to recover part of the headwinds. Or the 12% ROTE target is backloaded? Or I mean -- or is the IFRS 17 you can help reconcile. And then second question is about in the event that you could consider further share buybacks, and you mentioned that probably this one is not the last one. So if there is any limit in terms of the shareholding structure and governance balance within the group and the Criteria stake will go up, so if there is any regulatory limit, the FROB stake could also go up. They could ask for another Board representation. So if you see any limit at all in the event of further share buybacks.

Thank you, Paco. On the second one, I don't see any relevant limit, to be honest, if there were to be more buybacks. But anyhow, we have one buyback on the table for the next 12 months. So this is, I think, something that we'll need to get into at the right time. But I personally don't see a problem from that point of view. And obviously, you know that the only relevant threshold upwards is 40% ownership for Criteria, which was the limit that was put by the ECB when they took the decision to deconsolidate both groups. And we are far, far, far away from that situation. On the first question...

Well, just to remark that the 12% ROTE target is for 2024, okay? And this accretion for the tangible book value per share and dividends is for the CAGR for the 3-year plan. So I think that probably this helps to reconcile. But there is not any kind of buffer just in case restructuring or whatsoever. No, no.

And also one is average equity and the other one is equity point in time as well. So there's a difference on the denominator and the numerator. You also mentioned that the AT1s are deducted from the numerator, but we can go through it afterwards if you want, Paco. Let's take another question from the gentleman next to him, please.

Ignacio Ulargui from BNP Paribas Exane. Just have 2 questions. One on the deposits competition and whether -- I mean you have gone through it several times, Javier. But I mean we have seen in the last 2 weeks 2 banks raising the deposit costs. To what extent your rural network is a bit of a defense in that context, if you could just elaborate a bit on that? And the second question is, if you could clarify a bit better, what are the new synergies on the revenue side on payments? I mean are they coming sort of like soon, later? And also, if the EUR 75 million of the synergies are related to the modernization of the loyalty programs in Bankia and Caixa that you were commenting in the 1Q results.

Okay. Maybe I'll take the first, and Javier can add there and take the second. On deposit costs, I think obviously, every competitor will follow it on the strategy. And looking at history, there will be competitors that are more aggressive normally because they have a higher appetite for having liquidity, and they fund themselves to some extent in this way. We have the opposite position. We have too much liquidity. And then we have a very different nature of relationship with our clients, relational, transactional. The EUR 14 billion of cash a month that is paid into our accounts through payrolls and pension speak by itself. So I think that's mostly the difference. Obviously, the rural presence adds to that, but it's not that because of rural, then our business is different. I think the whole of our business is different in terms of having relational clients with us and we acting as really the bank for payments and transactionality in Spain, which is clearly the case. Rural helps, but it's all of it. Javier, on synergies.

No. And just to add on to this is that -- well, the fact that we have so many clients that are relational precisely is what makes the difference. So this is not that our clients will start shopping for the best deposit in town, so -- because they already do all their business with us. And once you have all the business, it's really difficult to move around them. So I think that this is the key difference. The average size or the deposit average balance is EUR 20,000. So EUR 20,000, well, it's a decent size, but it's not like you start shopping for this because this is actually like the household buffer for the day-to-day. So this is a key difference, and actually what we are aiming is to do even more relational clients. So this is the plan. So actually, our business plan, the trend will be towards reinforcing this. I understand that this is quite a unique situation compared -- not only to Spanish players but also across Europe. And when looking at differences on the performance on what the balance sheet will do, on that front, I feel that you need to take this into account. Back to synergies. Well, we have revised, I would say, all our synergies. I was consulting here the figures. What we have done is in terms of long-term savings, actually, we have reduced slightly the amount of synergies initially contemplated. And this has to do basically with the pension plan business. You know that we have had some changes in terms of legislation on that front with caps in the amount potentially being invested and having a tax benefit. And we have had to adapt to this. But on the contrary, on protection and everything related to life insurance and nonlife, we have increased the pace of revenue synergies. On that front, remember that what we are targeting is our convergence of the penetration rates of Bankia clients or former Bankia clients to the levels of CaixaBank clients but not 100%. The target is 60% on average, depending on the product if 55% or 60% something. But we are conservative on that front, so we are not assuming that we are going to be at the same level by the end of the synergy plan. And then we have identified further synergies on credit cards. We have, for example, observed that the use of the financing in terms of credit card amongst Bankia clients was much lower than amongst CaixaBank clients. Then an initiative on Wivai that has been clearly commented by Gonzalo that, well, this is something completely new for former Bankia clients. And also in terms of consumer lending convergence, gradual convergence in terms of pricing and in terms of the use of those credit facilities. So this results into extra synergies. And then what I already commented on our first quarter results presentation is that after the IT integration, we have been able to fully understand all the overlaps we could have on loyalty programs, et cetera. And this results on the main part of the negative synergies that we have been identifying.

Okay. I think we have a question over there at the far end. If we could please take that question.

Fernando Gil from Barclays. Two questions, please. First one, what are the assumptions in the plan for the Single Resolution Fund and deposit guarantee fund? How much are they going down in your assumptions? That is one. The second question is about sensitivity. If you have done any sensitivity on how much you need rate to go up to trigger an asset quality, let's say, issue in your customers? Have you done that? And if you can provide some clarity there.

Yes. On the second one, I would say we have plenty of leeway here. One, pretty obvious, one thing is the overall macro environment. And when interest rates go up generally for the economy, there may be second-round consequences. But direct impact, obviously, we always look at the mortgage portfolio. And here, we have a floating portfolio that is very well seasoned while in the last 5 years, we have been producing mostly fixed rate mortgages. So the combination is pretty attractive from that point of view. Our average installment in mortgage is EUR 350 round number per month. 200 basis points takes the EUR 350 to EUR 400. It's a EUR 50, extra 200 basis points. And then you can extrapolate every 100 basis points, EUR 25 to EUR 30. So we have quite a lot of leeway before we have a problem. I don't think the problem will be that one. Javier?

Yes. On the deposit guarantee fund, well, we have pretty clear that the targeting size of those 2 funds will be reached as expected -- as initially expected by the end 2023. You know that in the case of the deposit guarantee fund, the target is 0.8% of the current deposits. There may be even an extra 10% add-on that we are already included in our estimates. We had a contribution last year of close to EUR 400 million to that fund. And from 2024, this is moving to a contribution of approximately 17 basis points over the total stock of guaranteed deposits to 0.8% of the marginal growth of those deposits. And as a consequence, we are expecting this contribution to be much lower, approximately EUR 150 million. And on the resolution fund, the situation is pretty much the same. In this case, the target is 1% of the total guaranteed fund in the banking union. This is not Eurozone. It's banking union. And we are expected to reach that level by late 2023, so according to the latest figures released by the Single Resolution Fund. And so from 2024, the contribution will be also over the marginal growth into guaranteed deposits instead of a larger figure because we were on this buildup process of the fund. So this is very clear. It's set up in European Union regulation. We don't have any information that this is going to change. On the contrary, that authorities are fine with those sizes and levels. So we are expecting that we will be reducing our contribution significantly. I didn't mention the size of the contribution we are making on resolution fund. It was like EUR 160 million last year. It's expected to be circa EUR 70 million.

Okay. Do we have any more questions in the room? Or should we give way to the audience? I think we have a question over here at the other end of the spectrum here, the gentleman with the beard.

Okay. Very quickly. Carlos from SocGen again. When would be and how much of the EUR 90 billion target of the ALCO portfolio is embedded in your forecast if it's full? And the second one is, when you work around the lower disposable income coming from higher energy costs, higher fuel costs, mortgage prices also rising, which kind of [ groups ] do you expect are going to be most affected sectors? And that is on top of whatever they have impacted from the energy crisis and everything on inflation. But on that sense, that is probably the second derivative effect that we haven't really seen. And if you could guide us a little bit on your thoughts, would be helpful.

Sorry. Well, on the first one, as I think I answered in another question, yes, we have made an assumption on the ALCO portfolio, but I insist. So current market levels for fixed income securities are actually at the same level where forward rates will be in 2024. So the accretion in terms of NII in 2024 is not that much. What you are doing now investing into fixed income security is locking the market rates, but you are not adding an extra spread significantly.

Okay. On the second one, we have conducted a bottom-up analysis precisely on the impact of the current inflation and particularly high energy and raw material scenario in our clients. Obviously, the sectors that are more affected include agricultural, fishing, transportation and generally industry affected by sort of high energy consumption. And clearly, the critical part is to what extent the industry or the activity is diversified or not and to what extent they can pass on these increases in prices to customers. Our perception is that there is a good ability to do so, but obviously, some players in some industries are going to suffer more. We made EUR 214 million of provisions in the first quarter, precisely taking a first look at what we think may be the impact. But obviously, this is something that we will continue reassessing as the situation evolves.

Okay. I said at the beginning, we have to be very strict with time. It's 11:30. So it's probably -- we need to call it a day. Thank you very much for your attendance. I would also like to thank especially the internal team who are involved in preparing this Investor Day. And now we have a chance to go outside and have some light refreshments. Thank you.

Thank you very much.

Thank you.