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

Good morning, and welcome to CaixaBank's results presentation for the fourth quarter and full year 2024. As usual, we are joined today by our CEO, Gonzalo Gortazar; and our CFO, Javier Pano. We will start with the presentation about 30 minutes and then will be followed by a Q&A, which is live and will take about 45 minutes to 1 hour, and you should have received instructions by e-mail on how to participate. Let me end by saying that my team and I will be at your full disposal after the call. And without further ado, Gonzalo, the floor is yours.

Thank you. Thank you very much, Marta. Thank you, everybody. Welcome to this year-end presentation. I'll start with what is the summary of the year, which obviously, you have seen now for a few hours, but basically, I think to highlight the strong activity in which we are closing the year. Customer funds, in particular, with that those numbers, 11.7% wealth management, 7% deposits. This has been obviously something that has gone beyond what we were expecting for the year and very positive fourth quarter. Similarly, on the loan side, the fourth quarter has been very strong, which allows us to end up a year in a clear growth trajectory with 2.2% growth in performing loans and very significant, obviously, new lending revenues, close to 10% on NII and 4.6% from services, clearly above what we were expecting and guided for. So very happy with those numbers. Capital in line above the 12% benchmark. And that is after having announced another EUR 500 million share buyback. This is #6. And this is -- we are obviously executing #5. So this will come after we finish the #5 share buyback. Dividend with that 53.5% payout ratio at EUR 0.435, which makes it exactly into the EUR 12 billion capital target that we had upgraded for these 3 years and obviously leaves us with a good starting point for capital into 2025. Net income is up 20%, Return on tangible at 18%. Cost to income below 40%. These are all obviously numbers that are much better than what we were expecting. I'm not going to go through this page, but obviously it has been a very successful plan, very successful 3 years and ends with a very strong 2024. Very happy to have been able to achieve the main targets that we set ourselves for these 3 years. Moving on to activity, obviously, starting with macro. We had great confirmation yesterday of the strength of the Spanish economy, 3.2% growth in 2024. We were expecting 2.8%. We have been seeing indicators through the quarter that actually economic activity was stronger than that, and this has been the confirmation. Obviously, during the year, started with a much more conservative approach to what we expected the Spanish economy to do. A lot of it related to sort of weaker Eurozone. But the year has confirmed that the Spanish economy has decoupled from the Eurozone. The reasons for that are obviously subject to much discussion, but clearly, we're seeing very different numbers in the Eurozone, including today in Germany, France versus what we've seen in Spain. And today, also very good numbers in Portugal. This means that for 2025, our forecasts, particularly for Spain, are under review and given that all is sort of surprising on the upside, it's logical to expect that we will eventually be upgrading that expectation for GDP this year of 2025. The PMIs are quite -- they speak for themselves with us close to 57 and all the large EU countries and the Eurozone below 50. Employment, tourism, the fact that we continue to see very low levels of leverage in Spain, high saving rates. The fourth quarter in terms of -- in GDP, the composition of the GDP growth has been now more biased towards investment recovery, which has been something that we had been lacking in the past and somehow supports our thesis that we're going to hopefully see a significant increase in loan demand and loan balances over the next 3 years. Too early to say. But certainly, as of today, what we were expecting a few months ago when we presented the plan, seems to be vindicated. Clients up 280,000. Obviously, this is also in the context of a growing Spanish population through immigration, but gaining market share, you see some of the numbers here. Overall business volumes, so it includes customer funds and loans, is up 12 basis points. And then some more highlights in consumer and SME, where we are obviously seeing higher returns than elsewhere. And then all what it has to do with wealth management, we'll discuss that later. And by the way, protection, you see life risk, significant market share gains. Another very important point is actually growth during the year has been accelerating. So we have had fairly decent start of the year, but then throughout the year, growth has been increasing. And when you look at the fourth quarter, whether it's consumer lending, business lending, mortgages or on the customer fund side, deposits and wealth management, even protection insurance, we see the right trend. Obviously, we'd love to guarantee that this is going to continue on to 2025. As of today, it does seem that the trend is going to be persistent. So very good news, not just on the overall balance of the year but also how things have been accelerating in this period. Moving on to new lending, very significant growth, 27%. Obviously, in residential mortgages, in particular, huge improvement over 50%, still doing a lot of fixed rate mortgages, close to 80%, 78%, but consumer lending and when we look at business lending also, we have pretty good numbers. And again, in SMEs this year, in particular, with a significant gain in market share. From a pricing point of view, you look at the front book yields still above those of the back book. So we are indeed looking at a fine balance between accelerating growth, but still obviously maintaining appropriate profitability. In terms of the loan book, we have increase in consumer lending. That's been throughout the year. Business lending, we had a very strong fourth quarter with that 3.3% growth and residential mortgages. Again, you see the private sector lending on the bottom right of this slide, again, suggesting that a trend of improvement, which has accelerated in the fourth quarter. You see, obviously, from the point of view of the loan book, it's been businesses in terms of absolute size, which has had the major impact. Customer funds, up 8.7%, as I said, with both deposits and wealth management, case of wealth management slightly more, but fairly balanced. If you look at the overall, it's increase of EUR 55 billion in customer funds, EUR 25 billion -- EUR 24.5 billion of those are deposits and the rest is off-balance sheet. Wealth management, where you see there's again, EUR 11.4 billion of net inflows and the rest is market impact. Now market shares are very significant. As you would see in the following page, particularly if you look at the right-hand side on the top, wealth management market share for us is 29.5%. You look at BBVA and Santander Peer 1, Peer 2, they obviously, even if we put the 2 together, they are well behind us. So it means, in my view, that we're doing something right in this business, particularly right, where you have such a difference in market share. One of the reasons, obviously, it's about distribution, it's about advisory, it's about trajectory, I'm talking about trajectory. I just wanted to comment on the numbers of profitability. And I hear you have a very simple, but I think it's important, looking at 5-year performance to make sure that we look at a long enough period. You see both the asset management from our mutual funds as well as pension funds being actually well above our competitors. It's quite a significant difference, which actually is repeated itself if it's a year, a 5-year or a 10-year horizon, there's a very different positive impact of profitability, which is obviously an increase in the value of AUMs. That's very relevant, particularly when you look at long-term savings and insurance, certainly compared to deposits. The fact that we actually managed to get people to invest in long-term products. 10, 20 years ago means that obviously, they have much more money, and we obviously have higher fees. But also that we are attracting and we have a good reason to attract money from other times. And hence, the market shares, again, just have a look at the market share in annuities gives you the example that this is basically a market that we have developed ourselves. And actually, it's covering the need that our clients have. So that's why we have had very significant and positive impact over the years and obviously, still expecting to continue on that front. Protection, very good year, 11.7% growth. MyBox has really been very successful now. We have had MyBox for quite a few years and every year, it's proven that it's commercial success. And certainly, we're actually quite bullish about the potential and protection in insurance. you see some particular wins this year in home insurance, which is obviously very relevant and attractive product. Returns moving on the right direction. You know these numbers. We have been able to reach our EUR 12 billion distribution target. In fact, we have exceeded it because now we have close to 20 basis points of excess over 12%, so that we start the new plan now with excess. And it means that we're going to get closer to our targets that will allow us to further distribute capital. We are announcing the #6 share buyback, as I mentioned at the beginning, and maintaining basically the payout policy that we fixed for the past year, it's going to continue on to 2025. And then one final comment, just some numbers. We continue to try and make sure that we do our business in a first-class way, not just financially, but also in terms of our social responsibility. Financial inclusion is one example. And the fact that we are actually increasing our presence in more and more towns where there's no bank and these we're doing through our mobile branches. We now have 33 buses equipped that act as a mobile branch. And this has been obviously very well received by over 0.5 million population that now has access to banking services, that we didn't have to and certainly by administrations and the overall public in general. Micro lending, largest in Europe, I think worth highlighting what we're doing in context to the flood in Valencia, the DANA, where we have already actually done 10,000 lending transactions. And by the way, the deterioration we have seen in the book has been minimal, and we are well provided for any deterioration that may happen in the future. I'm sure Javier will elaborate on that. And obviously, we have well exceeded our mobilization of sustainable finance targets for these 3 years, increasing now for the next plan as you already know. So we continue to be a bank that is actually doing very well financially, but also making sure that we actually do not just too good, but do well, but do good also to our communities. And with that, that's Javier now.

Okay. Thank you, Gonzalo, and good morning to you all. As usual, my comments on the P&L and the balance sheet. But let me first start with a brief overview of the P&L for the fiscal year. You already know it very well. Net income, close to EUR 5.8 billion. That is up by 20% compared to 2023. Well, we are ticking all boxes in terms of guidance, as you may see, with that NII finally at EUR 11.1 billion, that is up by close to 10%. Revenue from services with a strong push on the fourth quarter, EUR 5 billion, that is up by 4.6%. As Gonzalo said, outperforming our guidance on that point. And well, then expenses, 4.9% up, and the cost of risk, those 27 basis points also well into our guidance. And finally, that return on tangible equity at 18.1%. Also, a brief comment on our activities in Portugal. BPI contributing to net income by over EUR 500 million. That is also an increase of 20% compared to 2023, and well here -- on this slide, you have several indicators, metrics, market shares, gains across key products, business volume also doing very well, both on the lending side but also on customer funds. Efficiency, an all-time low, also 37.5%; profitability close to 21% ROTE in Portugal and continuing with a really strong credit position with an NPL ratio at 1.7%, well below the average of the industry in Portugal. And also this year, several rating upgrades, obviously, with some tailwind from the sovereign that is doing very well, but now BPI A for the major credit rating agencies, as you may see bottom right. And with that, let me move to the usual quarterly review. With that, net income for the fourth quarter slightly over EUR 1.5 billion. Note, as you already know very well, that this year and the fourth quarter, we no longer have the deposit guarantee fund charge compared to the fourth quarter last year. And then moving to revenues, net interest income for the quarter, down 1.9%, something that was already pretty much expected in this new rate environment. But on the other hand, with revenues from services doing really well. And as you may see, up 6.7% year-on-year, 7.8% quarter-on-quarter, its performance basically supported on wealth management. It's clearly a good market performance inflows and this fourth quarter when you look at the comparison quarter-on-quarter, obviously, with the influence the impact of success fees. Protection insurance, that continues to do well with a strong commercial activity, although we have, on the year-on-year comparison, some positive nonrecurring items in the fourth quarter last year. And then banking fees, really recurring fees doing very well, I would say, in the fourth quarter and also a strong push this fourth quarter from CIB. The only other thing I would like to remark on this quarterly P&L is the EUR 67 million capital gain we have had after the disposal of merchant acquiring JV together with -- JV we have together with Global Payments and Erste that has been disposed as I say, during the quarter. Let's now move to the usual analysis on NII. Here you have the usual NII bridge, well, as you may see, already client yields having a negative impact. This is basically a lower loan index resets that are partially offset, but not fully, by lower deposit costs. Beyond that, we have commercially speaking, a very good evolution in terms of business volumes, mainly from deposits, strong contribution from deposits in the quarter. And then also the ALCO having quite a significant positive contribution. This is coming mainly from lower costs on wholesale funding. Remember, wholesale funding almost fully hedged into floating, already having a positive impact from that. And also those deposit hedges we have been commenting that are already having a positive impact. I would like here to highlight that during the fourth quarter, we have added EUR 13 billion of new structural deposit hedges. Hence, now the total amount outstanding is EUR 50 billion. Below, you have the usual charge on margins and yields on margins, customer spread down by, as you may see, 10 basis points to 331 basis points on yields, the back book yield of the loan book, down 20 basis points to 427. Also, deposits down already, the cost of deposits down this quarter to 80 basis points, minus 4 basis points. And this is a trend that is set to continue in coming quarters. And as you may see, the cost of deposits, including hedges, is coming down at a faster pace. And on the right-hand side, those additional details on the evolution of our deposits, something important to focus on. On the first line, you may see the quarterly average balance of our deposits that as you may see, year-to-date, we are up by 6%. Interest bearing deposits is now 27.2%, a slight increase and something that is expected to stabilize really soon. And the yield of those same interest-bearing deposits already trending down to 2.63% pace that is expected also to accelerate in coming quarters. But the most important probably is what we call internally that jewel of the crown, which are those noninterest-bearing client deposits that, as you may see, in absolute terms remain stable since the second quarter of 2024, something that is quite remarkable. Moving now to revenue from services. Really strong performance as we said, up by 4.6% for the year, wealth more than double digit. I commented already, inflows market. So really a very good momentum that we expect that is going to continue in the future. Protection up by 4%, with that nonrecurring factors in the fourth quarter last year. And finally, fees, with that strong commercial CIB activity in the fourth quarter, compounded by reduced drag from lower maintenance fees as the year has been progressing. Costs, not much to say, finally delivering on our guidance, up by 4.9%. You have here all the details, the breakdown and driving our cost to income to a historical low, 38.5%. Loan loss charges, the usual, let's say, fourth quarter seasonality with a slight increase in terms of loan loss charges. But this does not prevent to deliver on our cost of risk guidance, as you may see, 27 basis points. Our coverage continues to be really sound, 69%. That is EUR 7 billion of total provisions, of which unassigned collective provisions at EUR 339 million. That means a lower use than initially expected, which obviously bodes well for 2025. Let's move now to the balance sheet. First comment on NPLs. I would say that the overall situation is as good as ever in terms of asset quality. So NPL is down by EUR 200 million, EUR 10.2 billion. The NPL ratio 2.61%, well below the average of the industry in Spain. You may see the breakdown across the different segments. And you may see that there are no major differences compared to the average. So there is not any single sign of deterioration or a negative evolution. So I think that we are quite comfortable with the current situation. Liquidity, the same message as in recent quarters, very comfortable and ample situation with that liquidity coverage ratio at 207%, net stable funding ratio of 146%, liquidity sources well above EUR 200 billion, EUR 219 million. And in the central chart, you have the comparison of our liquidity metrics with the top 10 Eurozone banks by market cap. So clearly, our position, as you may see, is clearly outstanding. On the right-hand side, you have the mix of our deposit structure, 78% retail, as stable as in the past. Year-end. So a summary of our MREL position with MREL ratio at 28.56%, that is well above the requirement of 24.42%. Actually, we are complying with the requirement mainly with subordinated instruments. You know that this is a strategy that is yielding good results in terms of our senior ratings, as you may see, also rating upgrades during the year, now CaixaBank well into A. It has been a year with successful issuances, 30% in foreign exchange and already started 2025 in really good shape with that new AT1 combined with a tender offer EUR 1 billion plus EUR 800 million tender offer for a net issuance of EUR 200 million plus after good result of that transaction, adding EUR 1 billion senior nonpreferred also very successfully. Final word on capital. We are already fully deducting this #6 share buyback, sixth share buyback, EUR 500 million, minus 22 basis points, we're fully deducting that from our regulatory CET1 ratio. From there, we have plus 49 basis points of organic capital generation, minus 26 basis points dividends and AT1s, and then minus 5 basis points other impacts that this quarter is mainly the seasonal impact on the fourth quarter from operational risk, as you know. CET1 ending the year at 12.19%, but the positive news we have for you today is that after fine tuning our figures, we are now expecting Basel IV day 1 impact of circa plus 15 basis points with no material difference actually between day 1 impact and the fully loaded. On the right-hand side, you have additional metrics with that book value per share at EUR 5.17, dividend per share in total EUR 0.4352. And that fifth share buyback, that is being executed as we speak, 66% executed, and that EUR 500 million final share buyback to comply with the EUR 12 billion capital evolution. And now finally, the much waited fiscal year '25 guidance. NII is expected to come down by mid-single digit for 2025. Revenues from services up low to mid-single-digit. Operating costs, as we already outlined on our Investor Day, up by circa 5%. Cost of risk less than 30 basis points and a return on tangible equity is expected to be already circa 16% during next year. On the right-hand side, keep in mind that our CET1 management target for this year is between 11.5% and 12.25%. That 12.25% being the threshold for additional distributions together with that regular, let's say, cash payout between 50% and 60%. And with that, I think that we are ready for questions. Thank you.

Okay operator, you can let the first question in, please.

The first question is from Alvaro Serrano of Morgan Stanley.

Two, please. First one is on -- can you -- maybe this one is for Javier. Can you walk us through what you expect in terms of NII quarterly trajectory? I'm thinking Q1, Q2 versus the second half, and in particular, what kind of deposit growth you're expecting this year and your rate assumption? And the second question is on fees. I see your guidance of low to mid-single digits. Why so cautious on fees if you're clearly outlining that activity is picking up, it's surprising you markets are on fire really. That looks a bit cautious. Is there anything we're missing there to take into account?

Thank you, Alvaro. I will pass it on to Javier obviously. But on the second point, why so cautious on fees. I'd say it's in our DNA. That's the reality. We tend to be cautious on guidance. If the activity confirms at very high levels, obviously, there's -- that would be good news.

Okay. Well, on NII, well, several comments. In terms of the assumptions that are behind in terms of rates is the yield curve as of the end of 2024. So currently, it's a little bit higher, like 20 basis points, but the impact into 2025 is not that significant. Remember that we are always guiding for sensitivity 1 year forward. So for 2025, obviously, higher -- slightly higher rates is nice to have. Obviously, it's positive, but it's more important beyond 2025. In terms of lending, we are assuming a good tone getting closer to our, let's say, long-term target in terms of loan growth. Remember, on our Investor Day, we guided for 4% CAGR. We don't expect that we are going to be 4% already this year. This is not what is embedded in our projections, but getting closer to that. And we can elaborate if you wish on segments, et cetera. In terms of deposits, what the evolution we have had in terms of growth in 2024, we think it's not going to be repeated. Remember that 2024 has been, to some extent, also impacted by inflows from the public sector, et cetera. But in any case, it's going to be a positive one. So we were guiding for deposits to grow over 3%, and this is what is embedded on our guidance, somewhat a little bit better than 3%. So in terms of mix, what we have been commenting is that we are expecting to maintain the percentage of interest-bearing deposits. If you got at 30%, we are close to there. So we think that, that percentage, that wave of interest-bearing deposits is going to stabilize very soon, if not next quarter, shortly after that. And obviously, what is going to come down is the yield of those interest-bearing deposits. Actually, 50% of those, as you know, are fully indexed, the major part to the overnight index, so it's pretty much automatic. In terms of time deposits, we're expecting the size of the book to remain broadly stable, but obviously at lower yields. Note that the average maturity of our time deposit portfolio is less than 6 months. And actually, we don't have maturities with a yield higher than 2% beyond the summer. So it's, to some extent, obviously, we have a commercial work to do here in terms of bringing down those -- the yield of those deposits, but is something that so far we are already doing. So anything is doable. So with that, we are expecting that on average, the cost of our deposits this year is going to be in the low 60s. So this is a little bit what we are assuming while giving you guidance. So because we're talking about EBITDA, it is probably no longer as useful than in the past. On the way up, we had a deposit EBITDA of circa 20%. Broadly speaking, we are assuming that the deposit EBITDA on the way down is going to be pretty much the same, but probably to give you more visibility is better to talk about what we expect in terms of costs. And in terms of the quarterly trajectory, well, our expectation is that the trough in terms of NII should be later this year. In any case, we don't expect that, that trough is going to go into 2026. So that's our expectation, but it's something that we need to follow. Let's see how finally rates evolve. Let's see how volumes evolve. The key, in my view, for NII this year is basically NII -- sorry, the deposit evolution. Because, as I said, we are expecting to have that weight of circa 30% of interest-bearing deposits. That means that we are already incorporating growth on noninterest-bearing deposits in absolute terms. And this is because we are gaining clients, we're gaining market share, on payrolls, et cetera. And as a result of that, this is going to be a significant driver to NII. So if we do well on that, so I think that we can do even better. But with the current yield curve, what I can say is that the guidance that we gave for 2027, remember that we said, okay, 2027 in line with 2024. That 2027 guidance for NII has upside with the current yield curve. So that will no longer be like a flattish NII guidance '27 vis-a-vis 2024. It's going to be -- would be upside to that. But obviously, time will tell, and we'll see. Thank you.

Thank you, Alvaro. Operator, next question please.

Next question is from Francisco Riquel of Alantra.

Yes. So the first one is about your payroll accounts, what you call the jewel of the crown. We have seen large Spanish banks reporting this morning saying that they have gained 1 million clients in Spain in '24, 130 payroll accounts -- payroll clients. We have -- there are a few other Spanish banks paying to gather these payroll accounts. And obviously, you are the market leader in this category with low funding costs. So I wonder if you see a risk of losing out payroll clients to these competitors? And what measures are you envisaging to retain those clients, and at what cost, if any? And my second question is just a follow-up on the NII guidance that Javier provided before, particularly on the ALCO contribution in '25, what type of size, duration and mix composition of the bond portfolio given the current yield curve you are expecting? Any -- what type of tailwind shall we expect?

Thank you, Paco. I would say on the payroll front, I don't see really much change. We have actually been very successful this year gaining additional payrolls, and we're expecting to continue in that way. The reality is since rates started to be positive, most of our competitors have started to compete more aggressively on payrolls. When rates were negative, I think we -- I wouldn't say we're the sole bank, but we were still very focused because we knew the value of payrolls, not just for gathering deposits, but also for gathering, obviously, all the -- the whole relationship around the client. We have a 36% market share. Our aim is obviously to grow that market share, but certainly don't expect to lose in any material way. We have, obviously, every year, included in our expenses, marketing costs associated to gaining payrolls. But that's something that we have done in the past, we will continue to do in the future is part of our strategic plan, our 3-year plan because of the increase in activity that we would be spending more. So that's completely incorporated into our forecast. So I'll give you an example, speaking from memory, this year, we have gained 900,000 payrolls. Obviously, there's also some people that lose their job and hence, this is just the gross acquisition number of payrolls and we're going to continue to be very competitive, and we're not expecting to do anything different or assume any additional cost to continue having that very clear angle edge in the market.

Okay. Paco, well, in terms of the ALCO, well, basically -- the ALCO activity is basically driven in order to maintain the sensitivity of the balance sheet. The more deposits grow, basically, the more you need to be active. And this is actually what has happened in 2024. You know that at the end of the day, we have done better than initially expected. So we had to adjust also our hedging activity to that. And more importantly, not only deposit, but basically noninterest-bearing deposits. The more noninterest bearing deposits you gather, the more hedging you need. So that's basically what is going to be driving our activity. So you can expect us to roll over one way or another, what is already in place, plus adding some hedges eventually. So what -- if we are going to be using derivatives or cash would be market dependent. Also the length of those hedges also is a little bit market dependent to some extent. So currently, sovereign bonds spreads have widened vis-a-vis swaps. So we are a little bit more keen to use now the sovereign to hedge, not only Spain, but I mean a diversified portfolio of sovereigns. But this is market dependent. So basically, that's the point. In terms of the contribution, if you remember, on our Investor Day presentation, there was a bridge where you could see in 3 years the impacts from, let's say, client yields, volumes, and then ALCO. So the contribution from ALCO in 2025 is significant, because if I remember well, it was plus EUR 1.9 billion coming from ALCO in 3 years. So a last chunk of those EUR 1.9 billion are already in 2025, precisely because it's the year when we have the major impact from rates and consequently, hedges, et cetera, to have a strong impact already in 2025. So in that quarterly bridge, we disclosed, so you will see more and more contribution from ALCO in coming quarters.

Okay. Thank you, Paco. Operator, next question, please.

The next question is from Maks Mishyn of JB Capital.

I have three. The first one is on the loan book expectations. You've accelerated growth in loans across all segments, but mortgages continue to lag. I was wondering what's the reason? Are you being more prudent with pricing or prepayments remain high? And could you please share your view for loan volumes per segment for 2025? The second is, could you please share your estimate of the Spanish banking tax in its new shape for 2025? And then the last one is on the news of a renegotiation of a health insurance contract between SegurCaixa Adeslas Muface. They plan to hike premium significantly. And I was wondering if you decide to go with the new contract, how can we quantify the impact on your P&L?

On the banking tax, the second question, what's exactly your question? Sorry, Maks. How much? Oh, yes, how much. Sorry, Maks, I now fully understand. On the banking tax, our estimate is around EUR 600 million for 2025. That's what I can say at this stage, it shouldn't be too far away from that number. If anything, it would be below. On Muface, I would not want to get into the details. This is -- obviously, it's a joint venture where we have close to 50%, and all communications we have agreed will be coming from the company. There is, in any case, some news over the last few days that seem to indicate that there is likely to be an agreement and that Adeslas is going to continue to be able -- if all goes well, to continue to provide this service, which I think would be good news. For us, if anything, it's not going to be a material issue. And again, given the sensitivity and the fact that this is an affiliate of us, I'd rather not comment, I would not be certainly worried of its impact because, again, it's not really material. And on the loan book, and making sure I keep my voice, I'll let Javier comment.

Will do. Maks, well, in terms of the evolution of the loan book, to a previous question, I said that overall, it's going to be a year where we are going to be getting closer to that, let's say, circa 4%, that was our, let's say, 3-year guidance for probably not 4% yet this year, but approaching to that. So 2024 has been 2.2%. So let's say, 4%. So getting closer to 4% is the idea. By segment continues to be individuals, what is leading and corporates. So it's basically consumer lending. We're expecting to do well on that. So we delivered up 7% in 2024. We should be close to that, I would say, in 2025. Mortgages, well, you see the progression. You mentioned like that there was, if I understood well, like an acceleration of prepayments, not on the contrary. So this is now well under control. So that's what had an uptick early 2023, actually, once we had the sharp increase in rates. But since then, it has been trending down and is, I would say, back to normalized levels, also because a major part already of the -- not -- it's 40% approximately, of our mortgage portfolio is already at fixed rate. So hence, not impacted by prepayments, not impacted by the evolution of rates. So it's normalized. So currently, we are being able to originate more mortgages than, let's say, the normalized pace of amortization plus extraordinary prepayments. So the book is already growing. We were targeting long term to grow circa 2%. Probably, we are -- on that front also, we are going to be getting closer to that. Corporate is doing well also with support from our international CIB branches. And what has been still lying a little bit is SMEs. On that front, we still have a little bit of headwind from the runoff of the ICOS -- the runoff of the ICO portfolio. To put a figure on that, it's circa EUR 1 billion per quarter, ICOS are running down approximately EUR 1 billion per quarter. So you have to originate more than that in order to keep the book stable. Something that, in our view, is coming. So we have a better tone. Obviously, the macro GDP growth we had yesterday. So it's clearly supporting that. We're expecting CapEx to accelerate as 2025 progresses. So we think that SMEs gradually will add to the momentum. So that's basically the summary. Thank you, Maks.

Thank you, Maks. Operator, next question, please.

The next question is from Sofie Peterzens of JPMorgan.

This is Sofie from JPMorgan. So maybe if you could just share your thoughts on M&A opportunities for CaixaBank and how do you think about kind of M&A in your -- in the markets that you operate and also outside your -- the markets you operate? What are your thoughts on using Danish Compromise for any acquisitions? And then maybe if you could also just talk a little bit more broadly what you're thinking around bank consolidation in Europe? How do you see kind of bank consolidation in Europe over the next couple of years? And then my second question would be kind of on SRTs. Could you maybe just discuss a little bit what the potential volumes for SRTs is for CaixaBank in 2025 and what these potentially could mean for your equity Tier 1?

Thank you, Sofie. I would start with consolidation for us and then as you ask for some more general comments, I'd say, obviously, we have a large market share in Spain, and we have that leadership position and we'll see value is in organic growth. And actually, there's not much room for us to grow on any other basis because of competition reason and -- competition reasons and generally because we are active in every part of the market. So we don't need to do bolt-on acquisitions or whatever. Portugal is a bit different, but here we have been with BPI for 8 years, growing organically, gaining market share. BPI is in a great moment. And I would like to make sure that the focus is, and that's our base case, and organic growth that bank is not distracted. The bar for anything in Portugal would need to be very high for it to be a better value creation than what we're currently doing with BPI in sort of 20% return on tangible and our market share growth. Beyond Spain and Portugal, we, as of today, don't see value creation for us. We don't see synergies. We see complexity. Our model is one where we have very large scale. But in one big market, if you put together Portugal and Spain, which is a simplification, but to some extent, it is -- so we have really the advantage of scale. When we talk about spending over EUR 5 billion in IT, this is in one single organization. It's very different if we were to invest this EUR 5 billion over 10 banks in 10 different countries. The benefits of that investment would be completely different, much more diluted. So we are happy with where we are, because we don't see opportunities to create value. Now that we are fundamentally against cross-border consolidation, just that we're practical, we don't see value coming from that. When you look beyond our position in Spain and Portugal, obviously, there are transactions going on. All of them have a component or a business rationale based on domestic consolidation, which we have proved in Spain that can create a lot of value, so I respect and understand that. But for those people that are not present in those markets to think about cross-border deals on the basis of -- this is the thesis of let's have larger EU banks to make sure that they compete better with the U.S., I think this is, with all due respect, not the case. I'm just going to give you an example, a great bank like BNP in Europe is more or less the size in total assets of Bank of America, 10% difference. But Bank of America is worth 5x more. The issue of market valuation -- I would go with Santander and Wells, it's a similar case, similar size, but Wells is worth 3x more. And any example, the issue is not about size. The issue is the fact that they operate in one big market, and they have scale, like we do in Spain and Portugal. And when you compete in a fragmented EU market, you don't have the same scale. So you cannot really get the same profits. And here, the focus needs to be not on growing our banks. There could be growth in domestic countries or in some selected situations, domestic consolidation or some selected situations. But the real focus would be on making a real single capital union, long savings and investment market, banking union, et cetera, because unless there's a real union, we do not have synergies of operating in France, in Germany and Italy or whatever. And if we were to operate in those countries, we'll be bigger, but we will not be worth much more. So that's generally my perspective. We need to deepen the integration, the single market, the capital markets, savings and investment, whatever you want to name it. And that is the first element. And then logically, cross-border consolidation would follow. Having said that, obviously, this is our view. And obviously, others may have different views and time will tell.

Sofie, you had a question on SRTs. I was checking my notes of what I said at the Investor Day, just 2 months ago. We have already a few transactions in place. This is going to have a runoff of circa EUR 2 billion in terms of risk-weighted assets during the next 3 years. And I commented that we would probably be originating like circa EUR 6 billion. So that is for a net of circa EUR 4 billion. So that is for 3 years. I am not saying that in 2025 we will do exactly 1/3 of that, but you should expect us being active already into 2025, yes.

Thank you, Sofie. Operator, next question, please.

The next question is from Ignacio Ulargui Lopez of BNP Paribas Exane.

I have two questions linked to capital. I mean the first one, if I just look to your CET1, including the positive effect of Basel IV, you are already above the target. I just wanted to see how do you think about potential extraordinary distributions. You said in the presentation in December that growth will be more relevant than distributions, but your target is already -- or your capital is already above the target. And linked to this as well, looking to the organic capital generation, if I just look pre-markets and others, you have generated around 15 bps of capital in the quarter, and that has been consistent with the strong growth in RWAs. Do you think that, that kind of level should be what we expect in terms of buildup of capital in '25 per quarter?

Thank you, Ignacio. I would say on the first point, yes, we are again, generating capital. We started this new 3-year with 12.19%. And as you say, we do have a pro forma positive impact of another 15 basis points. So for all purposes, we're already above on a pro forma basis at 12.25%, that is the threshold, and that's good news. And at no given point we have said that we will not continue with our policy of buying back shares or distributing capital beyond the payout ratio. What we are seeing is that things continue to go in the right direction. When you look at the 3-year plan, we -- because that's a bit more difficult to forecast, we didn't want to commit to a given number of capital distribution because that would hurt our ability to grow the business in very attractive conditions as you know, and we said in the past. But it doesn't mean that as far as we start building capital again above our new threshold, which is 12.25%, we will keep, as we've been doing in the past, announcing further share buybacks. We have 6 now on the Board. I think there will be more. And hopefully, that will be soon enough in the future. We will continue to buy back shares. And the way things are looking, it seems to us that you're going to be benefiting from that in 2025, certainly.

Ignacio, well, on the organic capital generation, well, the fourth quarter -- I was checking, 49 basis points. If this is the pace for 2025, I would say, not exactly every quarter. You know that there are quarters with some seasonality or you have quarters, for example, the banking tax that comes in a specific quarter. So -- but we should be approaching 200 basis points. Yes, we should be probably a little bit below 200 basis points for the year, but not exactly, let's say, 40-50 every quarter.

Okay. Thank you, Ignacio. Operator, next question, please.

Next question is from Cecilia Romero of Barclays.

I have two. The first one is on provision. Some resources have reported recently that the ECB could be considering enforcing a new regulation that requires banks to incorporate historical credit data from 2008 to 2018 in the risk model. This, I guess, could potentially impact weighted assets and provisioning. Given that CaixaBank's cost of risk modeling may already reflect some crisis periods to some extent, how do you anticipate this change affecting your banks with weighted assets and provisioning a strategy? And the second one is on your NII guidance. I'm sorry to go into this again. Your NII sensitivity to 100 basis points is minus 5% in year 2, which should be half year 1 around 2% or maybe a bit above. A drop of Euribor 12 months implied now in the yield curve is less than 100 basis points. We also have to think that there might be a steepening of the yield curve if you add to that the fact that you're expecting growth in volumes on deposits, why an NII guidance for 2025 of mid-single-digit decline? Are you being too conservative?

Thank you, Cecilia. On the first point, this is something that has been launched by the ECB. As you said, I think it's a bit early to evaluate in full. But from our own perspective, we have a very conservative approach to modeling and we actually have quite a few bad years of the cycle included. So we certainly expect no impact on provisions in particular. Overall sort of judgment will need to wait a bit, nothing material.

Well, on NII sensitivity for year 1, that's between 2%, 3%, maybe a good guidance, although it's not, I would say, such a hard number as with the guidance we are giving you for year 2. And for year 2, probably, I have to remind here how this works. So the sensitivity is to changes of the forward rate in year 2. So it's not to changes on the rate from year 1 to year 2. So if the forward rate in year 2 goes up 1 or down 1 percentage point, then this is the impact on NII for year 2. So I think that we have been commenting on NII for 2025 the last few quarters. So I remember that we started talking about it that it was -- the consensus was like at EUR 10.2 billion, then it was EUR 10.4 billion. And now we are guiding midpoint slightly over EUR 10.5 billion. So actually, there is an improvement compared to what we have been commenting in previous quarters. So we think that we are not extremely conservative on that. So we think that is the guidance we have. It's -- actually, it's a guidance that is ample enough to accommodate rate volatility that will continue with us. Today, we have ECB. So I think that is ample enough to accommodate the scenarios that are more probable -- or that we think that may be more probable for 2025. Thank you, Cecilia.

Thank you. Operator, next question, please.

The next question is from Ignacio Cerezo of UBS.

I've got two and a clarification. The first one is on the corporate book, the EUR 167 billion. If you can give us a little bit of information on breakdown, how are you growing each of the segments inside and what kind of yields are you generating in each of the segments as well. The second one is on the maintenance fees, if you can give us a number you booked in 2024, and how much are you expecting that to decline in '25? And the clarification is on -- I think Javier mentioned that the average cost of deposits through the year will be around 60 basis points. So confirming that is correct and confirming whether that is ex hedges or including hedges?

Thank you, Ignacio. I think it's all yours, Javier.

It's ex hedges. So that's to clarify that is ex hedges. And yes, maintenance fees, we have booked EUR 300 million this year, and we are expecting still some pressure into 2025. This is what is in our guidance. Obviously, we'll try to do as better as possible, but we have assumed still some underlying pressure on that for next year. And on the corporate book, well, the corporate book, I would say that so far on SMEs and corporates, we are being able to pass on rates where those rates are. So I would say that we are being able to maintain margins, generally speaking. Broadly speaking, we should think about margins circa 150 basis points. If you combine SMEs, corporates, et cetera. So that could be the average over Euribor. The major part of the new lending is at floating as it has been historically. So probably 80% of the book and the lending is at floating rate. And that's it. So the situation is fine. So picking up activity, margins being maintained. The segment where we continue to have more pressure, as you know, is mortgages, basically because all competitors are there, smaller ones, regional banks. We are originating circa 80% and growing at fixed rate. And being at fixed rate, you cannot always pass on what the yield curve does immediately to commercial rates. So sometimes you have a little bit tighter margins on that front. But for consumers, for SMEs, for corporates, I would say that it's fine. So it's obviously super competitive as always, but being able to maintain margins.

Okay. Thank you, Ignacio. Operator, can you please let the next question in?

The next question is from Marta Sánchez Romero of Citi.

I've got a quick question, sorry, on the provisions guidance for 2025, and any update on the litigation with Mapfre and Lone Star, and whether you expect a resolution in 2025? And the second question on productivity. You clear -- you clearly have a productivity gap versus your peers when I look at revenues relative to your branches and your employees. So how do you close that gap? Is it just a matter of growing your revenues? Or do you think you have space to reduce your structure?

Thank you, Marta. Let me maybe start with productivity. Obviously, we are always aiming at improving our productivity. And there's many ways to look at it, not that you're doing it that way, but I take the opportunity -- we shouldn't be looking at it on a per branch basis because we have over 1,000 branches in rural Spain that our competitors do not have. And these branches have approximately 400 branches where we have 1 person and another 400 where we have 2. And this is a different business. And obviously, when we look at sort of revenues per branch, it distorts reality. And our presence in rural Spain with different dynamics, but it's a very attractive one. Sometimes I say when we run the bank, and this is a pretty simple reason that, again, but I want to make sure for the benefit of everyone, let's suppose we are at costing about 40%, would we want to double our operations at 40% cost to income? Yes, would we want to double our operations at 42% cost income? The answer is yes, as well. We may deteriorate, but we'd rather -- on a marginal basis, we will be creating a lot of value. Sometimes banks, and I remember the old popular to make an example where managing ratios and then you improve the ratio, but you don't improve the actual value added by the overall activity. So this is one example of our presence in rural Spain, very attractive but different dynamics. Then when you look at our overall productivity and then looking at employees, which obviously is something that makes more sense, as you also mentioned. Actually, we need to understand what's our business mix. And the business mix is different. We have plenty of insurance business, where the contribution to sometimes, particularly in the protection business to the assets, if you look at productivity by assets, et cetera, is not there. So in a nutshell, I would say it's not easy to compare productivity vis-a-vis other banks. I would modestly not agree with the fact that we are worse in terms of productivity than our peers. I wouldn't necessarily argue that we are better, we're different. But in any case, what is most important, we want to be more productive. And whatever level we achieve, we would want -- we will want more. And for that, we continue to work every day. For this plan, we're not assuming any sort of headcount restructuring. As we said, we will present the plan. That view has not changed. We think we have the right platform post the merger in terms of branches and people, and we see opportunities to grow the business. With the economy growing at 3.2% this year with us gaining market share and with plenty of opportunities that we're investing for with that EUR 5 billion IT investment, I think the focus for us to be more productive is to put more revenues on our platform. Having said that, obviously, circumstances change, we will adjust our -- or if at some point, we get a conviction that we're not going in the right direction, we'll change tactics. There's no -- nothing religious about what we need to do in this respect. But today, clearly, the focus is on containing the cost base, but mostly increase in revenues, yes.

Okay. Marta, you had a question on other provisions. Well, on that front, you know that we have had a larger charge in 2024 due to an increase of claims and lawsuits in -- related to mortgage costs. Well, the pace of those claims and lawsuits is clearly trending down. We have already built and reassessed the situation and built sufficient reserves for what we think may come into the future. So to that extent, we are a little bit back to business as usual in terms of further provisions for the future. Remember that we have been guiding in the past after the merger with Bankia, circa EUR 50 million, EUR 60 million per quarter. So I think that probably we can be back there, always subject to the underlying volatility of a line like this one. But the setup costs from mortgages, I think that we are already adequately provided.

And Marta, as we mentioned two specific names. We're not expecting any outcome of this in the short term. One of those, it may be later in the year. And in the case of Mapfre, I think it's unlikely to be this year. In both cases, we think we have a very consistent and well sort of thought out approach and we're not expecting any negative financial impact out of those two situations.

Okay. Thank you, Marta. Operator, next question please.

The next question is from Hugo Cruz of KBW.

Just one question on the rate sensitivity. Your sensitivities for a parallel shift, but it's more likely that we'll see the short end going down in the middle and the long end going -- staying where they are, so steeper yield curve. How does that impact your stated -- the sensitivity that you gave for NII?

Yes, you are right, it's parallel shift. Well, there are -- we run plenty of scenarios about the potential evolution of the yield curve. And well, in the short term, let's say, short-term rates going faster down in the short term is -- has a negative impact, but long term is a positive impact, because at the end of the day, for example, all the origination on mortgages is more linked to the long end of the yield curve. So actually, there will not be an impact on that front. And obviously, there are opportunities that is coming and structurally, let's say, the economic value of the balance sheet is less affected if there is a steepening of the yield curve than with a flattening. So I would say that, broadly speaking, is very short term, slightly a little bit more negative. But if you look at the fundamental value of the bank, is positive, a steeper yield curve. So that would be a little bit the summary.

Thank you, Hugo. Operator, next question, please.

The next question is from Pablo de la Torre Cuevas of RBC Capital Markets.

There are just two follow-ups on NII and fees. The first one is again on that 60 basis points average cost of deposit for 2025. Could you please provide more detail on the quarterly reduction in cost of deposits that you expect? And more broadly, the overall evolution of customer spread during the year? Then the second follow-up would be on revenue from services growth in 2025. Also, is there any way you can provide a bit more detail on the breakdown of the assumptions underlying the guidance that you provided today? For instance, what is the expected impact from market movement in AUM growth in 2025?

Okay. Pablo, where I said low 60s, so not said 60, just for the sake of clarification. Well, it's going to be faster at the beginning of the year and, let's say, a little bit less pronounced by the end of the year. But you will allow me not to give you a specific figure for every quarter. And customer spread is expected to be on average, slightly over 300 basis points. So that's the idea. Keep in mind that today, we are providing the customer spread with and without hedges just in case, and that those 300 basis points is including hedges. And in terms of what is embedded on our wealth management, we are counting on inflows to be -- to do really well, probably not as good as in 2024, but close to that. It was over EUR 11 billion. So I think that probably we are going to be close to EUR 10 billion for the year. And in terms of market evolution, we have an extremely conservative assumption here, which is basically rates, so we are assuming like AUMs are yielding the market rate that is circa 2%. So it's a very conservative assumption.

Okay. Thank you. Next question, please, operator?

There are no more questions registered at this time.

Okay. So that's all for today. Thank you, Gonzalo and Javier. Thank you all for joining us, and talk to you soon.

Thank you very much.

Thank you. Bye.